Introduction
Two-factor export factoring means an agreement whereby a seller assigns his existing or future accounts receivable to Bank of China (the Export Factor), and then to a foreign Import Factor. The seller will be provided with finance and receivables ledger maintenance by Bank of China, and services such as collection of receivables, credit risk control and protection against bad debts by the Import Factor.
Both of recourse and non-recourse factoring are provided; according to whether the buyer is notified of AR assignment, both of undisclosed Two-Factor export factoring and disclosed Two-Factor export factoring are provided.
Features
1. Increase of business turnover. Through factoring, the seller can provide his new or existing customers with more competitive O/A, D/A payment terms, thus expanding the overseas markets and increasing business turnover.
2. Effective risk coverage. Through a network of factors both at home and abroad, the Import Factor appraises the credit risk and sets a credit line for the buyers. Sellers can be guaranteed a 100% receipt of foreign exchange earnings within the approved credit line.
3. Financing facilities and improved financial statements. The Export Factor provides financing facilities through payment in advance, to relieve the problem of sellers' working capital tied up in accounts receivable, and to improve cash flow of sellers; at the same time, under the Two-Factor export factoring system, Bank of China buys out accounts receivable, sellers can enjoy the benefits of export tax rebate and writing off in advance, evade exchange rate risk and improve financial statements.
4. Saving costs. Factors are responsible for business information survey, sales administration, and collection of receivables, therefore alleviating the seller's burden, and saving handling costs.
Interest Rate
LIBOR plus some basis points. Please refer to authorization of Bank of China's Interest Rates Table for Trade Finance.
Target Customers
1. Sellers who desire to reduce accounts receivable, but are doubtful about potential customers' credit status, while wishing to reduce risks and expand business;
2. Sellers whose working capital is tied up in plenty of accounts receivables, with lower accounts receivable turnover rate, and seeking for financing support;
3. Sellers who desire to alleviate the burdens of accounts receivable management and collection.
Application Qualifications
1. The business license of enterprises legally approved, registered and annually checked and other valid certifications sufficient to prove the legitimacy and scope of its operation;
2. Loan cards;
3. The account opening permit and a settlement account with Bank of China;
4. The qualification of import and export operation;
5. Credit lines in Bank of China.
Process
1. Bank of China asks her foreign counterpart to appraise the credit risk of the buyer abroad based on submission of the export factoring business application form by the seller to Bank of China;
2. The Import Factor approves a credit line for the buyer. Then the seller signs the Export Factoring Agreement with Bank of China and assigns his accounts receivable to Bank of China, which will be further assigned to the Import Factor;
3. After delivery of goods or services, the seller submits invoices which bear the assignment clause to the buyer and sends Bank of China duplicates of the invoices;
4. Bank of China notifies the Import Factor of detailed information about the invoices;
5. If the seller needs finance, Bank of China provides payment in advance for receivables within the credit line. The finance usually cannot exceed 80% of the approved invoice amount;
6.The Import Factor begins collection of the receivables from buyers several days before or on the due date of the invoices;
7. If the buyer makes payments to the Import Factor on the due date of the invoices, the Import Factor will transfer the fund to Bank of China; if the buyer fails to pay an undisputed invoice in full within 90 days of its due date, the Import Factor will make payment under guarantee to Bank of China;
8. The balance will be paid to the seller by Bank of China after deduction of financing principal and interest and factoring fees.
Our Advantages
In 1992, Bank of China took the lead at home in launching Two-Factor export factoring business, and became the first to join the world's biggest factors' organization-Factors Chain International (FCI) in 1993. By April 2009, Bank of China had been ranking the first in the world for 12 consecutive months in terms of the volume of export factoring business. Bank of China has signed contracts with 103 factors in 40 countries and regions, maintaining good partnerships. An expert from Bank of China holds the office of FCI vice-chairman at present, so that Bank of China has strong discourse power in international factoring circle.
Case
Company S is a private enterprise producing domestic cookware. In 2002, the company began to consider exploring the overseas market. At that time, company S was little known abroad and buyers in the U.S. and the EU all refused to use L/C. They required a payment term of O/A 90 days. Company S had to meet with the buyers' required payment terms while worrying about the credit risks and facing the capital turnover problem. The company turned to Bank of China for a solution.
Bank of China recommended Two-Factor export factoring service to the company, and through its good partnership with the U.S. Import Factors, successfully approved a credit line for the U.S. buyers of the company, and launched Two-Factor export factoring business for the company. Just in 2003, the business volume exceeded USD 15 million. Afterwards, Bank of China provided Two-Factor export factoring business service for exports of company S in the European and Hong Kong markets. With the help of the service of Bank of China, company S successfully exploited the overseas market, with steady rise of sales volume and profit margin, and successfully went public in 2004. This successful marketing case of Bank of China was also published in the FCI annual report of 2005.
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