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Export Factoring - Finance International Sales03/23/2013
In this article, we are going to go over international factoring: Debt-free way to safely sell to international clients, No more waiting 30, 60 or 90 days.
Selling your goods internationally can be very rewarding and challenging at the same time. When you begin exporting goods, you undoubtedly open your company into a world of opportunities, including the potential for large financial rewards. While doing so, you expose yourself to many of the challenges of international commerce.
Many international deals are settled using a letters of credit, which means you can rest assured that you will be paid punctually provided that the letter of credit is written properly and everybody meets the shipping / payment conditions.
However, using letters of credit could be time-consuming and many foreign clients may rather, insist on getting terms - particularly when they're a sizable business. Which means you could need to ship the goods and then you will wait numerous weeks before getting paid. This is very difficult for small, and growing companies that are just starting their international sales and can't manage to wait that long for payment.
One alternative is always to go to the bank for a financial loan or bank line. But getting bank financing is notoriously challenging.
The majority of banks only offer financing to companies that have a very strong financial history and will provide substantial collateral. Few small companies can meet these requirements, which puts bank financing out of reach for many business owners.
One method to improve your cashflow would be to consider factoring, a form of invoice financing. This program finances your open invoices from foreign commercial clients. It improves your cashflow and provides the funds you need to run your company. Export factoring, is a form of international financing known to can be a very great tool for new growing businesses.
The transaction works utilizing a financial intermediary who finances your export receivables. They secure the receivable as collateral, when you get immediate funds for your company. The transaction is divided in to two parts - the initial advance and the rebate. The advance covers about 85% of the invoice and is wired once your client accepts the invoice - usually at that time when you deliver your product or service.
The factoring company then uses the remainder 15% to pay for any potential invoice disputes, charge backs or issues. As soon as the customer pays the invoice in whole, your business gets the rebate which takes care of the 15% that has been not initially advanced, less the fee.
Businesses that are eligible for international factoring?
- • U.S. subsidiaries of foreign exporters.
- • U.S. exporters aiming to use open account credit terms as a sales tool.
- • Foreign exporters aiming to increase sales to U.S. importers by utilizing open account credit terms.
- • Sell credit worthy international clients or businesses.
- • Has a minimum of $20,000 in receivable finance.
If you are doing business with an international company and want to eliminate the waiting 30, 60 or 90 days to receive payment, then international factoring could be a valuable financing tools that will help you with advances up to 85% on the total value.
Quick Link to Financial Resources:
|Purchase Order Financing||Accounts Receivable Financing||Asset Based Lending Options|
General Articles about Accounts Receivable Financing and Factoring:
» 08/01/2012 Debt Financing or Off Balance Sheet Financing?
» 09/15/2011 What to know when selecting a Factoring Company