Export Financing Advantages, Application Requirements and Process
Export financing advantages, requirements, process
Due to globalization, companies today aim to achieve boundary-less growth by expanding their business into global markets that offer profitable possibilities and opportunities. Undoubtedly, the aspirations of globalization come with some challenges. However, the corresponding benefits effortlessly outweigh these troubles. Moreover, companies from different industries are currently seeking quick solutions to achieve global growth and to establish long-term overseas business ahead of their competitors.
In terms of smooth international trade, export financing has proven to be a powerful tool. Export financing, also known as international factoring or accounts receivable financing, is an excellent solution for exporters to trade with international importers or buyers. It enables exporters to conveniently and quickly obtain working capital without waiting for buyers to settle invoices.
How does it work?
Export financing is highly suitable for small and medium-sized enterprises that need funds but have limited bank credit or no credit record documentation. To a large extent, it becomes the responsibility of financing institutions to pursue overdue payments.
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To attract importers, exporters usually draft payment terms that state buyers can have longer payment periods. However, this also means they must manage the funding gap between shipment and receipt of payment. To arrange funds to sustain their business during this waiting period, exporters can turn to export financing.
They can submit unpaid invoices to the financing institution, which will provide them with a certain percentage of the total invoice amount as an immediate payment. Then, the buyer is responsible for paying the financing provider instead of the exporter. After the importer settles the invoice, the financing provider will pay the remaining amount to the exporter and deduct the service fee agreed upon by both parties when signing the contract.
Advantages of Export Financing
Export financing brings many benefits to global suppliers. It helps companies maintain stable cash flow, improve collections, and take preventive measures to handle debt. They can take advantage of opportunities to achieve higher sales by offering longer payment terms to buyers, while avoiding cash flow shortages. The following are the main advantages of export financing:
1. Exporters can quickly obtain funds that would otherwise be tied up for months.
2. They can use these funds to develop growth strategies for the company and invest in new tools and technologies to accelerate growth.
3. Funding is based on individual invoices rather than the exporter’s credit history.
4. After invoice settlement, the financing company will immediately pay the remaining amount.
Can you get export financing?
It is important to check the terms and conditions of the financing company you are considering to see if you qualify, as different financing institutions have different regulations. To qualify for export financing from different financing companies, exporters must meet certain criteria. Generally, export financing is applicable to exporters of global trade and must provide longer payment terms for invoices.
In some cases, exporters may also need to provide proof of the minimum proportion of export income or submit unpaid invoices. To qualify for export financing through traditional means such as banks, exporters may need to meet additional standards such as a positive credit rating or proof that the company has sufficient income to repay the loan.
The Power of Export Factoring with Coface
Coface International Factoring focuses on cross-border transactions and provides financing for sales with payment terms of open account (O/A), letter of credit (L/C), and documentary collection. We help you solve short-term cash flow problems by purchasing your accounts receivable, and can provide prepayments of up to 95% of the invoice amount. Then, at the expiration of the invoice, we collect the full amount from your customer. After the invoice is fully paid, we will pay the remaining amount to you.
Why Choose Us?
DeYiShi specializes in simplifying company cash flow, providing non-recourse trade financing solutions, and providing customers with quick working capital. You can also flexibly choose the best way to fully utilize export financing:
1. Export factoring under credit sales settlement
We first check the credit status of your buyer and set a credit limit for them. Then, we purchase your accounts receivable and usually pay you within 24-48 hours after submitting the invoice. We manage your accounts receivable and collect on your behalf from your customers. If your customer is unable to pay due to bankruptcy, we will pay you (without recourse).
2. Export factoring under documentary settlement
If you settle through documentary settlement, we will discount it for you and handle the bank collection procedures on your behalf.
3. Export factoring under letter of credit settlement
Your buyer opens a letter of credit with us. If the terms and conditions specified in the letter of credit are met, you will receive payment.
Here are some other key advantages of choosing us as your export financing partner:
1. Our service is different from a loan. Therefore, for most companies, our financing will not appear as debt on your balance sheet.
2. The application and setup process is faster and easier than applying for a bank loan.
3. We primarily finance based on your customer’s creditworthiness rather than your financial condition.
4. You can rest assured because we monitor your customer’s credit status and assume the risk of insufficient payment due to their bankruptcy.
5. You will receive payment within 24-48 hours after submitting the invoice, rather than weeks or months, and sometimes even faster in certain cases.
6. You can offer longer payment terms, which are more likely to attract larger buyers.
7. We will handle the collection, recovery, and bookkeeping work on your behalf, simplifying your workflow.
8. Our local experts comply with regulations in each country and region, and provide appropriate services such as currency regulation and control.
9. Our financing schemes can be tailored to your company’s needs and can be expanded as your company grows.
In addition to providing factoring financing for your export receivables, Deyisi can also provide financing for your entire supply chain. Our global financing program can support financing based on accounts payable, accounts receivable, and inventory. We use order financing, inventory loans, letter of credit discounting, and structured guarantees to help you coordinate the needs of both buyers and sellers.
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