In a global economy, invoice factoring is quickly expanding in popularity. Big and small companies alike have customers from around the world, which means that a large number of foreign currencies are being exchanged. An international factor can help you if you have international clients but don’t feel comfortable handling them.
How much you will pay an international factor depends on the same criteria that traditional factors use, but since dealing with international clients can be an unpredictable partnership, the process is slightly more encompassing. Fees still depend on how much you plan to factor, what your average expected invoice might be, and your average yearly sales. But unless you have an already-strong working relationship with a foreign company, the amount that a factor will advance to you up front will be a lot lower, sometimes as low as fifty percent and near thirty percent difference from normal. However, this difference in advance is only in effect for the first few contracts. Then the advance returns to normal. This eliminates any problems that might occur from dealing with a foreign company that doesn’t plan to pay.
There are ways around losing such a percentage of your factoring advance:
*Provide copies of prior payment arrangements between your company and a foreign company. This reveals a foreign company’s creditworthiness.
*Have the international client sign off on the product and state that they have received the goods and agreed to the payment terms.
*Have the goods inspected by an objective third party that can verify that the goods reached the client in an acceptable manner.
Once you have secured an international factor, the process of factoring becomes nothing more than ensuring that the product reaches the point at which you are no longer responsible for it, and your customers’ invoices make it to the factor. Since the terms of sale for most foreign companies involve Free On Board shipping port, you are responsible for getting the product to their port-of-call, after which they sign off that they received it and take possession. It is at this time that your company should send a copy of the purchase order (on the foreign company’s letterhead), a copy of the invoice, an ocean bill of lading and anything else that is normally shipped with the product, including an inspection ticket if required, to your factor. They take it from there.
Besides providing international companies with fast cash, international factors can also provide a credit line for foreign buyers and credit insurance for you. Although credit insurance isn’t always a necessity if you are familiar with your buyers, it can be necessary to guarantee that you are paid regardless of whether your client pays or not.
For more information about construction factoring, invoice factoring, government factoring, accounts receivable factoring, and asset based lending please visit http://www.capitalplus.com/
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