BenefitsĮxport factoring improves short-term cash flow and boosts the businesses competitiveness in an international marketplace. The facility virtually eliminates the risk of non-payment by foreign buyers, allowing the UK exporter to offer open account terms with confidence. Put simply, a factor or factoring company buys the exporter’s foreign accounts receivables and provides an advance to the business of up to 80% of the value of the invoice typically without recourse where the factor assumes full liability for non-payment. This is when goods are shipped and delivered before payment is due, typically within 30-90 days. This type of factoring is suited to small and medium-sized exporters that export consumer goods with open account terms. During this time the exporter has: – a cash-flow deficit while it waits to be paid – the risk that the importer may run into business difficulty, such as insolvency, during the period before the goods arrive. In this scenario, the exporter has an immediate cash-flow impact, as well as being held hostage to the speed with which something can clear customs.Įxport timings may be 30, 60, 90 or even 180 days. Many buyers prefer to arrange trading relationships whereby they can pay for goods once they have received them through customs, for example. While this would be the best scenario, competitive markets mean the availability of preferential credit terms has become a key factor in choosing multi-national trade partnerships. Typically, companies asked to send their goods and services overseas can’t charge 100% payment upfront. What are the Potential Credit Problems for Exporters? It’s a form of asset based finance, specifically tailored to businesses insolved with exporting to international markets.Įffectively, it’s a loan whereby invoices (in this case those held by a foreign debtor) are used as collateral for an advance. How Does Export Finance Work?Įxport finance is a finance agreement similar to factoring, whereby money is advanced against the value of unpaid invoices. Once a shipment has left domestic customs, there can be a significant time period while the goods are in transit, and are then collected by the importer.Įspecially where emerging markets are concerned, the ability to extend attractive payment terms to the importer is often a huge part of winning an order.Įxport finance aims to maintain positive cash-flow cycle during the gap. ![]() How can Trade Finance help Support Exporters? DefinitionĮxport Finance is the term to describe the specialist range of finance focussed on the export market.Įxport financing aims to support businesses reaching an international market.What are the Potential Credit Problems for Exporters?.Thank you for your interest in Curtis, Mallet-Prevost, Colt & Mosle LLP. ![]() For that reason, please refrain from sending the Firm confidential information through e-mail. In addition, in the absence of such an agreement, the Firm will be entitled to utilize such information on behalf of existing or future clients who may be adverse to your interests. Any information provided to us without such a prior agreement may waive legal privileges that you might otherwise have. An attorney-client relationship, and an obligation for the Firm to maintain your communications in confidence, can be created only after proper checks for potential conflicts with current clients are conducted and an agreement of representation is reached. It is important to us that you understand that transmitting information to us by e-mail does not establish any attorney-client or confidential relationship with us. We value your interest in Curtis, Mallet-Prevost, Colt & Mosle LLP and any communications prompted by your viewing of our website.
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