Get Your Invoices Paid Faster With Import And Export Factoring
Last Updated on November 17, 2022
In the import and export industry, you often have to wait weeks or even months to get paid. Unfortunately, business expenses do not wait, and you may need to sacrifice assets or equity to pay them off. Late customer payments cause your company to fall into a cycle of negative cash flow and mounting debt.
To grow your import-export company, you need cash to make payments, bring in new products, and meet payroll obligations – this is where import and export factoring comes in.
In this article, we discuss how invoice factoring for import and export companies works, its benefits, and how it compares to other financing alternatives. Read on to learn how you can benefit from altLINE’s international factoring services!
What Is International Factoring?
International factoring is a way to receive cash advances by selling your invoices to third-party companies like altLINE. Import and export companies often get paid through invoices, so there may be delays in receiving payment, which leads to negative cash flow that may hurt your business. International factoring is usually used to unlock working capital when you need it, reducing your reliance on customer payment timelines.
Benefits Of International Invoice Factoring
Invoice factoring in international trade is a great way to unlock extra funds when customers take a long time to settle their bills. Check out how invoice factoring for international export and import businesses helps you access cash when you need it:
Get Your Accounts Receivable Invoices Paid In Days, Not Months
The best international invoice factoring companies can fund your invoices in 1 or 2 days. This means you will get up to 90% of your hard-earned money as soon as possible instead of in 30, 60, or even 90 days.
Access Capital To Grow Your Business While Maintaining Equity
Business owners, sometimes you must sacrifice equity to fuel company growth, but invoice factoring can set them up for long-term success. Invoice factoring gives you the money necessary to fund business growth, pay expenses, and fulfill payroll obligations without sacrificing valuable equity.
Get Cash When You Need It Most
Late customer payments and overdue invoices create low-cash flow situations that may hurt your business. Improving cash flow through invoice factoring ensures your company stays financially healthy, even when customers delay payment.
How Does Import-Export Factoring Work?
altLINE’s import-export factoring services work by turning unpaid invoices into cash advances – these help you finance company initiatives and promote business growth. Additionally, submitting invoices to altLINE also softens the financial blow of late customer payments. Instead of waiting on customers to pay their invoices, you can use our services to get cash whenever you need it.
How does export factoring work? Here is a guide to applying for our services:
Submit Your Unpaid Invoices
Our international factoring company accepts all kinds of customer invoices. We generally favor invoices for creditworthy customers and established companies. Additionally, we do not factor invoices for customers with a history of debt delinquency.
If your invoice turnover time is between 30 and 90 days, your receivables are well-positioned for factoring.
altLINE Advances Up To 80-90% Of The Invoice Face Value
You can typically expect a factoring advance rate of up to 90% of your invoice’s face value and receive the cash advance within 24 to 48 hours after submission to altLINE. The exact deposit timing may vary depending on when your customers receive the goods.
altLINE Helps Collect Payment For Your Outstanding Invoices
altLINE helps you gather invoices by providing a secure lockbox for customers’ money and reporting collections progress through an online customer portal. If issues arise, our team can communicate with the customer to resolve them professionally, ensuring you maintain good business relationships.
altLINE Pays Out The Remaining Unpaid Invoice
After payment collections, our import factoring company will deduct a factoring fee (typically 1-5% of your invoice) and transfer the remaining invoice balance to you.
Uses For Your Factoring Cash Advance
Receiving cash advances from international invoice factoring means you do not have to wait on customer payments to fund your business. Instead, you can avoid long payment cycles and unlock growth capital sooner to accelerate business development.
Here are some ways you can use international factoring cash advances:
Negative cash flow due to late invoices causes delayed payroll, which reduces productivity and morale. Invoice factoring cash advances ensure you can pay employees on time, improving productivity and morale.
Take On New Orders
You should not be forced to wait for customer payments to clear to take new orders, buy business necessities, and grow your business. Invoice factoring provides cash advances to buy business necessities and take new customer orders without sacrificing assets and equity.
Pay Operating Expenses
Running an import-export company is not cheap – you must pay transport costs, legal fees, and other expenses to stay in business. Direct export factoring helps you get the necessary cash to pay these obligations without sacrificing assets or equity.
