For sourcing funds for overseas trade, factoring is a great option. Factoring means purchasing the company’s receivables by the purchasing company as early as possible, in order to create a continuous form of cash flow. The key benefit of factoring company is that the buyer is responsible for company’s credits, without any kind of interference in the company’s management. In other financing options, there is involvement of loan factor. In case of factoring there is a direct purchase of the receivables so as to give funds to company.
Sale of goods in the international market is challenging and rewarding as well. Once you begin to export your goods, you will be actually exposing your company to lots of possibilities globally. You never know, you might even get rewarded with great financial gains. Not only will you be in a position the get the best financial rewards, but you will also be exposing your company to come challenges of international trade and commerce.
The settlement of many of the international transactions is made using corporate or bank letters of credit. Therefore, you will never face a problem of not being paid on time. There are some types of clients who might demand you to give the terms of payment. In such a case you might have to wait for 30, 60 or may be 90 days before getting the payment from your client. In such a case, waiting for a long time for receiving the payment can get tough especially when it is a growing company.
Other option is to approach the banking institution for the business loan. You can’t get assurance of the loan as your loan might get sanctioned or even get rejected. Due to the banks stringent policies, loans are sanctioned for the companies that have a good past history. Therefore, this won’t work for trading companies that have a very short history with bright future.
One of the most common option is going for invoice factoring. This will eliminate the 30 day waiting period for getting paid. International Factoring or export factoring is the high utility tool for fresh, new as well as growing businesses.
The factoring is another type of financing where the company that is factoring will assist you in advancement of your substantial portion of invoices. The company that is factoring will wait for getting paid, and you will immediately be in a position to utilize your funds. In this manner your cash flow issues during extension of terms will get eliminated.
International factoring is a specialty area in factoring. Quite a few factoring providers offer international factoring. Therefore, before going ahead with the International factoring, you need to make sure that you talk to the factoring companies and make sure that you specifically ask the factoring companies whether international factoring is offered by them or not, and their specific terms and conditions.
There are several factoring companies offering purchase order financing. Factoring of this kind will provide you with financing for fulfilling your purchase orders. This form of factoring will give you the required funding for paying your suppliers, making the purchase order as collateral.
If you have a growing company and is selling goods overseas, make sure you also use the purchase order finding as a good financial tool for helping you grow better.