Export Factoring 

What is export factoring?

It is a service for exporters who have received export purchase orders without an L/C (Letter of Credit). The details of this service are as follows:

1. Check the credit history of buyers oversea
2. Provide risk insurance on bad debts in case buyer has payment problems
3. Provide advance payments through factoring credit lines on domestic sales
4. Follow up payment on debts due. If the buyer fails to service debt, KFactoring will offset payment on the debtwithin 120 days after debt maturity.

KFactoring offers factoring services to medium-sized exporters by cooperating with the provider of import factoring services overseas.The KFactoring services offered to clients include financing, credit risk insurance, credit verification and collections.

Reasons for Export Factoring

• Buyers overseas prefer to make payments through D/A(Documents against Acceptance), D/P (Documents against Payment) and Account Opening (O/A).
• Risk occurs in receipt of payments for goods from overseas buyers
• Obtaining credit lines from banks based on D/A, D/P and O/A is difficult
• Banks want high value collateral for credit lines
• Businesses needing credit facilities may lack of working capital

Role of Export Factoring

Payment Follow-Up and Providing Payment Insurance to Buyers

• Follow-up on payment for goods through financial institutions in the same country as the buyer
• Covers 100 percent of the risk, per the amount shown in the invoice
• Provides insurance immediately upon goods shipment departure from the port of embarkation, even if buyer refuses to accept goods
• Offset payments are made on-time within 120 days after payment due date as stated inthe invoice
• No complicated steps to get payment, and it is not necessary to submit a request to get offset payment
• No legal expenses, or expenses on payment follow-up

Checks on Credit History of Buyers Overseas 

• Will check the credit history through a financial institution in the same country as the buyer
• Can analyze financial risk, legal status, economic conditions, and reputation in business, etc.
•  If it is necessary to contact buyer for more information, the seller must give permission first
• Credit check duration is 2-4 weeks
• Credit check results provided on payment of guarantor’s fee

Benefits of export factoring

• Credit history checks on buyers to enhance confidence in selling
• Provides insurance against non-payment by buyer
• Provides debt collection services and follow-up, reducing trade expenses and provides an exact detail of expenses incurred
• Increases trade opportunities with buyers that do not open L/C, or who change conditions of sale
• You can choose specific services as required

Risks that are protected

• Trade Risks
• Buyer refuses to accept goods
• Buyer refuses to pay after receiving goods
• Buyer becomes bankrupt
•  Political Risks
• Control of fund transfers
• Cancellation of buyer’s right to import