International Factoring - How does it work?

01

Exporter receives purchase order
02

Exporter sends importer’s information for credit approval
03

Export factor checks the importer’s creditworthiness through FCI partner
04

Import factor evaluates the importer and sets a credit limit
05

Exporter makes shipment to importer
06

Export factor makes cash advance up to 80% of assigned invoices
07

Collections are carried out by the import factor
08

Import factor remits funds to Export factor
09

Export factor remits the 20% remaining Balance to exporter’s account less any charges

STEP 01

Exporter receives purchase order

The foreign buyer places an order with the Exporter under “open account” payment terms. The Exporter has signed an export factoring agreement with a Bank or a Factoring Company in his country and his Factoring Company is a member of FCI.

STEP 02

Exporter sends importer’s information for credit approval

The Exporter sends all information about the foreign buyer to his Factoring Company (exact name, address, identification number, maximum outstanding amount, payment terms).

STEP 03

Export factor checks the importer’s creditworthiness through FCI partner

The Export Factor has chosen an Import factor in the buyers’ country and has signed an Inter Factor Agreement, agreeing on mutual cooperation in the two-factor system, based on FCI’s General Rules of International Factoring and on the use of edifactoring, FCI’s messaging system. The Export Factor will send through edifactoring a credit approval request on the buyer to the Import factor

STEP 04

Import factor evaluates the importer and sets a credit limit

The Import Factor will analyse the creditworthiness of the buyer in his country, based on his internal credit information or by using the services of a local credit insurance company. The Import factor will send to the Export factor his decision to approve (or refuse) the requested credit limit approval.

STEP 05

Exporter makes shipment to importer

The Exporter will be advised by his Factoring Company about the Credit Approval on the buyer and will ship the goods. On the invoice the Exporter will advise the buyer that payment will have to be made on due date on the bank account of the Import factor.

STEP 06

Export factor makes cash advance up to 80% of assigned invoices

The Exporter receives pre-payment (generally up to 80%) of the invoice amount from his Factoring Company, based on the Factoring agreement signed with his Factoring Company.

STEP 07

Collections are carried out by the import factor

The Import Factor will send reminders to the buyer to receive payment on due date and will start collection procedures if no payment is received. The Import Factor being situated in the buyers’ country will do these collection efforts in the buyer’s language and according to commercial and legal practices from his country. If the approved buyer still hasn’t paid for reasons of insolvency on 90 days after the due date of the invoice, the Import Factor will pay the Export Factor and will continue legal collection activities with the buyer.

STEP 08

Import factor remits funds to Export factor

As soon as the buyer has paid the invoice, or in case of non-payment by the buyer at 90 days after due date for reasons of insolvency, the Import factor will make a SWIFT payment to the Export Factor for the invoice.

STEP 09

Export factor remits the 20% remaining Balance to exporter’s account less any charges

The Export Factor will clear the invoice in his books and will pay the remaining balance (20% if pre-payment was 80%) to his client, the Exporter.