Export Factoring: Improving Cashflow and Growing Small Businesses

Selling goods and services across international borders is a very exciting and often profitable business venture. However, in the export business the minimum time for payment is 60 days, which creates a major cash flow crisis for many existing export companies. Many extremely large exporting companies can absorb the costs associated with waiting for payment that long but most independently owned and operated exporters can not afford such a luxury.

There are several solutions that can be tried before seeking financial help from an outside source. One of these options would be to ask your clientele base to pay immediately upon receipt of invoice. Most customers will see this as a huge draw back and may be influenced by such factors to seek the competitions services or goods. If losing business is not a feasible solution for an existing export company, it may mean that it is time to seek the services of an export factoring company.

Export factoring companies will eliminate the waiting period in the export business and purchase the accounts receivable invoices from the exporter. This practice will provide the existing business with the available working capital to continue working, paying employees and purchasing supplies. Export factoring is a very effective financial tool that enables the export company to be paid immediately. It is not a confusing process and is very clear to both the customer as well as the export company.

The process involved for an export factoring company is straightforward. The export company delivers the goods and/or services to the foreign client and usually issues an invoice immediately following the delivery. The invoice is then sent to the export factoring company that is looking after the financial aspect of the exporting company. Once the export factoring company receives the invoice, they will issue a cash advance that will equal anywhere from 80-85% of the gross total export invoice. The export factoring company waits until the invoice is paid for the 60 days and once it receives the payment from the customer will issue the remaining funds minus the processing fee.

Every export factoring company has its own pricing and fee schedules and they vary accordingly. Each situation is different and has a different set of mitigation issues that will influence the rates and fees that an export factoring company sets out. The first rule to remember for export factoring or any type of invoice factoring service is that they are very unique and operate under a different set of guidelines.

That being said however, there is a couple of contributing factors that influence the rates either positively or negatively. These are such issues as the credit worthiness of the clients as well as the industry that is being exported. These determine the fees and prices that are required while balancing the amount of financing that is required. Export factoring makes an ideal financial solution for small and growing export companies.