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Two-Factor Export Factoring


 

Introduction

Two-factor export factoring means an agreement whereby a seller assigns his existing or future accounts receivable to Bank of China (Canada),acting as 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 (Canada), and services such as collection of receivables, credit risk control and protection against bad debts by the Import Factor.

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 (Canada) buys out accounts receivable, sellers can enjoy the benefits of evading exchange rate risk and improving 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.

 

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.

 

Process

 

1. Bank of China (Canada) asks her foreign counterpart to appraise the credit risk of the buyer abroad based on submission of the export factoring business application by the seller to Bank of China (Canada);

2. The Import Factor approves a credit line for the buyer. Then the seller signs the Export Factoring Agreement with Bank of China (Canada) and assigns his accounts receivable to Bank of China (Canada), 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 (Canada) duplicates of the invoices;

4. Bank of China (Canada) notifies the Import Factor of detailed information about the invoices;

5. If the seller needs finance, Bank of China (Canada) provides payment in advance for receivables within the credit line. The finance usually cannot exceed 90% 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 (Canada); 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 (Canada);
8. The balance will be paid to the seller by Bank of China (Canada) after deduction of financing principal and interest and factoring fees.

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