International factoring – Two -factor system
International Factoring represents buying of existing undue or future short term receivables which occur from goods or service purchasing contracts in international trade business.
Whom is International Factoring intended for?
International Factoring is intended for exporters, mainly medium-sized or large companies, with signed commercial agreements and long-term co-operation with their foreign customers.
Advantages of International Factoring for an exporter
- Enables offering better payment terms for customers abroad, particularly in terms of prolonged payment due date
- Provides faster collection of receivables, which positively affects cash flow
- Financing of exporter by the Bank is in foreign currency, depending on the currency of the receivables
- Meets the needs for additional working capital, without credit indebtedness
- Increases potential for export due to utilization of flexible source of capital
Who are participants in the International Factoring?
- Exporter (Seller) is bank’s client who assigns, via bank, receivables arising from purchase agreement on international trade business
- Importer (Buyer) is foreign legal entity who received goods or services on the basis of a contract and is liable to pay invoiced amount in the future period.
- Export Factor (Bank) is our Bank which provides factoring services and pays to the exporter the contracted nominal amount of the invoice.
- Import Factor is Bank or factoring company which offers factoring services in the country of Importer and which handles the business of assignment and collection of receivables for the Export Factor
How International Factoring works?
- Export factor signs an agreement with the Exporter on the purchase of receivables based on the invoices
- Export Factor signs an agreement with Import Factor on collection of receivables
- Export Factor approves to the Exporter financing of 100% of the receivables. It immediately transfers between 70% – 90% of the assigned receivables to the foreign currency account, while the rest of 10% to 30% of the amount, after the payment of Import Factor, is transferred to the Seller with the prior payment of interest
- Interest for the Importer is calculated on the amount financed from the moment of financing to the Import Factor payment date
- Upon payment of the assigned receivables of the Importer to the Import Factor, it is required to remit payment to the import factor immediately.
- In a case of non-payment by the Importer in all cases except from goods quality claim, the Import Factor has 90 days from the date of invoice reception to settle its liabilities towards Export Factor under the guarantee
- After the payment from the Import Factor to the Export Factor, the remaining amount (between 10% and 30%), reduced by the amount of fees and interest, is transferred to the foreign currency account of the Exporter
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