Invoice Factoring for Import-Export Companies

Financial Risk In Currency Exchange Rates – The consistent fluctuations in foreign exchange can cause significant changes in your balance sheet and potentially compromise your financial stability. Political and economic changes can make evaluating the evolution of current exchange rates a lot more difficult, which introduces a higher level of risk and can lead to a significant loss in profits or earnings.

Minimize Your Risk Of Failure – Disagreements regarding exchange and interest rate fluctuations are common in the international trade industry, and unfortunately, this often results in customers refusing to pay. This is why businesses in this sector need to invest in legal teams that are experts in local protocols in order to improve their protection against risks. Strategies and business plans will also need to be adjusted to plan for other international risks, such as infrastructure problems in other countries, trading obstacles (tariffs and taxes), customs clearance, and whether the foreign country has special trade zones or other red tape areas. This is why fast and substantial working capital is so important in this industry.

Fluctuating Costs – Capital markets experienced a convulsive shock at the same time that key commodities experienced steep price increases. This had a steep effect on the prices of raw materials, food, commodities, and fuel. The higher fuel prices will also mean that costs throughout the supply chain will continue to increase. The impact on the global economy and the consistent fluctuation in costs means that many business owners may have to review their logistics and distribution strategies.

Research the current market and target a specific niche to set your business apart from competitors and improve your chances for success.

Be flexible and adaptable to make sure that you can effectively respond to the consistent changes in the industry, helping you stay competitive.

Government Funding – The Government of Canada offers numerous programs to help businesses obtain working capital. The Trade Commissioner Service, for instance, offers funding to Canadian companies that sell their products overseas or are entering new markets through the CanExport program.

Letter of Credit – A documentary letter of credit is a form of payment between a buyer and a seller, brokered by their respective banks. Your client’s bank will promise to pay you for the goods or services you are selling, provided you present all the required documents outlined in the letter of credit to your bank.

Purchase Order (PO) Financing – PO financing is a trade finance tool that enables companies to access capital for specific purchase orders. While waiting for payment from their customer, companies can finance up to 90% of their purchase order costs. This financing option can be very flexible, but if your financial institution doesn’t offer it, invoice factoring is another valuable option.

Import or Export Invoice Factoring – This is one of the most transparent, flexible, and cost-effective financing solutions available. You can extend more generous payment terms to your international customers yet still receive the money you are owed for goods delivered upfront. The factoring company (depending on who you partner with) will usually advance between 70% and 90% of your total invoice value, and your clients will pay them instead of you. The remaining balance will be sent back to you (minus a small factoring fee) once all your customers have paid. Instead of waiting for 30, 60, or 90 days for your international customers to pay, or waiting months for banks to pay out a loan (if you get approved), invoice factoring gives you the working capital you need when you need it.