Debtor Factoring Assists Aussie Importers
There’s been a shortage of trade finance on the market of Australia and Aussie importers are already compensating by making usage of debtor factoring facilities. Following the Global Financial Crisis, many providers of trade finance – where funding was provided based on purchase orders allowing importers to cover overseas suppliers – withdrew in the Australian market.
This is the reason why debtor factoring, a kind of finance allowing Australian importers to accelerate the gathering of their invoices and enabling them to use the funds to stay up deals with overseas suppliers have been increasingly made good use.
Let’s make use of example in one of our own clients who imports a selected brand of pizza oven from overseas and sells these ovens to both food equipment distributors and pizza delivery retailers. He is able to order the goods from his supplier and have them sent to Australia but he must outlay cash within Sixty days from order. On the other side, his customers (that are quite sizable companies and will command terms) are only prepared to pay him Thirty days from the end of the month where the goods happen to be delivered.
The payment for his supplier ought to be covered by the end of January if he ordered goods last 1st of January. Because of the time frame necessary to have the goods shipped to Australia after which sent to the client, the items are simply going to be received through the customer in February. Because of this the invoice is only due for payment after March, but our importer has to settle up with the supplier by end of February.
He makes use of debtor factoring to receive an advance (up to 90%) on the invoice in February and uses these funds to settle up with the overseas supplier. The debtor factoring then receives the payment of the invoice and supplies the rebate (minus the fees charged) returning to the customer after the payment of the invoice is satisfied.
Needless to say there is a cost to using the service, however the importer has worked out that the incremental sales he can generate by ensuring that more orders can be filled more than offsets the expense of the service.
For more information about debtor factoring, call The Interface Financial Group (IFG) on 1300 957 900.
