International Accounts Receivables Factoring is more popularly called International AR Factoring. It is a financial instrument whose main objective is to give security to exporters on the products and transactions they do in another country. International Factoring gives both protection and financing to exporters regardless of the changes in the currency rates.
International AR Factoring is the assignment of an exporter to a factoring company. This will facilitate the collection of accounts receivables.
In order for the exporter to make the work of the factoring company easier, he or she has to submit all invoices receivables. The international factoring company will review all the information and the invoices. They may reject all those that they deem too difficult to collect. But will keep those more likely to pay back. The exporter cannot work without the consent of the international finance company.
For the international factoring company to take your case, your company must receive an authorization from the buyer prior to the agreement. After this is done, the waiting period is generally of ten days. This does vary depending on the country and amount of the buyer. If the application is denied, you will have to collect your accounts receivables in any way you estimate more appropriate, look for financing of other sorts, or assume the costs of the waiting periods.
Generally, an international factoring company will require the services of an insurance company on the accounts receivables it is taking from your company. If that company refuses to take the case, the international finance company will likely refuse it too.
Via a statement on the invoice, the exporter requires its buyers to pay the amount due to the company. It keeps track of customers and cash payments. In case of default of payment, the company factoring triggers raises. The legal proceedings will begin in case of refusal of payment from the buyer. The amounts received by the factoring company are paid back periodically, usually every week to the company.
On the plus side, International Factoring protects the exporter from fluctuations in the currency. On the minus side, political risks and commercial disputes are not covered. In these cases, all must be settled between the exporter and the buyer of the products. It is important to note that one implication of this is the fact that the factoring company will not meddle when the reasons for non-payment are commercial or technical disputes.