Important Elements of International Factoring

International accounts receivables is more popularly called International factoring. It is a financial instrument whose main objective is to give security to exporters on the products and transactions they do in another country. International factoring gives both protection and financing to exporters regardless of the changes in the currency rates.

International Factoring is the assignment of an exporter to a factoring company that will operate the collection of accounts receivables.

In order for the exporter to make the work of the factoring company easier, he or she has to submit all invoices payable in the future that belong to the customer in case. The international factoring company will review all the information and the invoices. They may reject all those that they deem too difficult to collect and will keep those more likely to pay back. The exporter cannot work without the consent of the international finance company.

For the international factoring company to take your case, your company must receive an authorization from the buyer prior to the agreement. After this is done, the waiting period is generally of ten days depending on the country and amount of the buyer. If the application is denied, you will have to collect your accounts receivables in any way you estimate more appropriate, look for financing of other sorts, or assume the costs of the waiting periods.

Generally, an international factoring company will require the services of an insurance company on the accounts receivables it is taking from your company. If that company refuses to take the case, the international finance company will likely refuse it too.

Via a statement on the invoice, the exporter requires its buyers to pay the amount due to the company. It keeps track of customers and cash payments. In case of default of payment, the company factoring triggers raises. The legal proceedings will begin in case of refusal of payment from the buyer. The amounts received by the factoring company are paid back periodically, usually every week to the company.

On the plus side, international factoring protect the exporter from fluctuations in the currency. On the minus side, political risks and commercial disputes are not covered and therefore need to be settled between the exporter and the buyer of the products. It is important to note that one implication of this is the fact that the factoring company will not meddle when the reasons for non-payment are commercial or technical disputes.

Accounts Receivable Financing - Exporting to Africa

Several agencies of the US government support departments that have mandates to help you increase your export sales and minimize risks with regard to the sales of products and services to Africa. These departments exist within US agencies such as the Export-Import Bank of the United States, the Department of Commerce, and the Overseas Private Investment Corporation. All are supported by a relatively recent law called: The African Growth and Opportunity Act. The African Growth and Opportunity Act (AGOA) was signed into law by President Bush on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.

The African Growth and Opportunity Act (AGOA) has been modified three times to increase exports to Africa.

In the first modification, AGOA was changed in to substantially expand preferential access for imports from beneficiary Sub-Sarahan African countries in several ways: 1) The term "fabric" was previously interpreted by U.S. Customs as excluding components that are "knit-to-shape" (i.e. components that take their shape in the knitting process, rather than being cut from a bolt of cloth); now knit-to-shape apparel will qualify for AGOA benefits. 2) The definition of hybrid cutting was broadened to include cutting of fabric in the U.S. and/or AGOA countries. 3) The volume cap on duty-free treatment for apparel made from fabric made in AGOA regions or, for lesser developed beneficiary countries from fabric made anywhere was doubled. 4) Botswana and Nambia were specially designated as less developed countries.

In the second modification, AGOA's periods for preferential treatment for African imports to the US were expanded.

In the third modification, known as AGOA "1V" was expanded and liberalized again. In essence, US laws were created to increase US exports to Africa and imports from Africa to the US.

Pursuant to AGOA the US organized a U.S.-Sub-Saharan Africa Trade and Economic Forum hosted by the Secretaries of State, Commerce, Treasury, and the U.S. Trade Representative. The Forum serves as the vehicle for regular dialogue between the United States and African countries on issues of economics, trade, and investment. This fosters a unique cooperation between US agencies, African countries, and US businesses that desire to increase export sales to Africa with minimal risk.

How does this work? It involves the Export Assistance Centers of the US Department of Commerce to assist you with your marketing and sales efforts to Africa and financial support from the Export-Import Bank of the United States to Banks that participate in and finance the export of goods and services to Africa in a variety of programs.

The Export Assistance Centers are part of the U.S. Commercial Services which is the trade promotion of the International Trade Administration (a part of the US Department of Commerce). Their mission is to provide 1) market research in the form of country specific commercial guides; 2) industry sector analysis; and 3) internal market insight reports. They provide trade counsel and advocacy through every step of the export process. They sponsor trade events that promote your product or services to qualified African buyers. They provide introductions to qualified buyers and distributors. They will help settle disputes and negotiate tariff issues. Once described as "glorified matchmakers" they will go as far as possible to help you export safely to Africa- even to the US Ambassador to facilitate these objectives, if appropriate.

And they help with the nuts and bolts of exporting to Africa such as setting up meetings for you with up to 5 prospective buyers per day, selecting drivers, translators and hotels. When you go to Africa to sell your goods or services you will not be making a cold call; you will be meeting with pre-qualified people when you participate in this program- all at a nominal cost to cover the agency's expenses.

It is necessary for you to actually travel to Africa and meet face to face to successfully export to Africa. This is a cultural necessity. African businesses do not operate like American businesses where we trust negotiations conducted over the telephone and internet, and often transact without ever meeting the buyer or seller.

