Posts tagged: financing

Things People Confuse About Invoice Finance

invoiceJust because something’s famous doesn’t mean it’s completely and wholly understood. Take invoice finance for example. This receivables financing method has been in popular use for decades and yet people still find something to confuse about it. Sad, we know but we’re here to help end that or at least lessen it for the mean time with better information and myth busting. Are you ready? Because we sure are.

#1: Is it a loan?

No it is not. Invoice finance may be a funding method but it is an asset transaction. In other words, it creates zero liability because it isn’t classified as one to begin with. When utilized, it decreases trade receivables, increases cash and debits an expense account for the service fee. Additionally, it does not come with interest or an asset-based collateral requirement. Using it will not affect the entity’s credit score and it will even help the financial reports look more attractive as it aids in liquidity.

#2: What happens to my receivables?

Invoice finance involves the sale of the rights to collect against a customer invoice/s in exchange for a cash advance on their value. This means that the collection function including its costs and burdens , at least as pertains to the invoices subjected to the financing arrangement, shall be transferred to the provider or the financial institution. The receivable shall remain to be under the business’ name and control but the burden to collecting them shall be shifted.

#3: Do I risk customer relationship?

No considering that you choose trustworthy and quality invoice finance companies and providers. Make sure to inquire, research and read about them thoroughly first to identify who can indeed deliver. Businesses may also opt for a confidential arrangement where customers are not made aware of transaction between business and financier.

#4: Is it expensive?

Not at all. The fee involved can either be on a per period basis or a onetime thing depending on the specific type of invoice finance chose. Regardless, this is significantly cheaper compared to other financing methods because it is fixed and comes free of any interests.

#5: Can all businesses use it?

Another great thing about invoice finance is that it can be obtained by all businesses regardless of type, industry, size or length in the market. Even startups, small to medium scale enterprises and recovering entities can use it. After all, the cash is derived from a receivable and not a borrowing.

The Benefits of an Export Overdraft Arrangement

OverdraftDomestic sales can only do so much. The lure of international trade is real and the reason behind it is obvious, out there in plain sight. Opportunities abound but so do challenges; for instance financial risks, liquidity and collection. Luckily, there’s this thing we call an export overdraft arrangement.

An export overdraft is a type of financing particularly directed at entities that wish to take advantage of the world market without having to undergo the usual repercussions or threats that accompany it.

To export means to abide by international trade protocols and country-specific laws. It requires meticulous documentation, new market penetration, added collection responsibilities and of course the ability to dodge credit, interest rate and foreign currency risks. Let’s not even get started about receivables and cash availability.

But despite such challenges, entrepreneurs still want to do it. The cons may be present but so do the pros and they abound just as much if not more. But a smart business owner will want to mitigate such risks and challenges to the best they can. After all, who wants them tagging along with success? Nobody.

Export overdraft is a method that allows exporters to advance the value of their export sales invoices thus allowing them to receive cash almost immediately without having to wait for maturity. More often than not, receivables will lock up cash for prolonged periods of time preventing their immediate use and at times putting liquidity and solvency at risk. The longer a receivable remains outstanding, the higher the risks of non-collection. Cash sales are still there but majority of importers opt for deferred payments. They prefer to pay only until the goods have arrived to them or until they have been resold.

Because cash is received immediately, there’s less likelihood of losses due to the fluctuation in foreign currencies and delayed or default payments. Moreover, the duties related to collection shall be borne by the export overdraft provider. This includes all administrative duties and paperwork related to the job. Of course, this provides utmost ease for companies not only in terms of time and effort but also resources.

Export overdraft therefore also helps entities focus more on the income generating activities and operations instead of the backend duties. Plus, providers having had experience and expertise will often have a better grasp about a particular country’s culture, language and laws when it comes to invoices, payments and collections.

How to Plan Your Export Funding

export fundingExport funding has become one of the most widespread financing methods that aided a great number of businesses in putting themselves in the realm of international trade. It is a tried and tested tool that delivers the benefits of foreign trading such as growth and market expansion without the often prickly threats of financial risks (e.g. currency, interest rate and credit risks), strict legislations, scrupulous documentation requirements, collection hiccups and liquidity setbacks.

Not only has export funding been a ladder to small and medium scale enterprises and startups but it has also acted as a life saver for businesses in recovery. Even already established organizations find benefits in it, further increasing sales and strengthening profitability in a global scale.

To truly benefit from such financing medium, companies have to plan for its use from start to finish. After all, even a tool as great as it would fail to succeed if used incorrectly. In order to achieve its full potential and maximize the benefits that it gives, here is some expert advice on how to plan an export funding.

First, determine its effects on finances. Is the business really ready for exportation? Before thinking about whether or not to make use of such method, determine if the organization is really ready to trade on the international market. This is no joke and so operations as well as finances must be taken into consideration before anything else.

Second, determine needs and goals. It is crucial to identify the company’s needs in the export trade. Moreover, goals must be set. An endeavor won’t exactly be one if there is no end goal.

Third, identify territorial requisites. Each country that the business wishes to export to shall have its own set of rules and regulations. What these are and how to achieve them must be looked at and examined to determine if they are worth all the trouble and if the benefits of trading in such market will be greater than its costs.

Fourth, weigh out the alternatives. Is this financing medium the best option out there? There are many ways by which entrepreneurs can trade and bring their products overseas and export funding is only one of them. Part of planning its use will have to be scrutinizing if it really is the best option to take.

Lastly, find a trusted export funding company. They must not only be prompt in terms of providing for the invoice advances but must also be seasoned enough to handle overseas transactions. Their knowledge, skills and resources must be beyond par.

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