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Is exporting really that pot of gold at the end of the rainbow that people make it out to be? It can be, but not without a magnitude of cash flow risks that your business won’t have had to encounter before.
Once you start exporting, a whole new range of customers will fall into your lap. To improve the growth process, export factoring is there to help companies hedge the risk involved.
This is financing that’s focused solely on exporters and the risks that follow them. Financing will usually be provided by banks or the government, as exporting leads to overall economic growth. Export factoring helps exporters to achieve consistent cash flow for growing and stimulating their own business and the economy.
The main difference between domestic and overseas invoice financing is the parties that are involved. With domestic invoice financing, the buyer, seller and financing party are involved.
Export factoring includes four parties, the seller (exporter), the buyer (importer) and the financing parties for both export and import. The financing party that handles the importing will need to qualify according to the export factoring company’s requirements.
When considering your options for export financing, make sure you keep the following features in mind:
The cash flow dilemma reveals how beneficial invoice financing can be for a business that is operating in exports. Each of the risks above can be offset by choosing the right invoice financing solution for you.
Export factoring isn’t available for all exports. If your overseas customers take longer than 180 days to deliver payment, or do mostly cash transactions, export factoring will have limited functionality for your business.
Before you start the application process, ensure that you have all of the required documents, which can differ from one provider to another. For example, you may need to provide your qualifying turnover per year, but all of the legal documentation that refers to your buyers, as well as a creditworthy export manager, will be included in the requirements.
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