International Accounts Receivable Factoring, more commonly referred to as International factoring, is a technique that aims to protect the exporter against the risk of non-payment. It is a means of financing international trade transactions. It may also offer protection against currency risk.
Through International Factoring the accounts receivables of an exporter are sent to a factoring company for their collection.
For the factor to start working on a case, the export must present all information concerning the amount the customer has to pay in the future or that has already failed to pay. This information will then be reviewed by the factor which will select those customers who are most likely to honor their commitments and reject those that are too risky. By doing this the exporter is granting the factoring company the authorization to work on collecting those bills.
To qualify for the guarantee of the company, the exporter must obtain prior authorization for each buyer under a credit limit. The average response time is ten days but depends on the country of the buyer and the amount of the invoices. If denied, the participant can complete the transaction at its own risk or by using another technique of coverage.
Generally, an international factoring company will require the services of an insurance company on the accounts receivables it is taking from your company. If that company refuses to take the case, the international factoring company will likely refuse it too.
In the best case scenario, the international factoring company decides to take your case and collect your bills. The factor will use the information provided by the exporter about the buyers and the amounts owed. The international factoring company takes legal measures to settle the accounts when the customer does not pay. The transfer of the funds to the exporter will typically take a week.
Additionally, by using international factoring all changes in currency are covered by the company. Although some risks are covered, not all of them are. International factoring will not protect you from political risks or commercial disputes. The reasons for non-payment have to be different from commercial or technical dispute. It is up to the exporter to settle differences with the importers without the mediation of the international factoring company.
Through International Factoring the accounts receivables of an exporter are sent to a factoring company for their collection.
For the factor to start working on a case, the export must present all information concerning the amount the customer has to pay in the future or that has already failed to pay. This information will then be reviewed by the factor which will select those customers who are most likely to honor their commitments and reject those that are too risky. By doing this the exporter is granting the factoring company the authorization to work on collecting those bills.
To qualify for the guarantee of the company, the exporter must obtain prior authorization for each buyer under a credit limit. The average response time is ten days but depends on the country of the buyer and the amount of the invoices. If denied, the participant can complete the transaction at its own risk or by using another technique of coverage.
Generally, an international factoring company will require the services of an insurance company on the accounts receivables it is taking from your company. If that company refuses to take the case, the international factoring company will likely refuse it too.
In the best case scenario, the international factoring company decides to take your case and collect your bills. The factor will use the information provided by the exporter about the buyers and the amounts owed. The international factoring company takes legal measures to settle the accounts when the customer does not pay. The transfer of the funds to the exporter will typically take a week.
Additionally, by using international factoring all changes in currency are covered by the company. Although some risks are covered, not all of them are. International factoring will not protect you from political risks or commercial disputes. The reasons for non-payment have to be different from commercial or technical dispute. It is up to the exporter to settle differences with the importers without the mediation of the international factoring company.
About the Author:
Wade Henderson - very Professional - 15 yrs in the Business Finance Field - reputation for getting the deal done. IMMFinancial.com Comercial Finance Broker
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