Can I Qualify for Export Factoring if I Have Been Rejected for a Bank Loan?

At some point, most small to mid-size businesses need help to improve their cash flow. The most common recourse is a bank loan, but for many international companies, traditional lending isn’t an option. In such cases, international trade finance companies offer an attractive alternative. Export factoring, a solution available from such companies, provides additional cash flow for businesses who have been rejected for a bank loan. The best factoring companies specialize in cross-border finance and export factoring.

Cash Flow Solutions for Businesses that Don’t Qualify for a Bank Loan

While a bank loan is the most common option for businesses seeking additional cash flow, it isn’t always the best option. Bank loans require extensive underwriting. Also, companies must show strong profitability, a long-term operating history, and excellent credit to qualify for one.  

In short, businesses often face challenges when seeking a traditional bank loan. Export factoring, on the other hand, offers accessible and creative financial solutions.

How Does Export Factoring Work?

Export factoring is a financial tool in which a factoring company purchases a business’ accounts receivable and in exchange advances cash to the business. The cash amount is generally equivalent to the majority of the receivables' value. Not only does this arrangement generate cash flow, but it also places the finance company in charge to collect receivables from the client’s buyers directly.

For example, an international trade finance company such as Tradewind purchases your accounts receivable for up to 95 percent of the value. Tradewind then acts as the collector on the receivables. When payment is received, Tradewind forwards the balance to you.

Advantages of Export Factoring Over Traditional Lending

Companies who qualify for traditional lending also have good reason to pursue export factoring as an alternative. There are excellent benefits – many of high interest to manufacturers and exporters:

  • Cash flow is almost immediate. Once your invoices are submitted to the finance company, you are supplied cash within 24-48 hours.
  • Financing is based on the quality of your customers. Financing terms with an export factoring company are based on the health of your customers, not the quality of your own credit.
  • Protection if your customers become insolvent. The best export factoring companies like Tradewind work on a non-recourse agreement, so if your customer goes bankrupt, you still get paid. Therefore, the concern about the creditworthiness of your customers is gone. The export factoring company assumes the risk for you.
  • Local expertise. Tradewind maintains export factoring and supply chain finance experts in every part of the world, eliminating concerns about varying financial and currency regulations.
  • Simple application process. The application for export factoring is simple and expedient when compared to a traditional bank loan.
  • You no longer have to deal with receivables. When you work with an export factoring company, you no longer deal with your receivables because the factoring company takes over their management and collection, which better streamlines your operations.
  • Export factoring isn’t debt. Taking on a traditional bank loan shows up on your financial snapshots as a debt. On the other hand, export factoring isn’t considered debt so that you can enjoy immediate cash flow without the liability of debt on your books.

What Type of Companies Qualify for Export Factoring?

Many industries qualify for export factoring. The businesses that the best factoring companies work with typically belong to the textile, industrial and mechanical, automobile, or food and beverage sectors, and often have international sales. Most industries that deal with a tangible good qualify for export factoring.

Who Uses Export Factoring?

Export factoring is useful for any type of business who has a need for immediate cash flow and may or may not qualify for a bank loan. Examples include:

Fast-growing companies. If your company is experiencing rapid growth, you may need an influx of cash flow to meet demand. Traditional bank financing may take too long to underwrite.  

Businesses with nonstandard credit or finances. Commercial lending requirements are stringent and unattainable for many companies. Export factoring is an alternative financial solution for companies who don’t qualify for traditional lending.

Companies with minimal assets. Trading companies who sell internationally often possess limited tangible assets but have significant receivables. The best factoring companies allow businesses to leverage those receivables for needed cash flow.

 

Tradewind is an international trade finance company that provides creative cash flow solutions for global businesses who may not qualify for traditional loans or services. Tradewind offers flexible financing, credit protection, and accounts receivable collections for a variety of industries including textile, automobile, industrial and mechanical and more. At Tradewind, we finance the world’s exporters and importers.