I would say it is the connected ecosystem of import and export factoring institutions across geographies and continents. We are looking at close to 400 FCI members across 94 countries - all of them connected through a uniform legal foundation, transacting seamlessly with each other, using a digital EDI platform.
The message types as well as legal and operational contents have been standardized for factors across the world for an efficient communication. It’s a great example of partnership across shores, to help our clients transact on their physical supply chains.
I have seen FCI promoting a culture and a forum of Connectivity, Mentoring and Trust. There are several examples where an existing established factor opens up its Operations, for a New FCI member, to visit, learn and experience the process and controls required, to conduct this business properly. We can also see often that import and export factors assist each-other with their local knowledge, to collaborate and win the business, together.
I remember, in one of the cases, the Bank was dealing with an export client who used to deal with debtors across 3 continents, in locations where the exporter’s bank had no presence. The export factor leveraged their FCI membership to reach out to different import factors in debtors’ locations, who were able to underwrite debtor risk as well as collect from them locally. This enabled the export factor to provide appropriate solution to the client and win the business.
Recent months have been one of the most challenging times for businesses, as well as business leaders, across the world.
Heightened risk environment, liquidity, sustainability of business, supply chains and sales velocity, have all been impacted, unlike anything seen before.
In the Middle East region, factoring has allowed our clients to monetize their trapped receivables and helped them with liquidity issues during the crisis.
Many clients faced an adverse impact of lockdowns where their sales were impacted but they still had to pay for their working capital needs as well as overheads. Factoring, an apt solution, allowed them to stay competitive and assured liquidity.
For example, one of our clients, a large Hospital chain, had receivables from their insurance companies which were usually getting delayed. The suppliers on the other end wanted quicker payments, as their products were in-demand. This client used factoring as a working capital tool and helped them with upfront liquidity to meet their immediate working capital needs.
Factoring assisted our clients to better predict their supply chain and cash flows. It provided necessary credit cover to help them focus their resources and time to meet their business needs.
In tough credit times, features of cross border factoring that provides 100% bad debt protection against buyer risk, came in handy to continue to sell, on a secured basis.
We have seen many cases where Sellers have used factoring as a tool to increase credit appetite, change payment terms and expand to new geographies and buyers.
In a particular case, the credit terms of a large automobile company were backed by Letters of Credit. The buyers were not very happy as the LC required them to block much needed working capital, costed more and was operationally intensive. The bank looked at their strong track record along with growth potential and gave them a factoring credit line, which enabled overall cost reduction for the Seller and their Buyers.
In another case, a large telecom provider in Asia was bidding for a new business with a large buyer. While both the parties were reputed, the seller required credit protection on the buyer as this was the first time they were selling to this name. Bank pitched in with the solution and arranged for credit protection to help them conclude the deal.
Factoring thus builds trustful relations.
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