Export Factoring
Export factoring has a growing role in the financing of UK business. Improvements to travel, communication and technology have made the world seem a much smaller place. However, to small and medium sized businesses in the UK, exporting may still be quite a daunting proposition.
Currency exchange rate fluctuations, language barriers and local customs all mean that dealing with foreign customers remains tricky and requires great skill to ensure you not only sell the deal at the right margin but most importantly obtain payment for your invoices. With this in mind using factoring to not only finance you export sales but to also collect payment from foreign debtors has proved to be a great success for many UK businesses.
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There are two ways in which UK factors operate their export factoring facilities, which we refer to as direct and in-direct methods.
Direct Export Factoring
Direct is as simple as it sounds, using specialist staff, many multi-lingual, located at the UK factor's premises to telephone your overseas customers and help secure payment of your outstanding invoices. This works particularly well when dealing with overseas customers within Europe although it does have it's limitations when dealing with nations such as Australia, due to the timing implications of different world time zones.
In-Direct Export Factoring
In-direct involves the use of fellow members of a worldwide network of factoring companies such as Factor's Chain International (FCI), who are factoring companies based in countries all over the globe.
The UK factor assigns the debt to the overseas factor who is then responsible for chasing and securing payment of the debt, they may also provide bad debt protection ( non recourse). By using a local factor there are no issues regarding language or indeed local customs and legal issues, and this type of arrangement can become particularly useful if the debt requires litigation.
Whichever method is used, Export Factoring can be a valuable asset to any UK business that wishes to increase their sales by trading abroad whilst minimising the potential risks.
Watch the full length video explanation of factoring here.
