International Payments

International Payments

Factoring - A new way of short term financing

Factoring is a service that allows the collection of receivables prior to their maturity, where the Bank emerge as buyers of their clients’ receivables, giving them the opportunity to promptly obtain the money they will be able to use in business.

Factoring differs from the classic loan by the fact that it includes insurance of payments, besides the financing, as well as a complete collection service, such as filing, bookkeeping etc. Also, in this case, the risk of collection of assigned receivables is divided between client and bank.

The process of financing through factoring is very simple: factor, or bank, which mediates the purchase of receivables from the seller, or the client, is paying him a certain amount of advance payment of an invoice, after which the client has no longer an obligation to wait for payment; he is in possibility to immediately dispose with funds. Bank is waiting for payment from the customer, after which the client pays the remainder of the assigned receivables, used as a guarantee fund in payment of receivables and any related interest and fees.

Domestic factoring is compliant with financial needs of companies that have continued selling in the domestic market and includes the financing of working capital over the advance payment of up to 80% of the value of assigned invoices, credit assessment, administration and collection of receivable.

Procedure is simple:

  • The Bank analyzes of any proposed purchaser and approves the total factoring limit to the seller 
  • The seller signs a factoring contract with the bank and delivers goods or performs customer service and deliver receivables to the bank 
  • The bank pays the seller the agreed advance payment for the preassigned invoice and the amount of the invoices, in accordance with the agreement 

Upon completion of the process, the buyer pays money to an account in bank.

Export Factoring – Two Factors System through FCI

 

Export Factoring Two Factors System through FCI

  1. Supplier delivers goods (services) to buyer and issues the respective documentation
  2. Supplier assigns the receivables to the Export Factor and delivers copies of the documentation
  3. Export Factor offers Administration, Financing and Credit Risk Coverage services to the Supplier
  4. Export Factor assigns the receivables to an Import Factor located in Buyer’s country
  5. Import Factor offers Collection and Credit Risk Coverage services to the Export Factor
  6. Buyer performs payments directly to the Import Factor

* Credit Risk Coverage service is offered in cases of Without Recourse Export Factoring

Export Factoring – Single Factor System

 

Export Factoring – Single Factor System

  1. Supplier delivers goods (services) to buyer and issues the respective documentation
  2. Supplier assigns the receivables to the Export Factor and delivers copies of the documentation
  3. Export Factor offers Administration, Financing and Credit Risk Coverage services to the Supplier
  4. Buyer performs payments directly to the Export Factor

* Credit Risk Coverage service is offered in cases of Without Recourse Export Factoring

Export Factoring with Assignment of Insurance Policy

 

Export Factoring with Assignment of Insurance Policy

  1. Supplier retains an insurance policy with an Insurance Company for covering buyers’ credit risk
  2. Supplier, Insurance Company and Export Factor sign a trilateral agreement for assigning the compensation rights from the Supplier to the Export Factor
  3. Supplier delivers goods (services) to buyer and issues the respective documentation
  4. Supplier assigns the receivables to the Export Factor and delivers copies of the documentation
  5. Export Factor offers Administration, Financing and Credit Risk Coverage services to the Supplier
  6. Buyer performs payments directly to the Export Factor

Discounting of Export Letters of Credit

 

Discounting of Export Letters of Credit

  1. Issue / Forward Proforma Invoice
  2. Buyers’ authorization for Issuance of a Discountable Letter of Credit
  3. Letter of Credit Issue
  4. Letter of Credit Advice to Exporter
  5. Shipment of goods
  6. Presentation of Documents
  7. Forwarding of Shipping Documents
  8. Receipt of Documents & Checking for Documents’ discrepancies
  9. Discounting of Letter of Credit
  10. Payment at Maturity

Discounting of Export Letters of Credit - Advantages

  • Discounting without Recourse to Beneficiary
  • Cash Flow Security
  • Improvement of Financial Figures (Balance Sheet)
  • Country / Bank Risk elimination
  • Enhance competitive advantage providing  extended credit to Buyers, making Products more attractive
  • Significant Reduction of Operating Costs
  • Transaction and Documentation simplicity

Download Hetranex Factoring Presentation