This type of financing is usually called factoring. this is a good solution for businesses needing extra cash flow for operations of the business. The lender (factor) will purchase all your account receivables and advance you a percentage of the value of the invoices.
This percentage will depend on the credit worthiness of your customer. The lender will advance between 60%-90% of the total amount within 24-72 hours. With this type of financing the customer will pay the lender directly and once the lender has taken the amount owed to them they will forward the balance of the payment on to you.
Under this type of financing you don’t need to have all your accounts receivable under a factoring program you can select specific invoices. When you are using specific invoices for one-time factoring it is more expensive, but in some cases it is more beneficial to have the cash on a large invoice when the business usually carries small invoices through their financial institution. Also under this program you can have the lender (factor) purchase export invoices, not only does this advance funds on the accounts receivable invoice but the factor can assist in checking the credit worthiness of your overseas customer.
Some factoring programs have a recourse, this is where the business assumes the risk in the event the client is unable to pay. This will result in lower fees as there is less risk to the lender. Non-recourse is also available, if the customer goes bankrupt the factor cannot come back on you for payment. There is a premium on this service as there is more risk for the lender (factor).
Factoring Specific Industries
Every industry has their own concerns and criteria from freight invoices to floor planning, factoring can be arranged to meet your industry needs. Other industries with different criteria are the medical services industry or businesses doing business with various governments.
This type of export financing is usually used for much larger loan amounts (in excess of $250k) and over an extended period of time (1-10 years) and without recourse to the exporter who is removed of some risks due to the various political and commercial situations that arise under international trade.