Finance for Export Companies

Invoice Factoring Group

Selling your products and services internationally can provide very important advantages to your company. It provides an opportunity to increase your market share all while diversifying your revenues. However, selling internationally increases the complexity of your operations and your cash flow. Most foreign clients, especially large companies, will demand term credit. Just like their US and Canadian counterparts, they will demand the option to pay their invoices in 30 to 45 days. This can create two problems for exporters:

  1. Cash flow issues due to slow payments
  2. Bad debt risk due to bad credit decisions

One way to mitigate these problems is to use an export finance tool known as factoring. It allows you to finance your invoices from strong credit worthy clients. You get immediate working capital, which improves your finances and enables you to operate your company. By accelerating your revenues with this financial tool, you can create a platform that enables you to grow your sales while minimizing cash flow problems.

Additionally, most factoring companies will also provide credit advice. They can evaluate your invoices and your clients, and help you determine which should get terms and which should prepay for goods. While no credit service is perfect, they can allow you minimize your chances of incurring bad debt, while improving your cash flow.

Most transactions are financed in two installments, called the advance and the rebate. The advance is provided immediately after your client accepts and verifies the invoice. It usually covers 80% of the invoice. The remaining 20% is rebated (less a fee) once your foreign customer pays the invoice in full. The export financing facility is adaptive in nature and will grow as your export revenues increase, as long as your invoices meet the funding criteria.

Qualifying for this type of funding is comparatively easy. The most important requirement is to do business with foreign clients that have solid commercial credit. Additionally, your receivables need to be free of liens and your company should not have major tax problems.. This makes factoring a valuable trade financing tool for growing export companies whose biggest cash flow problem originates from slow paying export clients.

Get competitive trade finance rates. USA and Canada
Questions? Call (866) 730 1922

Next: Trade financing basics

Previous: Trade financing for export companies