D-1-3- Factoring


Payment processing is one of the main preoccupations of companies with international transactions. Doing business is important, but compensation is essential. Esandis offers you free training space dedicated to international transactions, and all the skills you need to become an export or import manager. Our objective is to provide you an understanding of the importance of the payment component of an international transaction.

1-3-1- The Factoring : definition

Factoring is a complex payment technique. Generally speaking, it is a payment technique where the objective is to protect the stakeholders in a transaction, in our case the exporter and the importer. However, factoring is more often used as a mode of financing.

Indeed, export factoring is primarily a payment technique and secondarily a financing technique. Factoring can be a solution in debt collection or in hedging currency risk.

The course of a factoring transaction is fairly simple.

1-3-2- The Factoring company

Factoring involves an intermediary company between the importer and the exporter. This intermediary is simply a factoring company, the "factor". It is a specialized establishment and each bank has its own factoring subsidiary.

The role of the factoring company is to recover debts from export clients. The supplier must get the approval of the factor (factoring company) for each of its clients, usually with a maximum amount per client.

1-3-3- The main factoring groups

Factoring can be used within an import or export transaction.
  1. Export factoring

    Export factoring targets two types of companies: those looking to optimize short-term funding and/or those looking to establish management of receivables. Indeed, Factoring can meet the need of high-growth companies ready to invest, or companies that want to grant an extension on the payment terms for their clients.

  2. Import factoring

    Import factoring is a technique that aims to finance international transactions. It offers a solution to carry out the import transaction without bank financing. Import factoring permits payment to the exporter without having to wait for the due date stipulated in the letter of credit.

1-3-4- The factoring contract

Factoring is becoming a major tool within the scope of international transactions, and for this reason factoring companies have crafted extensive factoring contracts. For their part, institutions have set up common rules for factoring, e.g. the rules established for documentary credits.

1-3-5- The new factoring procedures

Factoring now offers the exporting and importing companies the opportunity to use the internet as part of their receivables management.