Export factoring combines financing of short-term foreign receivables with collection services and, in some structures, credit protection. An export factor may work with a factor in the buyer’s country to assess the debtor and collect the receivable.
How does Export Factoring work in practice?
The exporter assigns eligible foreign receivables to the factor. The factor may provide early funding, maintain the sales ledger, collect from overseas buyers and offer agreed credit protection. The exact division of work and risk depends on whether the arrangement is disclosed, recourse or non-recourse and whether a correspondent factor participates in the buyer’s country.
What the file should show
Keep the export invoice, shipment and acceptance evidence, assignment, debtor limit, advance, currency, collections and recourse terms.
What does Export Factoring not establish?
Currency movements, buyer disputes, country restrictions and cross-border enforcement can remain outside the factor’s credit protection.
