The Best Approach to Trade Finance Factoring

by | May 25, 2017 | Financial Services

International sales can be risky, but they do not need to be if a company is wise in choosing partners and support services that will help to minimize and carefully assess potential risk.

By using a trade finance factoring service with a proven record of support, assistance, and knowledge of international trade, your company can take advantage of untapped markets to be able to sell overseas. This is not just a way to evaluate your markets, but also to receive cash on the value of your invoice before your international customer is required to pay.

How It Works

Factoring for international sales requires a specialized trade finance factoring service. This company will have the ability to evaluate the buyer’s creditworthiness and then, based on the amount of the accounts receivable, provide an immediate cash payment to your business on the accounts receivable amount.

This can be up to 95% of the value of the accounts receivable. The factor will charge a specific fee for the service, which will be deducted from the amount of the financing advance. The residual of the account will be forwarded to your business once the accounts receivable is paid in full.

Making Collections

Not only will the trade finance factoring service provide you with the cash advance, which can be within one or two business days of the shipment arriving to the buyer, the factor then assumes the account management for those accounts receivable.

This means that your accounting department doesn’t have to worry about dealing with companies in other countries, the factor will make collections and manage the account until it is paid in full.

With the advanced funds, your company can choose to expand, replace inventory, hire new people or even move into new markets. This is a highly effective option for companies with a current sale that want to have the cash to keep on growing and expanding their international market.