The turnover of Sparkle Ltd. is ₹100 lakh of which 72% is on credit. Debtors are allowed one month's credit to clear the dues. A factoring company is willing to advance 80% of the bills raised on credit for a fee of 1% p

The turnover of Sparkle Ltd. is ₹100 lakh of which 72% is on credit. Debtors are allowed one month's credit to clear the dues. A factoring company is willing to advance 80% of the bills raised on credit for a fee of 1% per month plus a commission of 5% on the total amount of debts. Sparkle Ltd. as a result of the arrangement is likely to save ₹48,000 annually in management costs and avoid bad debts by 1% on the credit sales. A bank has also approached the company to make an advance equal to 80% of the debts at an annual interest of 15%. However, the processing fee will be 1% of the debts. Would you accept factoring proposal or the offer from the bank ?