In an ever-connected world, many companies are trying to take their operations beyond the international boundaries. This comes with its own financial difficulties, especially with regards to cash flow. Delayed payments, language issues, and currency value changes can all hinder businesses from getting paid on time, which in turn affects their operational cost and overall business performance.
In this regard, export factoring UK is incredibly useful. Businesses are able to draw cash against their unpaid overseas invoices due to it, which improves their liquid cash position and enables them to fund business growth initiatives without waiting for client payments. This post will discuss in detail what export factoring is and how it operates, and most importantly, why it’s a must-have solution for UK companies participating in international business.
What is Export Factoring?
Export Factoring, also known as Invoice Financing, is a flexible financial solution which allow UK firms to immediately receive cash by ‘selling’ invoices related to international sales. Typically, payment for goods and services offered to foreign clients is received after a considerable period of time. Export Factoring solves this problem since it gives businesses the opportunity to advance against invoices even before actual payments are realized.
This type of financing not only provides instant liquidity but also credit risk, collection agency, and, in some cases, legal services outsourcing which serves as a primary advantage for many small and medium sized enterprises that do not have the personnel to manage foreign accounts. With the help of Export Factoring, businesses can meet their operational spending obligations, purchase additional stock, and keep growing the business without having to wait for payments from foreign customers.
How Does an Export Service Factor Work?
Export factoring is relatively easy to understand. Here’s the procedure:
Step 1: Sell Your Export Invoices
After performing an invoice-raising service or delivering products to an international client, submit these invoices to the factoring company. All invoices submitted to the factoring company must be for goods or services that have already been delivered and the company ascertains whether your overseas clients are creditworthy.
Step 2: Get Cash Advance for Export Invoice Factoring
Once the factoring company approves the provided invoices, an immediate cash advance is made ideally within 20 days (this can also go to 30%).This is usually 70%-90% of the invoice amount. The advance disbursed boosts cash flow, allowing business operations to go unhindered.
Step 3: T Continue to Collection, Payment, reminders Follow Up
Responsibility shifts to the factoring company for collecting payments from your overseas customers. They attend to all correspondence, payment reminders, and follow-up enabling the timely payment of invoices.
Step 4: Last Payment
When you’re overseas clients settle their invoices, your balance will be settled by the factoring company after deducting their service fee. The factoring fee charged is generally between 1% to 3% of the invoice value because of certain considerations such as volume of invoices, general risk, and the terms of payment.
This cycle enables you to get cash quickly and efficiently so that your business continues operating without delays due to waiting for payments to be received from overseas.
Why Go For Export Factoring As A Business Decision
Export factoring UK is designed for businesses that engage in international trade as it brings a wide range of advantages. Here are some of the primary benefits:
- Better Management of Cash
The primary advantage of export factoring is instant cash, and that is precisely what the service offers. If your business struggles with receiving payments internationally in a timely manner, it is made easier with export factoring as you receive the money within 24-48 hours, enabling you to meet operational services like paying employees and maintaining supplier and inventory relations furthering your business objectives.
- Credit Risk Management and Mitigation
When conducting business across borders, one of the greatest concerns is the risk of payment defaults or payment delays. Export factoring businesses will frequently provide credit protection which means that they will insure against the risk of non-payment by your foreign clients. Such insurance can mitigate the financial risks associated with global trade and help diversify your operations internationally.
- Collection Outsourcing
Collecting and managing the receivables from an overseas vendor is often an overwhelming, if not an impossible task, especially when dealing with different time zones, languages and legal jurisdictions. When it comes to international collections, export factoring firms will take over the collection procedure, guaranteeing their client that payments will be collected in a timely and professional manner. This allows you to put your effort towards growing your business rather than focusing on payment collection.
- Scalability and Flexibility
Export factoring is a technique used to finance a business which is highly adaptable to the needs of the clients. With more accounts receivables, more funding becomes available. As such, export factoring is optimal for businesses looking to expand internationally because you can obtain sufficient working capital in order to support increased demand without the concern of cash flow gaps.
- Debt Does Not Exist
In contrast to loans or lines of credit, export factoring does not incur a liability on your balance sheet. Because you are not borrowing but, rather, selling your invoices, there are no repayments to be made, which translates to zero liabilities for your business. Therefore, export factoring can be considered a non-debt solution to financing your business.
How Simply Factoring Brokers Can Help
Simply Factoring Brokers specializes in providing export factoring services to UK businesses. We aim to help your business obtain the funds necessary to operationally manage your business and grow internationally. Here’s how we can assist you:
- Customized Export Factoring Programs
Every business is different, and we make it a point to understand them. Whether you are a new small exporter or a seasoned business looking to scale internationally, we will assist you in developing a feasible export factoring solution that aligns with your business model.
- Availability of a Network of Export Factoring Companies
Simply Factoring Brokers is associated with numerous trusted companies allowing us to form relationships with various trusted export factoring lenders. Their access to multiple lenders enables the clients to compare different offers and choose the best solution for their businesses. In terms of our services, you’ll be provided with the optimal rates and terms offered in the market.
- Other Services Offered- Transparent Procedures
We focus on offering our clients the minimum time delays by streamlining the process. Clients are able to access and withdraw at any given time and continue their international trade. Our team is dedicated in providing the right guidance starting from submitting invoices and payment collection.
- Guidance from Professionals
We consult you with professionals that have been in the field for about 5 years to provide you with the right support that will answer all your export factoring questions. Whether you have queries regarding the export factoring process, require help with some documents, or just want to know how export factoring is good to your company and we can certainly assist you.
Does Export Factoring Align With Your Business Needs?
In case you’re doing international business and have some of your invoices on the accounts receivable with cash flow issues, export factoring might just be what you’re looking for. Reap the benefits of obtaining cash from invoices that are not yet paid while improving cash flows and expanding your business internationally without the risk of bad debts or collection periods.
Simply Factoring Brokers strive to assist businesses of all sizes in meeting their factoring needs. If you’re trying export factoring for the first time, or if you’re looking for a better deal, we are able to walk with you to offer the right financing needed for your business.
Conclusion
Export factoring UK is effective for international businesses because of cash availability, reduced financial risk, debt collection services, and many more. Selling your international invoices brings working capital which reduces the financial burden, enabling you to grow your business internationally.
Simply brokers offer the best customer service to businesses aiming at reaping the benefits from export factoring. We offer the best terms of contract enabling your business pay as it grows.