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Import Factoring

For large corporations and businesses the problem of cash flow is never a major deal. When it comes to SME – small to medium enterprises, having to wait 60 or 90 days for payments can really stretch their budgets, and if they need to continue production or services, going to the bank for a loan is no longer a viable option.

Luckily Factoring has become a great and common way to generate funds without taking out a loan, due to the fact companies release money tied up in invoices.

Import Factoring is a tool used for the import of goods on the international market. This may mean shipping products across the globe. If the company needing supplies has rapidly grown over time this puts limits on the banks credit limit, so Import Factoring is a perfect solution.

When importing from across the seas, clients tend to require a letter of credit, to they can raise funds to ship the merchandise. The process would run as follows:

Company A would apply for a Letter of Credit for the amount they need to pay their supplier. The import factor would sign and prove the financial capability against the letter of credit. The letter would be sent to the supplier and the merchandise shipped. If the bank was involved providing the funding, the import factorer would pay off the bank. The Factor would advance funds to Company A to pay off shipping bills. Once the merchandise was delivered to Company A’s Warehouse then distributed to customers, Company A Would give the Import Factor the invoices, which would then generate funds to Company A. The Factor would then chase up the invoice payments and once completed would release the rest of the funds to Company A minus a small fee.

The difference with Import Factoring to the traditional factoring is based on the letters of credit which determine an overseas deal and provides security for the supplier.

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