Export Financing

Export financing is a financial tool used by companies to obtain advance payment of invoices from their debtors before the established deadlines or to cover the production costs incurred by these products. This type of financing is primarily aimed at self-employed individuals and companies that export products abroad, although there are modalities that cover domestic trade cases.

There are two modalities for requesting this type of financing for your exports.

On one hand, there is Forfaiting, the most recommended model in the case of exports to countries with significant economic or political risks. In this case, the financial entity always assumes the risk of non-payment of invoices, which is done through promissory notes or bills of exchange. The downside of this type of financing is that the interest rates payable to the financial entity are usually high but fixed, reducing the uncertainty that they may increase and become unaffordable.
Another modality is Export Factoring, which follows a similar procedure to the previous case but with a wide variety of options (without recourse, with recourse, confidential, domestic, and international). In this case, the financial entity handles the collection of invoices from debtor companies and assumes the risk of non-payment if it is non-recourse factoring. The main difference with forfaiting is that the collection is done economically, so the requesting company receives the amount of the invoices in monetary form and not in promissory notes or bills of exchange as in the previous case.

Prior to granting the aid, a study of the solvency of the company’s clients will be conducted to assess their default risk, and thus the company will be aware of the risks its clients may pose. Additionally, the financial entity must ensure that the payment by the company requesting the credit can be made effective, as the aid will not be granted if the insolvency risk is too high.

The request for this type of tool by trading companies results in significant benefits, such as financial advice, studies on clients, and the collection of outstanding invoices, which will increase the company’s liquidity to continue its business without waiting for the invoice deadlines. This financing can be done in Euros (for national or European exports) or in the currency of the country where the debtor company is located.