GUIDE: Securing Export Factoring for your clients

Sourcing domestic invoice factoring will uncover a plethora of options but, locking down a solution for clients that export to overseas customers can be challenging.

In the business of exporting, owners quickly become aware they need to reach a wide customer base and only extend credit to high-quality customers or risk taking a loss.

Of course, these risks can be mitigated by demanding payment upfront however, larger corporates may demand trading terms which simply can’t be avoided.

Export financing, including factoring, helps businesses obtain the working capital they need to expand into overseas markets. Export factoring is one form of funding where trade financiers extend businesses working capital by advance payment against creditworthy buyer receivables, closing down the cash flow gaps when selling overseas.

It can be difficult to find a suitable lender due to the risks associated with funding overseas customers. Most local invoice factoring providers prefer to fund domestic invoices, with some of the issues listed below:

  • Legal jurisdiction
  • Senior debt provider will not allow it
  • Inability to assess credit risk and/or counter-party complexities
  • The bank’s covenants or debt restrictions don’t cover overseas customers
  • Expensive to chase debts, the risk of non-payments and collection issues
  • The lender’s trade credit insurance policy doesn’t cover foreign debtors

Factoring Export Receivables

Export factoring is designed to allow businesses faster payment for the goods they have shipped to overseas buyers. Export factoring occurs when a business contracts with a buyer for their goods on credit terms commonly up to 120 days.

Early payment can be achieved for the exporter from funds advanced by the export factor, who then collects payment from the buyer’s at a later date based on the agreed-upon payment terms.

Depending on the terms, some businesses achieve early payment at the time of shipping. The export business can be paid once they have presented the customs and export documents showing that their items are on the way to the buyer. If buyers accept title to goods upon pickup or loading and inspection, funds can be released by the factor before they arrive in the customer’s warehouse or port.

Providers like Stak bridge the gap between export companies and international buyers to facilitate credit term agreements via our factoring partners that help to repay our pre-shipment funding. Stak provides upfront payment against export customer orders and more.

Exporting to other countries often involves greater financial investment than selling goods within Australia; Faster upfront payment can enable a business to advance growth by bringing cash flow forward so that they can tackle new markets without starving the operation of working capital.

Instead of waiting for payments to clear banks, shipments to arrive in other countries, and businesses to sell goods, exporters can rely on advanced payment based on the credit strength of their overseas customers,

Owners can remain confident that working capital is available without the stress of waiting for payments.

Brokers and advisors can offer export factoring, ensuring their clients never miss new opportunities to commit to new sales and book profits.

Need help raising capital for exporters? Ask Stak.

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We regularly share our thoughts on trade finance, lending, company culture, product strategy, and design.

Stak provides working capital to clients that sell to some of the largest buyers in Australia & overseas.

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