Factoring is a method used frequently and chosen by worldwide enterprises to maximise their business, helping domestic enterprises rapidly approach international payment methods and remove barriers and difficulties in trading activities. Vietnam Export Import Commercial Joint Stock Bank (Eximbank) is one of the leaders that deploy this service to meet the requirements of enterprises.
Advance capital from receivables
The integration process with many regional economic organisations has given us opportunities to enter foreign markets. However, in the foreign trade process, many enterprises have been left out of contracts because they do not have enough financial capacity to carry out deferred payments for products as required by importers, whether these products possess more reasonable prices and better quality than those from other countries. Meanwhile, for many importers, this condition is top priority to pick out partners and they usually accept conditions about price and quality if they are accepted to carry out the deferred payments. And because of financial difficulties, some enterprises have approached products with reasonable price and good quality, but lack financial resources to purchase for increasing benefits. Understanding these circumstances, many domestic commercial banks have deployed the factoring method to supply advance money for export companies. This solution is one method providing credit for export – import companies through acquisition of revenues from buying or selling goods, which have been agreed by exporter and importer in trading contract.
Known as a modern commercial bank, providing multiform banking products with high quality and best service for export – import companies, Eximbank has developed factoring method to support liquidity of enterprises, facilitating them to achieve stable business activities. This method aims to enterprises, which desire to expand market, ensure payment to importers, secure advance payment to purchase goods with deferred payment method. Banks which realise factoring will have to carry out some services, like insuring credits for importers, supervising receivables, giving payment advance for goods with value of 90 percent of total receivables and withdrawing credits. Currently, Eximbank has been implementing very flexible factoring methods regarding instalments or limits for enterprises to select an appropriate one.
Maximum benefit
With many existing benefits, Eximbank’s factoring method is considered necessary support for import companies not to miss business opportunities and export companies to maintain their position in current markets, and overcome payment method barriers to engaging new markets. Vice director of a fishery export company in Tien Giang shared that fishery industry recently has faced financial difficulties for business, and so his company has, and for United States traders, they always require deferred payment, otherwise they will import from another trader, and so the company encounters difficulties in achieving contracts. Nevertheless, after taking the factoring service of Eximbank, and by bank’s efforts, the company has approached advance payment to export its products to the United States market. Currently, it is expanding to markets in the Latin America like Mexico, Brazil, and Argentina where the company has previously missed many contracts due to slow payments. Many export enterprises shared that thanks to the service, they have become more competitive and capable of receiving contracts with the payment methods of D/A or T/T, collect capital faster to expand business and markets. Moreover, the service also helps save time and costs of management and collection of accounts receivable. Eximbank also guarantees against credit risk of accounts receivable of importers, as well as provides financial information and business situation of importers for enterprises. On the other hand, when using the service, importers can trade in the term of deferred payment without any cost of factoring. They not only can pay for goods early to satisfy business contracts, but also can use the capital of seller to finance the working capital without opening L/C for each time of importing and without paying a security. Eximbank will conduct recourse factoring to secure interests for all sides.
According to Eximbank’s requirements, factoring is conducted only with enterprises with tangible goods and conducted only after goods are exchanged. Moreover, the factoring contract does not prohibit exporters from assigning accounts receivable for a third party, or to transfer rights and responsibilities in the contract as long as all of these activities comply with legal regulations. Eximbank also requires that accounts receivable do not result from illegal and disputed activities. Moreover, accounts receivable cannot be used as a payment of debt, pledge or collateral and accounts receivable cannot be overdue. The experts estimated that in the current context of economic difficulties, factoring will help exporters increase liquidity, improve capital flows, raise revenues, reduce administrative costs, manage debts and secure capital without collateral and the necessity of depending on loans, therefore factoring also reduce bad debts, limit credit risk in international trading. On the other hand, importers will have more opportunities to negotiate better commitments and simplify payment activities. And last but not least, customers using factoring will help domestic banks upgrade their prestige in the international market.
Yen Lam
Đăng ký: VietNam News