What exports are needed in Africa? You can read the research reports to find out specifically what is in demand. At the top of the list you will see products that purify water. Africa has a huge water infrastructure need. There is also a great interest in security related devices such as high tech devices to prevent theft of vehicles and increase recovery of stolen vehicles. Textile manufacturing equipment and telecommunications equipment also head the lists. Certain medical devices are also in demand.

What are some of the challenges regarding creating or increasing your export sales to Africa? It is difficult to qualify buyers; there are limited credit reporting facilities in Africa; African companies' auditing and accounting systems are not "world class". And it is difficult to ascertain who will actually pay as promised in you negotiations. To minimize these risks it is prudent to work with the Export-Import Bank and their correspondent banks and insurance brokers for international trade transactions to Africa.

There are specific Export-Import Bank standards for short-term and medium term credit; these may be located on their website at exim.gov. Financing guarantees and insurance are available for short term financing in 44 Sub-Sarahan African countries. They facilitate more competitive terms for African buyers. After the US correspondent bank has reviewed and approved you for financing, you can use these guarantees and insurance to minimize your accounts receivable financing risk when extending credit to African buyers. This applies to transactions wherein you have successfully delivered your products or services to African purchasers.

Unfortunately, there presently is no way to insure against contract frustration, also known as transactional risk. In other words, you take the risk of default if a prospective African buyer cancels the transaction before it is completed. You are at risk regarding disputes such as delivery or product specifications until they are resolved. And you cannot avoid devaluation of currency as a political risk either.

On the other hand, commercial risks such as insolvency, bankruptcy and protracted default are covered risks utilizing these programs; also covered are political risks such as war, revolution and insurrection.

How the International Trade Finances the Small Scale Merchandisers

Small businesses wanted something that may resolve and sustain their ever changing financial needs. International trade finances have gone far enough since the last decade.

As export volumes jump, importations also are rapidly incrementing; Chinese companies are increasingly looking for international trade source wares and raw materials. These tendencies have thought to be an essential change in how companies face the finance trade cycle. Recently, China's exports are receiving and expanding to a full scale with many medium-sized businesses (MEs) getting an advantage of the ever increasing opportunities for expansion in Mainland China and South East Asia.

If mid-market companies are into a much more aggressive stadium, they could demand to source out allowable finances and work on directing the best solutions.

The chain of business should be a total function of a broader supply chain management. In its easiest form, supply chain finance is something that seeing what is ordered is delivered, that what is sold is paid for and that there is a hard cash obtainable through the way. A good structured and adaptable facility should heighten a company's talking terms; cash flow and ultimate profitability. Companies would genuinely examine on the provisions given to see if it meets their financial status.

How will you know what option is for your company? Most providers today have to depend upon their business positions from costumers ill-equipped to pay. Given this situation, an importer is illegible to secure an Import Letter of Credit which is guaranteed by the bank on behalf of the company. These will give more assurance to negotiate on the terms of credits as well as the cost and quality of the commodity to be imported.

A fixed term Import Loan set on the rate of the imported trading commodity will aid to bridge the gap producing a considerable working capital benefit for the business. This happens when there is a difficulty of obtaining finances and lost of time is inevitable due to processing of the essential papers and requirements for the period between obtaining the trade goods from a supplier and getting payment from a client.

Exporters who wish to keep control over the trading commodities until payment can also benefit for a loan. An Export Letter of Credit can be secured by the supplier while waiting for a payment on a due date from a client. Also at the same time the supplier can request a payment for credits made by the costumer through its trade financier and confirm the Letter of Credit, the bank is obliged to pay for this matter.

A lot of banking services is offered today and gives instant discounts. The numerous forms such as country, politics, currency, economy, non-payment and even bank risk are the underlying dangers of the international trade finance for merchandisers that may came in. The key is discovering them early by talking and working with the right bank, specialists in international trade finances and acquire a idyllic strategy at the start to pilot through the challenges.

Changing and Moving the World Through International Trade Finances

The ever changing financial necessities made the average enterprises demand something that could figure out and hold their financial status through international trade finances.

Exports in USA are like having a bonanza with a lot of medium-sized businesses (MEs) making advantage of all the progressive opportunities for expansion in Americas and beyond. Exports are boosting, imports are also steadily incrementing as American companies are constantly facing the international trade to find sources of raw materials. Thee curves have created an essential difference in how companies face to finance business.

To source out financing and operate in managing the solutions, a mid-market troupe must win frequently on a more assertive international trade finance stadium.

Chain financing should be a whole piece of the overall supply chain management. It usually points out to an input equal's output scheme, most likely. What is sold is paid for and that there is an adequate hard cash accessible along the way. Cash flow and ultimate profiteering can be easily negotiated when a company has a well structured and lively facility. A lot of alternatives to choose from, but companies still prefer to look through their current financial standing and demands.

