Export factoring companies exist to make life easier for exporters. Factoring is the process of introducing a third party into trade negotiations to make paying easier for the buyer while providing funds to the seller more quickly.
If your organization is considering partnering with an export factoring company, you want to remember a few things when you browse for potential factors:
- Payment terms and factoring rates. When you partner with a factor, they will essentially buy your open invoices for a percentage of the total value, and then they will take over tracking down payments for the full amount from the buyer. The factor makes a profit on the difference, and your organization receives the funds from the invoice immediately. When looking for an export factoring company, you need to assess their rates and make sure you’re not overpaying for a slight convenience.
- Contract requirements and special conditions. When you partner with factors, they may require you to enter into contracts, essentially providing them with open invoices on an agreed-upon basis over a set period. However, you may only need to factor a few invoices for larger sales, and a contract can rope your company into paying for a service longer than it needs it. Take special care to review the terms and conditions before agreeing to work with any factor.
- Factoring can be a fantastic pinch-hit. When you tie up your cash flow with open invoices, you can’t use those funds to pay your people or expand your business. Factoring frees up those funds – sometimes in as little as a day. Your business gets liquidity when it needs it, and the factor makes a profit once it collects full payment from the buyer.
- Factoring lends itself to leaner operations. Cut time spent on administrative tasks, get liquidity when you need it most, and free up the cash locked in open invoices. Factoring is a great way to grease the wheels of your organization’s operations and expand more quickly.
When you choose an export factoring company, you need to assess what it has to offer your business carefully. Drake Finance has grown into one of the most successful export factoring companies; we have a simple application process, very competitive rates, a full suite of cash management services, and no contract requirements. Visit us online to learn more about what export factoring can do for your operations.