It is possible to factor your export debts to help improve the cashflow of your business and although an export factoring facility runs very similarly to any factoring facility not all UK Factoring Companies offer this type of facility. Export factoring is suitable for businesses of all sizes which offer a straight forward product or service.
If you have just one or two export customers and these account for no more than 40% of your debtor ledger, then we know a number of Factoring Companies which will fund these debts. They will however often rely on you to carry out your own credit control. This may be the right choice for you but, if you don’t have the in-house expertise to collect debts in a foreign language or, if you have export customers which account for more than 40% of your ledger, then we can introduce you to funders who can provide multi-lingual credit control staff. Your debts will be chased in the local language thereby being more effective than trying to collect them in English. These credit control staff will often work outside core UK business hours in order to take account of overseas time differences.
There are also some UK Factoring Companies which work with global networks of overseas Factors. These are called Factors Chain International (FCI) and International Factors Group (IFG). These overseas Factors are used to obtain credit information about your customers as well as collecting your debts.
Bad debt protection (credit insurance) is usually an essential part of any export factoring facility. Assuming your customer is credit worthy (and who wants to work with a customer who isn’t?) then a credit insured limit will be approved, against which a funding limit will subsequently be agreed. This bad debt protection insures you against the risk of your customer going into receivership/administration, as well as your buyer defaulting i.e. as long as there isn’t a dispute over the goods or the work and the customer can’t pay, the debt is insured.
Factoring Companies who do offer export factoring can also offer multi-currency accounts thereby reducing currency fluctuation risks.
The export factoring facility will work very simply:
- You receive an order
- Pass the details to your Factor to obtain a credit insured limit and a funding limit on your customer
- Deliver the goods direct to your customer
- Send a copy of the invoice and supporting documents to your Factor
- Payment of up to 90% will be paid to you within 24 hours
- The Factor chases the debt in the local language if the payment hasn’t been received by due date
- Once the debt is collected, the 10% balance is refunded to you. Simple!
Export Factoring allows you to offer credit terms to your customers, thereby giving you a competitive advantage to win more orders. By having multi-lingual credit controllers working on your behalf and having your debts credit insured then you are reducing the risk of losing money.
Give us a call today to discuss which options are most suitable for you and your business.