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What is Export Financing?

The export financing It is a type of financial tool that is mainly intended for self-employed workers and companies that need to obtain liquidity by collecting the invoices of their exported products in advance or to cover the previous production expenses that these products cause.

Through this procedure the company in question acquires in advance the liquidity generated by those invoices that are not paid and you can continue with your business, while the financial institution takes care that the payment by the debtor company is made effective.

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Increase the liquidity of your company

The financial entity assumes the risk in the event of non-payment

Knowledge about the risk of delinquency of your clients

Saving of time when acquiring the administrative tasks of the financial institution

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How does Export Financing work?

The export financing It is a financial tool that companies access in order to Obtain an advance collection of your debtors' invoices, before the established deadlines are met or to cover the production costs that these products have caused. This type of financing is intended mainly for self-employed workers and companies that export products abroad, although there are modalities that cover the case of national businesses.

There are two ways to request this type of financing for your exports.

  • On one side is the forfaiting, the most recommended model in the case of exports to countries with high economic or political risks. In this case, the financial entity always assumes the risk that the invoices will not be paid, which is done through bills of exchange or promissory notes. The drawback of this type of financing is that the interest rates to be paid to the financial institution are usually high but they are fixed, which reduces the uncertainty that they may increase and not be able to pay.
  • Another modality is export factoring which requires the same procedure as the previous case but with a wide variety of options (without recourse, with recourse, secret, national and international), in this case the financial institution is in charge of managing the collection of invoices from debtor companies and assumes the risk of non-payment if it is non-recourse factoring. The main difference with the ski pass is that the collection is made economically, so the requesting company acquires the amount of the invoices in monetary form and not in the form of bills of exchange or promissory notes as in the previous case.

Previously to the granting of aid, a study of the solvency of the clients will be carried out of the company to assess its risk of delinquency and thus the company will be aware of the risks that its clients may pose, in addition to the fact that the financial institution must be aware that the payment by the company requesting the credit may be made effective, since In the event that the risk of insolvency is too high, it will not be granted.

The request of this type of tools by the trading companies are of great help due to the amount of advantages what they get from it such as financial advice, customer research and obtaining the collection of the invoices in debt that will suppose a increased liquidity of the company to be able to continue with their business without having to wait for invoice deadlines to be met. This financing can be done both in Euros (in the case of national or European exports) and in the currency of the country where the debtor company is located.

Advantages of this Financing

  • By obtaining an advance payment of the invoices of the exported products, the company suffers an increase in liquidity and can continue with its business
  • The financial entity is in charge of managing and monitoring the payment of invoices, so the company that requests this help saves time and effort by outsourcing these activities.
  • It is necessary to carry out a study on the debtor clients of said invoices, so that their risk of delinquency is known
  • In the case of non-payment within the established deadlines, the financial institution generally assumes this risk