Most alternatives are accessible to mid-market community. An importer for instance may demand to hold a credit or a discount from a supplier, but it needs to have the capability to be able to pay. This is where ILC or Import Letter of Credit comes. It allows stronger negotiating power for credit terms as also for the quality and pricing of the trade goods that are being imported. On behalf of the company, the bank guarantees to pay the supplier under strict terms and conditions.

Once the goods are delivered, they will be stored for production for a certain period of time and once all the stocks are sold out, financing will be necessary for the period between getting the commodity from a supplier and receiving payment from a client. To assist with this situation, financial credits in a form of a fixed term Import Loan are available. It is established base on the economic value of the imported commodity and this will assist to bridge this down time, producing a substantial capital benefit for the business.

To counter a possible breach of contract and maintain the control over the goods until payment is acquired, exporter is equipped with an Export Letter of Credit. At the same time, looking for that customer payment which is accepted on a due date base on a request to its trade financier to confirm the Letter of credit, hence supplying the bank's own undertaking to pay.

The key to distinguish the risk earlier is through talking and working with the right bank, specialists in international trade finances, and formulating a clear scheme at the beginning to navigate through the challenges. Non-payment, political, currency, country, economic and even bank hazard are the risk of foreign trading. There is of course a much wider range of banking services than just those presented above.

Learning the Process From the International Trade Finance Specialist

The international trade finances most medium-commercial enterprises and is able to work out there financial needs. Bulk exports boost importations excessively and are steadily growing as Philippine companies progressively seeing foreign companies to cook up the materials. These styles have entailed a cardinal change in how companies' approached the trading cycle.

Smaller commercial enterprises require something that could work out and support their financial demands. Most recent estimates issued by the National Statistics Office (NSO) reveals that Philippines exports are blasting with tons of medium-sized businesses (MEs) holding advantage of the accelerating probabilities for expansion in Asia and the rest of the world.

Generating allowable international trade finance and process management solutions, mid-market companies should be more aggressive to foreign arena.

Backing the supply chain should be a piece of general supply chain management. In its casual form, supply chain finance is most likely seeing that what is ordered is delivered, that what is sold items are paid for and that there is an enough hard currency accessible on the way. An adaptable and a well structured facility should, in reality, a company's negotiating posture, cash flow and ultimately profitability. While there are many choices offered, parties require to see at what is being proposed to them and verify the list of existing and latest, trade financial positions.

What choices are useful for mid-market companies? An importer can take to acquire credit or a discount from a supplier but likely or be required to pledge that they can pay. By having an Import Letter of Credit on the company's behalf, the bank contracts to pay the provider at a given point in time, abiding with the agreed conditions and terms. This satisfies the provider that they will take payment and offers better negotiating power for the transaction on credit terms as well as on the quality and cost of the goods that are being imported.

A fixed term Import Loan is established on the price of the imported commodity will assist to bridge the disruption, creating a remarkable working capital benefit for the business. These are beneficial when buying the stocks to a certain point of time. Before they can be sold on, financing will be mandatory for the period between having the goods from a provider and obtaining payment from a customer.

On the other side of the fence, exporters might want to hold control over the commodities until payment is taken by using an Export Letter of Credit, while at the same time seeing that customer payments are obtained on the due date by demanding its trade financier to confirm the Letter of Credit, thus bringing the bank's own task to pay.

International Business Finance

Many firms are interested in investing and seeking finance from foreign sources and exporting goods and services to foreign countries. Overseas involvement of firms is increasing, and this trend is expected to continue. This has been stimulated by a variety of forces. First is the change in the international monetary system from a fairly predictable system of exchange to a flexible and volatile system of exchange. Second is, emergence of new institutions and markets, particularly the Eurocurrency markets, and a greater need for international financial intermediation.

In 1971, the US dollar was unlinked from gold or allowed to "float". This brought about a dramatic change in the international monetary system. The system of fixed exchange rates where devaluations and revaluations occurred only very rarely, gave way to a system of floating exchange rates.

The distinguishing characteristics of international business finance are multiple currencies, differential taxation and barriers to financial flows. Of these, the multiple currency factor and the attendant issue of exchange rates has received considerable attention, particularly in recent years. An exchange rate represents the relationship between two currencies.

The procedure for evaluating a foreign investment in international business finance consists of identification of cash flows, choice of an appropriate discount rate and determination of net present value. Foreign investments generally involve higher risk, which arises from factor like changes in currency value, discriminatory treatment of a foreign company and threat of expropriation. Risk stemming from fluctuations in exchange rate looms constantly on the horizon of foreign investment. In addition, a foreign investment is subject to discriminatory treatment and selective control in various forms motivated mainly by political considerations. Finally, the threat of expropriation without adequate compensation may exist, particularly in countries where radical nationalistic sentiments are strong. In view of the higher risk associated with foreign investment, a firm contemplating foreign investment would naturally expect a higher rate of return.

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