intl-factoring-&-----forfeiting

ChapterNineInternationalFactoringandForfeitingProcedureofFactoring(1)ExporterImporterExporter’sfactorAdept.ofbankImporter’sfactorADept.ofbank(1)Factoringoperationinagencyagreement(1)Intheagencyarrangementbetweenbanksfactoringisamongtheoperationsnegotiatedbetweencorrespondents.(2)Smallormediumsizeenterprises(exporters)havelessexperienceincollectingaccountspayableabroad.Theywantfactorstooffertheserviceconcerningcollectingaccountpayableabroad.(2)Factoringarrangement(3)Inthefactoringarrangementfactoroffersthefollowingservices:-creditapproval,-creditprotection,-managementofaccountsreceivable-financing,etc.Opena/catImporter’sa/cProcedureofFactoring(2)ExporterImporterExporter’sfactorImporter’sfactor(3)Negotiatinglongtermcontract:dispatchgoodsinseveralshipmentsonopenaccount,payment:60daysaftershipment,etc.(4)Beforeenteringacontractwithimporter,exporterwouldaskthefactortoinvestigatetheabilityofimportertopaythenegotiatedcontractamount.(4)Applyforcreditapproval(5)Transmitapplicationforcreditlimit&entrustcreditinvestigationto……..(6)Creditinvestigation(7)Approvedamount＝amounttobecollectedguaranteed(7)Theguaranteemeansthatifaccountspayablescouldnotbecollectedonschedule,importer’sfactorwouldpayoutofhisownmoney.ApprovedAmount(7)ExporterImporterExporter’sfactorImporter’sfactor(3)NegotiatedcontractamountisUSD1200000(7)Approvedamount:USD100000,refuseamountUSD200000(7)Approvedamt:USD1000000,refuse200000ProcedureofFactoring(3)(8)Concludedamt:USD1200000(8)IfconcludedamountisUSD1200000,theriskofdefaultonoverrunamt(USD200000)isbornebyexporter,whichistobecollectedonbank’scollectionbasisinsteadoffactoring.(7)(9)OnlythecollectionofUSD1000000isguaranteed(approved)byfactors.(9)Concludedamt:USD1000000Importer’sfactor’sapprovalismadeonthebasisofcreditinvestigation.ExporterImporterExporter’sfactorImporter’sfactorProcedureofFactoring(4)Dispatchgoods(10)Carrier(11)Assignment:Notification&TransferofReceivable,Accountreceivableledgers,andwholesetsofdocuments(11)Assignrightofclaimtoa/cpayables.(12)Financeadvance(12)Ifexporterneedsmoney,hecanapplyforfinance,about30~70oftheamountofaccountreceivable.(13)Subsequentassignment:Notification&Transferofa/creceivables,wholesetsofdocs(13)Exporter’sfactorstampstheinvoiceissuingsubsequentassignmentandtransferthemtoimporter’sfactor.DocumentsTakedeliveryofgoodswiththedocsExporterImporterExporter’sfactorImporter’sfactorProcedureofFactoring(5)(14)Whenitisduetime,importerpaysonschedulee.g.60daysafterB/Ldate.(14)Payfortheshipment(15)Ifimporterdoesnotpayontime,importer’sfactorwouldpayoutofhisownmoney.(15)Payonschedule(16)Creditexporter’sa/cafterdeductingprincipal&interestofadvance.(16)Sometimes,exporteragreestocutrate,hewouldissuecreditnotetoimporterwhowouldtransferittofactors.(17)Creditnote(17)CreditnoteThenextshipmentwouldbeprocessedinthesameway.ExporterImporterExporter’sfactorImporter’sfactorProcessofFactoring(6)AccountsreceivablesLedgeraccountOpena/catTimepaymentgiveshimtimetosellgoodsgoodsavoidingworkingcapitalpressure.1.Getaccesstofinancelinkedtohiscurrentlevelofbusiness.（P245）2.Beabletoimprovetherelationshipwithhissuppliersthroughpromptpay&toextractoptimumtermswhenmakinghispurchases.3.Factoringfurnishesfinanceforgrowthtoseller,withoutrequiringinjectionofnewequityfromexternalsourcesoranadditionalguaranteefrommanagement.4.Savescostofmaintaininghisownadministrativedepartment.5.Buyer’sdefaultriskistransferredtofactor.ExporterisfreetoconcentrateonInternationalsales&developmentofnewmarkets6.Increasesalethroughfactors’knowledgeofmarket&abilitytooffercreditlines7.Beabletooffercompetitiveopena/csellingtermsinhighlycompetitivemarket.Andseller’sbaddebtswillbeeliminated.Inchargeofbook-keeping,dunning,calltoaccount,postinterestaccrued,charging,preparingstatementactasifitisfinancialdepartmentofexporter.Banksprovidesfinancetoitsclient,thusknowinghisclientwell&creditinvestigationcanbeeasilycarriedout.Lacksexperienceinexporting&a/creceivablesmanagementconcerningexports.ProcedureofFactoring(7)ExporterImporterExporter’sfactorImporter’sfactorThecostoffactoringincludes:Commission&interestpaidforadvanceCommission&creditinvestigationfeesCommissionrateis0.75%~1.75%,basedon:-annualsalesvolume,-averageinvoicesized,-qualityofclient’scustomerlist-lengthoftradetermsToexporter,theriskinvolvedislessthandocumentarycollection,butmorethandocumentarycredit.Thisistwofactorssystem.ProcedureofFactoring(8)ExporterImporterBankerImporter’sfactorSignfactoringcontractdirectlywithimporter’sfactor.Paycommissiononlytoimporter’sfactor.Onlysendsdocs.throughitsbankDocumentsThisissinglefactorsystemExporterhardlygetfinancefromimporter’sfactor,forforeignbanksseldomprovidefinancetonon-clients.Lesscost,lessconvenience.ProcedureofFactoring(9)ExporterImporterExporter’sfactorImporter’sfactorAssignment:Notification&TransferofReceivable,Accountreceivableledgers,DocumentsSubsequentassignment:Notification&TransferofReceivable,wholesetsofdocsCounterfactoringcontractIntermediaryFactorDocuments&collectpaymentsMoreintermediariesisinvolved,muchCost!Forfeiting(1)NATOWTOIn