Import Factoring (a.k.a. Foreign Exporter Factoring)

Every so often we get a call from a foreign prospect who is doing business with a US company, wondering if they can factor their invoices. Their usual argument is that the invoices are to strong US customers, so just because they are in a foreign country is should not matter. For many factoring companies, it does matter quite a bit since due diligence is tougher, as is getting a security interest in the invoice. But there are a few companies that offer that service, it's called  import factoring - also known as foreign exporter factoring.

Import factoring transactions are much like conventional factoring transactions. Usually, the invoice is financed through two installments - the advance and the rebate. The advance is giving as soon as the client is invoices (for completed work or delivered product) and goes from 70% to 80% of the invoice. The rebate is provided once the customer pays the invoice in full and is usually the remaining 20% to 30%, less the factoring fee.

There are a couple reasons why some foreign companies look for import factoring. It provides them with access to US funding at rates that are similar (though higher) than in the US. This type of financing solution also provides them with credit knowledge - since the factoring company can help them determine which customers can be offered 30 to 60 day terms.

However, import factoring is not for everyone. The few companies that offer this type of financing usually require clients that:

1. Sell more than $200,000 per month to US customers
2. Work with credit worthy US customers
3. Have a solid track record in their countries