Export factoring is a form of financing for international trade that fills the finance void when export companies have difficulty accessing traditional bank financing in tight economies such as today. The economy is not just tough in America, but all over the world and often there are export sales to be made when domestic sales are slow. More than 50% of the S&P Indexed companies’ sales come from abroad. How can you make more profit using export factoring when you are selling goods and services across international borders.
The key is to create a strategic plan before initiating the export sale. One must plan the credit with the lender, terms of payment that fit with your order, and the type of financing best suited for the product.
The challenge is that in the export business the minimum time for payment is 60 days to 90 days due to production time of product. Such a payment lag creates a major cash flow crisis for many existing export companies.
Luckily, PMF Bancorp can help fill the void as a one-stop financial service provider to plan your cashflow strategy through their accounts receivable financing and export factoring (aka trade financing services).
It is important to know your import partner’s credit so before accepting an international order, one must consult with their financial institution to gage the amount of credit and risk associated with the sale. PMF Bancorp constantly evaluates domestic and international credits for this exact purpose. PMF Bancorp has many tools to evaluate and control the risk for export sales. For example, PMF has specialty in evaluating Chinese companies’ credit and financing sales to various companies in this region through a network of branches it has in China.
One must strategize and remember to also negotiate a term of sale that fits the order size that it can handle safely. In many cases, a large order that requires extended terms is not feasible for small to medium size companies to accept. One must make certain that they have sufficient cash reserves for an extra 60 days beyond the payment terms as many export order payments can be delayed due to unforeseeable items such as custom inspections, ship delays, port delays, etc….
Lastly, one should make sure that they have selected the best financing product for the transaction. For goods that have volatile pricing such as electronics, commodities, etc., one should have a Letter of Credit or Bank Guarantee in place that guarantees payment. For items falling in the general merchandise category, export factoring can be safely used. PMF Bancorp provides its Trade Financing products to cover many international financing transactions so to learn which product may help your business best grow…feel free to contact us at +1-310-858-6696 or learn more at www.pmfbancorp.com
