Selling More Competitively Overseas
One of the greatest advantages of international factoring is that it allows both exporters and importers to trade on open account terms without risk.
Factors Chain International services to exporters
A member of Factors Chain International can offer three types of service to exporters that will give complete security, ensure administration is simpler and make a positive contribution towards cash flow:
1. Export Factoring establishes the credit-worthiness of existing and prospective customers and provides up to 100% credit protection.
2. Sales Ledger Administration reduces non-productive overheads and frees up valuable management time.
3. An agreed level of finance can be advanced once the goods have been shipped. The balance, less the factor’s charges, is paid when the invoice is settled in full.
The advantages for exporters are
1. They can expand sales abroad by offering competitive terms and conditions.
2. They can offer open account terms by invoicing the importer and granting deferred payment terms, usually 30-90 days.
3. They are fully covered against credit losses.
4. They avoid the delays often encountered when arranging letters of credit.
5. Speedy collection and remittance improves cash flow.
6. Administration costs are reduced.
7. They have access to a flexible source of working capital to help increase export sales.
One of the greatest advantages of international factoring is that it allows both exporters and importers to trade on open account terms without risk.
Factors Chain International services to importers
A Letter of Credit is the most internationally accepted method of guaranteeing payment. Yet, while this method does have some merit, it is outdated and cumbersome plus it places financial burdens on both the exporters and the importers.
The alternative is for Factors Chain International members to guarantee payment to the exporter through an arrangement with a local factor. No letter of credit is necessary. All that is required is for a revolving credit limit to be established on the importer’s business. When invoices are due for payment, the importer pays the import factor member who sends the funds on to the corresponding export factor.
The advantages for importers are
1. They can buy on open account terms.
2. They do not need to open letters of credit.
3. They can expand their purchasing power without using existing lines of credit.
4. They can purchase goods without incurring delays.
5. They will find it easier to generate new sources of supply.
Author: Toni Nicholson, factoringcompare.com, 02/03/2010