There are several programs in place in the United States for small to large size businesses that want to expand into international markets. Companies that have a very substantial US-based market may be able to qualify for traditional business loans and financing options, but many companies are not in this position when the opportunity presents itself.
For these companies, turning to international trade invoice factoring is a very smart decision. This is not the same as a traditional business loan, but it does offer the US business cash based on the accounts receivable. This also allows the buyer to avoid having to go through the complicated process of getting a letter of credit from their bank and coordinating with the seller in the US.
The inconvenience with this old style of transaction was the buyer having to pay in advance before receiving the merchandise, or at least having a hold on the value in their account. At the same time, US companies struggling with cash flow couldn’t afford to send out merchandise before payment.
With international trade invoice factoring, a third party – the factor – provides the funding for the seller based on the accounts receivable. This allows the seller to extend longer terms to buyers without limiting their own growth potential.
A few of the reasons that a company should engage in international trade invoice factoring include:
- New possibilities – with the cash available from the accounts receivable, the seller is able to move into new markets quickly and without waiting for payment from the past shipment from the buyer.
- New potential – to take advantage of new markets, the cash can be used to replace equipment, hire new employees and take on new marketing and advertising campaigns.
- Replace inventory – having the funds to replace inventory and pay off suppliers to keep the business open is critical. By using factoring services, your business may even be able to take advantage of discounts for early payment of vendors.
Moving into international markets is never easy. However, utilizing an international factor company can make the process a lot easier!
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