Which of the following is not a feature of factoring transactions?

(a) In factoring, the receivables are purchased by a factor company. (b) In the balance sheet of the seller firm, the factored receivables are an off-balance sheet item. (c) Factoring is another name for bills discounting. (d) Registration of charge is required to be registered in factoring, like bills discounting.

Factoring may broadly be defined as the relationship, created by an agreement, between the seller of goods/services and a financial institution called the factor, whereby the latter purchases the receivables of the former and also controls and administers the receivables of the former. Since the client’s debts are purchased by the factor and amount is paid to the client, it serves as off-balance sheet finance and appears in the balance sheet only as a contingent liability in the case of recourse factoring. In case of default by the buyer, the client will have to refund the finance amount to the factor. But in case of non-recourse factoring, it does not appear anywhere in the financial statement of the borrower. Thus, factoring services help the client to improve the structure of balance sheet.