What is Export Factoring?

A specialized variant of invoice factoring, export factoring, caters specifically to businesses that sell goods internationally. It offers non-recourse funding, meaning the business gets paid upon shipment without the risk of non-payment by the overseas buyer. The solvency of the foreign buyer is guaranteed by a bank or financial institution abroad. An example would be a craft exporter using export factoring to immediately receive payment upon shipping goods overseas, with the security that the foreign buyer’s creditworthiness has been underwritten by a reputable institution.

Financial institutions offering debtor finance vary in their policies, procedures, security requirements, pricing, and market focus. The landscape includes firms specializing in both import and export factoring, each with their own set of conditions that can differ significantly. For instance, a company specializing in import factoring might have different requirements and offer different rates compared to one focused on export factoring, reflecting the varied risks and procedures involved in domestic versus international trade.