What Major Types of Factoring are Prevalent in Today’s International Commerce?
Staffing for Global Factoring Companies
The best global factoring companies hire employees who are well trained in various aspects of the overall factoring business. Since the comprehensive services of these international industry financing giants focus primarily on “full service” or “recourse” factoring for their clients, their staff members must all be experts in both types of specialized industry funding. For example, in a full service factoring arrangement, the factoring agent actually purchases a client's debt along with the liability for its collection.
In a recourse factoring agreement, in the event the debtor cannot repay you or the factoring agent, you as the debt seller are obligated to pay to regain the debt. Your alternative would be to choose other invoices to replace the debt. In addition to expert financial professionals who are all very experienced in all such areas of factoring, each factoring company must have excellent support staff. It is essential that each employee is well informed and attentive to mastering and handling specific elements and stages of the factoring process. Staff members must also have good communications skills and be superior at customer relations and service.
What Other Types Of Factoring Are Provided By The Top International Factoring Companies?
Several different varieties of factoring services are offered by the highest quality global factoring businesses today, including:
Advance factoring — With an advance factoring agreement, the factor lends the customer working capital based on the value of the customer's accounts receivable. These advances may also be secured by inventories through inventory financing. Other customer assets like company equipment, company or business owner realty property or even intellectual property may qualify as collateral.
Invoice Factoring —Invoice factoring along with receivables factoring is also known as cash flow or working capital funding. In invoice factoring, customers sell their invoices to factors in exchange for fast cash. The majority of high level factors will agree to buy your receivables and issue 75 to 80 percent of the invoice value directly to you and your company. You will then receive the balance of payment due at the time the invoice amount is paid.
International Factoring — Many international factoring companies now offer multiple lending options on a global basis. When funding clients at various locations around the world, factors often arrange import/export funding deals. When a U.S. furniture design and production company sells office chairs to a large office supply chain in Brazil, the furniture company receives payment from the factor for this product order as soon as it is shipped. At a future date—anywhere from 60 to 90 days later—the Brazilian purchaser will forward payment due to the factoring agent. This is a simple explanation of how export financing is generally set up. In an import financing arrangement, for instance, when a Brazilian coffee distributor supplies coffee beans to a U.S. coffee importer, finance lending on inventories or receivables enables ongoing international commerce.
Purchase Order (PO) Financing — When you, as company owner or chief operator need quick access to cash for paying your employees, suppliers or affiliates for services that continuously enhance your business productivity, purchase order financing can solve this financial problem. It can save you from the burden of extra credit risks that borrowing from other sources can bring.
International Trade Financing — The practice of international trade financing enables global commerce through funding involving offshore buyers (global factoring) or offshore suppliers (purchase order financing).
Without question, an overview of all aspects of international factoring is essential for every staffing member of a global factoring enterprise. However, each specific area and aspect of the complex business factoring industry must be carefully addressed by employees, management staff and company directors with the careful, focused training and experience to best fulfill their work positions and company goals.