Export factoring refers to a technique in which a business sells its invoices to a financial intermediary and advances cash to the business. It is also known as invoice or account receivable financing, which is different from traditional bank loans in several aspects including:
- As there is no need for any collateral in export financing, so SMEs can easily prepare for export financing.
- It is different from a bank loan, as it will not appear on the company’s balance sheet as a debt.
- Financial intermediary releases funds based on the company’s customer creditworthiness rather than borrowers’ financial conditions.
- Banking services can offer limited funds compared to export factoring where the company’s orders and invoices decide funding.
Export financing is a very powerful technique to boost your cash flow through funding from finance intermediaries, which is simply the payment that a customer owes you. But you do not have to wait for months to get funds from your customers and trade finance marketplaces, like Fineon Exchange, will advances cash to your business within a couple of days after submission of invoices. These export finance companies pay you up to 90% of the invoice amount and the remaining will be paid soon after the full payment by the customer, charging a nominal price.
This way of financing your cash flow needs is most economical and quicker compared with bank loans. Here the factor (Export Finance Company) will simply oversee the borrower’s collections process. So, the business lending money in exchange for its invoices does not need to worry about payback. A business can negotiate longer payment terms with its customers since it will have quick access to the capital needed to run the business as usual. This way, it can help businesses to expand their sales and market share by providing flexible payment terms to customers internationally.
In non-recourse export financing, a financial intermediary delivers credit protection over the purchased receivables. So, another benefit for the borrower is credit-insured safeguards regarding their due payments from customers. The factor also acts as a guide for international trading including cross-border business rules, regulations, and currency demands.
Export factoring is the best option for businesses looking to seamlessly enhance their customer base internationally through scalable financing. It enables a business to commit high volume orders with customers and flexible terms of payment, consistently fulfilling cash flow needs after selling their invoices to any export finance company. So, the business will utilise all energies on growing sales and the factor will handle the collections process and bookkeeping.
In short, export factoring is a complete package of trade finance benefits, helping businesses with cash advances, collection processes, and credit insurance. Fineon exchange is one of the best export finance marketplaces to mitigate trading risks for its customers by providing export factoring services to help grow exports in the international marketplace.