What are the benefits to the factor?
- Direct monitoring or the receivables portfolio by the Factor/Bank
- Greater collateral control
- Collection of debts controlled by Factor/Bank
What are the benefits for exporters & importers
Benefits for exporters
International factoring has many advantages for exporters by outsourcing credit and payment collection activities. The commission paid to the outsourcing agent (the so-called factor) is based on sales volume so there are no up-front fees like credit insurance or fixed operating costs when sales are slow. This makes international factoring more economical: it's a 'pay-as-you-go' scenario.
The benefits of international factoring for exporters include:
- reducing time-consuming credit administration
- protection against credit losses
- reducing risk while offering foreign customers competitive open account terms
- increased sales through competitive terms of sale
- accelerated cash flow as a result of faster payment collection
- liquidity to boost working capital
- better borrowing potential and an opportunity to make use of supplier discounts
Benefits for importers
Until recently, the letter of credit was the universally accepted way to do international business. But in today's fast-moving world of international trade, importers are much less enthusiastic about accepting the financial burden put on them under the letter of credit system.
Here are some of the advantages international factoring offers to importers:
- the opportunity to buy goods using convenient open account terms
- removing the need to open letters of credit
- expanded purchasing power without using up existing lines of credit
- the ability to place orders swiftly and without having to pay letter of credit opening charges, negotiation fees, etc