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U.S. based manufacturers, distributors and service providers can now easily finance accounts receivables in Mexico.
1st Commercial Credit Corporation announces the expansion of their accounts receivable financial services to Mexico. In the past, a Letter of Credit or cash in advance was required to meet traditional payment terms. Due to global competition and new methods to capture market share in the region, U.S. manufacturers and exporters are staying competitive by offering attractive credit terms to Mexican importers. The offering of open credit terms in Mexico has reached an all time high and is expected to continue to grow. The average collection period was 90 days on an average net 60-day credit term agreement.
Economic indicators reveal that Mexico is currently experiencing an economic rebound. Inflation continues to fall and the Mexican government announced that in 2005, spending in machinery and equipment rose to 10.2%. According to the latest survey provided by the Organization for Economic Co-operation and Development (OECD), in 2006, Mexico's economy is expected to grow by 4%.
U.S. manufacturers that specialize in exporting to the Mexican market are anticipating spikes in equipment orders that may result in negative cash balances on their financial statements. 1st Commercial Credit can help U.S. companies by providing receivable- based funding during these uneven sales patterns and long-term collection periods.
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According to Raul Esqueda, president of 1st Commercial Credit: “We are proud to announce the expansion of our services to Mexico. We are well positioned (with the best institutional providers) to handle credit analysis, process due diligence and provide the technological infrastructure to expedite funding to our clients in a timely manner. This service provides instant working capital for U.S. businesses selling on credit terms to Mexican companies without generating liabilities or other indebtedness on their balance sheets. It is important for a business to keep existing credit lines liquid for future growth and inventory fulfillment. Our international financial service is an alternative way to tap into working capital by using foreign receivables as collateral without encumbering domestic receivables or other collateral. Service related industries will also benefit because this financial program can provide payroll funding and still offer credit terms to international clients.”
What makes this financial service different from other U.S. factoring companies that fund international receivables? Some factoring companies offer international receivable finance in the U.S. but require the client to factor domestic receivables to balance their risk factor. Usually, they will not allow the value of the foreign receivables to exceed the domestic receivables. This requirement is difficult for a company to comply with if its export sales are expected to exceed domestic sales. 1st Commercial Credit can facilitate 100% of foreign receivable (non-recourse) financing with credit protection on a per transaction basis.
1st Commercial Credit's financial program is non-restrictive to the origin of the products, which may be drop-shipped from any country. For example, a U.S. based company, importing a product from France may deliver directly to customers in Canada, Mexico, and Brazil. Each customer is billed in local currency and funding is complete within 72 hours (with verification of delivery and acceptance by the account debtor).
1st Commercial Credit offers products that can accommodate attractive payment terms for large equipment orders. A U.S. company selling large ticket items can offer 12-18-24 month payment terms to their customers. This puts clients at a competitive advantage because most exporters require letters of credit or extend only up to 60-day payment terms.
In addition to traditional export financing (which involves a manufacturer or a distributor that exports tangible products), 1st Commercial Credit can provide receivable based financing for U.S. service providers including (but not limited to) staffing companies, I.T. consultants and engineers. Financing service-related industries in the U.S. is a fairly new practice (first offered by non-traditional factors). Since it involves more risk, service companies usually do not have the assets (such as inventory, real estate or equipment) to pledge as additional collateral. This financial product will usually encumber the international receivables. See more on International Factoring and Export Trade Finance.
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