Supply Chain Solutions No.38 – Factoring, why do it?
With all businesses, a positive cash flow is paramount. In first world countries, credit facilities can be established to offset negative business cycles through a transparent credit rating system, allowing enterprises access to overdrafts, extended credit limits and payment terms or various forms of finance from financial institutions.
In developing countries, this is not necessarily the case; credit ratings been based on relationships, credibility and tangible assets. If your business is a start-up, high growth in its infancy or has gone through a length negative sales cycle; government or financial institution may not be enthusiastic granting necessary funding.
Subsequently, where does that leave these companies unable to obtain traditional financing, only take sales orders that can be financially managed limiting growth and opportunity? Commonly, these businesses look to relatives and friends for support, that support, however, can only be extended so far. The last option is to turn to private underground lenders, loaning short term at exorbitant interest rates to finance purchase orders and customer payment terms.
But there are alternatives; trade finance is available whereby the seller partners with a factoring company who acquires their receivables. When goods are exported, the seller is paid upon presentation of shipping documents to the factoring company who purchased the receivable from the seller. The buyer through pre-agreement pays the factoring company within the given payment terms to close the due receivable.
What are the benefits of using trade finance;
- Buyers have access to open account payment terms from sellers of 30, 60 or 90 days, allowing the ability to maximise credit lines and improve working capital.
- Sellers can offer attractive payment terms to buyers who only accept open account payment term improving competitiveness.
- Sellers reduce cash exposure and risk of late or non-payment through guaranteed quick payment upon shipment without navigating Letters of Credit or pushing the buyer for payment. The factoring company assumes all responsibility for the receivable.
- Both buy and seller reduce cash flow exposure, maximising business growth potential.
IDGC in cooperation with Stenn International, a UK-based factoring provider, focused on cross-border invoice financing between emerging markets and developed countries. IDGC is the bridge between global vendors and Stenn International, enabling the full benefit of factor finance to both buyer and seller.
IDGC 和Stenn International 配合（一个英国背景的保付代理公司），专注于跨境贸易在新兴市场和发达国家之间的出口发票融资。IDGC是国际卖方和Stenn International 之间的桥梁，使得保付代理融资的全面优势得以在买方和卖方中实现。
We support businesses globally offering an easy solution to financing from export to customers in developed markets. Factoring gives sellers immediate access to risk-free capital upon export, and the buyer receives flexible payment terms on an open account freeing cash flow…a win-win solution for both seller and buyer.
我们以最简易的融资解决方案，支持全球性的出口卖方到发达国家客户之间的贸易往来。保付代理可以给到卖家最快速的进入出口贸易中获取无风险资金，并且买方可以收到灵活的赊账付款条款达到现金流释放 – 一个卖方和买方双赢的方式。
Factoring is available to all global businesses exporting commodities to developed markets, reach out to Phil Bailey via email firstname.lastname@example.org to receive an immediate benefit to your business.