FACTORING

International Trade Financing

International Trade Financing is funding international business transactions using either foreign buyers (international factoring) or foreign suppliers (purchase order financing).

International Factoring can offer you immediate cash for your receivables and minimize your credit risk. Rather than have your client pay you cash against documents or by letters of credit, you can now offer credit terms and expand your sales. With foreign buyers involved we will usually factor the receivable. We will want either the foreign company to be covered by an export credit insurance policy either through a commercial insurance carrier or Ex-Im Bank. Our investors has overseas insurance policies through various institutions. Overseas suppliers usually require payment through a wire transfer or want to be paid by letters of credit.

1) Credit Insurance - Are your buyers credit worthy? Only sell on credit terms to buyers who have an existing credit history file. A number of credit insurance companies have extensive pay and financial information on overseas buyers. These credit insurance companies will give you a predetermined line to sell against and insure you for this amount in the event of slow or non payment. Initial Premiums run from $3000 - $10,000 depending on the size and number of overseas account debtors. Contracts are usually based on sales where premium costs can vary for ¼% to 1 ¼% of the yearly sales.

2) Advance - Advance rates from the factor will vary between 70 to 80% of the face value of the invoice. Invoices, bills of lading and purchase orders are usually required to be funded. On your initial funding with a factor, usually a partial advance will be given and the balance when the buyer receives and accepts the goods. After you establish a track record full funding will occur upon shipment.

3) Carve outs with Existing Lenders - Most lenders usually will not fund against foreign receivables when they are part of an overall receivable package. An international factor can carve out these foreign receivables with the existing lender by using an Intercreditor agreement that stipulates the factor is in a first position on international accounts and the existing lender is in a first position on the domestic accounts. Most lenders are willing to entertain this arrangement because it keeps the client happy and also offers both lenders additional safeguards in the event there is a problem or default with the receivables.