International Import-Export Businesses We Fund And Finance
altLINE provides invoice factoring services to all kinds of import-export businesses. Here are some example businesses that can benefit from our services:
- Import-export agents
- Direct importers
- Direct exporters
- Import-export warehouse managers
- Freight forwarders
Import-Export Factoring vs Other Funding Options
In addition to international factoring, your business has a few other funding options. How do these alternatives compare to international factoring? Here is a breakdown and comparison of alternative financing methods:
International Factoring vs Bank Line Of Credit
Most import-export companies seek a line of credit as their first financing solution. Import-export companies may have an easier time qualifying for a line of credit, but the funds it provides may not be enough to grow their business.
Banks approve your line of credit and set its limit by looking at your fixed assets. Companies with many fixed assets generally receive a higher lending limit and are more likely to qualify. If your company is still building its asset portfolio, you may not qualify for a line of credit easily.
In that case, factoring international bills may be better because financial companies look at your customers instead of your assets to determine funding eligibility. If you work with an established customer base, factoring companies will give you enough working capital when banks cannot.
International Factoring vs ACH/MCA Loans
ACH (automated clearing house) and MCA (merchant cash advance) loans provide funding based on a bank statement review. These loans only take one or two business days to provide funding, which makes them popular among businesses.
Unfortunately, ACH and MCA loans come with high interest and lender fees that can reach 60% of your initial loan. If you mismanage these loans, you may jeopardize your company’s finances.
International factoring is typically safer for your company because you get funding from your invoices, which customers will eventually repay. Because you are almost guaranteed repayment, you can focus on running your business without stressing over debts.
International Factoring vs Quick Pay Discounts
You can encourage customers to pay quickly by providing discounted rates for early invoice repayment, accelerating your cash flow when needed. However, this method does not always work because customers have different priorities.
If customers prefer having more cash on hand or think your discount is too low, they may ignore the offer and pay their invoice as scheduled, leaving you low on cash and unable to grow your business. Therefore, this method is not very reliable if you need an urgent cash boost.
International factoring is typically more reliable because you are almost guaranteed a cash advance if your invoices are approved.
Typical International Factoring Rates And Fees
Invoice factoring fees depend on how much you plan to factor and how long customers take to pay. Factoring higher amounts and getting customers to pay faster usually lead to lower fees. We may also consider things like your business tenure, customer base diversity, and overall customer credit quality.
We charge two types of factoring fees:
- Initial fee: This fee pays for your invoice factoring expenses for a set initial period of time (typically the first 30 days) and costs 0.90-3.50% of your invoice’s face value.
- Incremental fees: These fees cover all expenses after the initial fee period, costing 0.25-1.50% of your invoice’s face value.
Requirements To Apply For International Factoring Services
Planning to apply for our international factoring services? Here is what you need to be eligible for invoice factoring with altLINE:
List Of Existing And Potential Customers
As part of the qualification process, altLINE needs the names and contact information of all existing and potential customers. We need this list to review their credit quality and decide factoring eligibility.
You need to complete a form when applying for international factoring. Enclose these documents alongside your application:
- Business ownership identification
- Personal identification
- Employer Identification Number
- Customer contracts
- Articles of incorporation and other relevant corporate documents
Accounts Receivable Aging Report
An accounts receivable aging report records outstanding invoices categorized by their due dates. We need this document to research customer payment behaviors and determine whether they are eligible for factoring.
altLINE will accept invoices that are 60 to 90 days outstanding, but invoices for customers who cannot pay may be ineligible for factoring.
FAQs About Factoring For International Import-Export Companies
Here are some common questions about international factoring answered:
Do you need to run a credit check before getting started?
altLINE runs a credit and background check on all import-export company owners. However, there are no minimum credit thresholds for approval. Background checks are reviewed for financial-related crimes or felonies. In the event a borrower has a spotty background, approval with altLINE may be in question, but in the event the borrower is disqualified, altLINE will often work with the borrower to identify an international factor that is willing to help.
Do you require UCC filings when factoring international invoices?
Upon executing a term sheet, altLINE will file a UCC on the client’s business. This UCC filing allows altLINE to properly secure the collateral (i.e. the invoices) it plans to advance against when the factoring facility is in place. UCC filings are an integral part of any form of lending.
Is international factoring a debt or loan?
International factoring is neither debt nor a loan. Invoice factoring is the sale of your invoices to a third party. The money advanced against these invoices will be repaid by your customers.
However, altLINE is a recourse factor, so you may need to pay the cash advance back if your customer fails to pay their invoice.
Do you offer non-recourse international factoring?
altLINE only offers recourse international factoring. While you must repay the cash advance if your customer fails to pay, recourse factoring structures often allow for factors to extend lower rates and larger credit limits on your customers.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.