Export factoring funds invoices raised on customers outside the United States. Everything that makes domestic factoring work still applies, and three things change: the factor cannot assess the customer through the same credit infrastructure, collecting across a border is slower and legally different, and the invoice may be denominated in a currency that moves between the advance and the payment.
Assessing a customer you cannot look up
A domestic factor sets a limit on your customer from credit data it can pull in minutes. Abroad, that data is patchier, sometimes unavailable and often in another language, so factors either work through a correspondent in the customer's country or restrict the countries they will fund at all. The practical consequence is that your ability to factor an export invoice depends more on WHERE the customer is than on who they are, and the first question to ask a factor is which countries it covers rather than what it charges.
Currency, and who carries the movement
If you invoice in dollars, the customer carries the currency risk and the factor's job is simple. If you invoice in the customer's currency, somebody has to carry the movement between the day the advance is paid and the day the invoice settles, and it will be either you or the factor at a price. Establish which before you agree a rate, because a facility that looks a point cheaper and leaves the exposure with you is not cheaper. Ask whether the reserve is calculated at the original rate or at settlement.
Collection across a border
Chasing an overdue invoice in another jurisdiction is slower, more expensive and governed by that country's law rather than yours. Factors handle it in one of three ways: a correspondent factor in the customer's country, credit insurance behind the facility, or by simply not offering non-recourse terms on export invoices at all. All three are legitimate; what matters is knowing which one you have bought, because the third means the risk of a foreign customer failing has stayed with you no matter what the marketing said.
Questions people ask about export factoring
Is export factoring more expensive than domestic factoring?
Generally yes, because assessment and collection both cost the factor more. No factor in this record publishes a rate for either, so the useful comparison is between two written quotes for the same ledger rather than between published numbers.
Which countries will a factor fund?
It varies by factor and is the first thing to ask. Many will fund invoices on customers in countries where they have a correspondent relationship or where credit data is reliable, and decline others outright regardless of how strong the customer looks.
Do I need credit insurance to factor export invoices?
Not always, and it is often how non-recourse cover is provided on foreign receivables. If a factor is offering non-recourse terms on an export ledger, ask what sits behind it, because the answer is usually an insurer with its own exclusions.