What are the Best Tips for Export Factoring
Export factoring can be explained as a facility of collecting money from the international market, on behalf of the company which has exported goods there. This facility is given by banks or specially formed company for this purpose. The money that is going to be collected is also known as open receivable. It is like a contract between Export Company and bank or third party. So it becomes very important for Export Company to select the best company or bank for the purpose of export factoring otherwise company may lose its money.
There are some tips for managing the export factoring procedure. First of all exporter should follow all laws of that country where goods are going to be exported. Before selecting a company or bank, you should check the reputation and also take advice of an expert before selling your open receivables. Also set your contract on short term basis, if you make it for long term then you may lose your money.
When a company trades in international market then it has to obey all laws of that country concerning business dealings. Some countries does not distinguish export factoring, in that case it becomes challenging for a company to gather all receivables. If factoring company buys receivables with just the expectation of money then it affects the business a lot.
Before selecting a company who buy receivable, exporter should check the capital of that company in case of any delay of payments from market whether he could pay your money on time or not. Export factoring is suitable only for short period of time. If an exporter repeatedly sells his receivables then factoring goes for long period which in turn leads to losses. Only 80-90 percent money is returned if exporter goes for long period export factoring, which outcomes as loss of business. The only benefit of export factoring is that exporter does not have run after every single buyer for money otherwise it’s a risky as well as in secure for every exporter.