Factoring Case

International factoring

Case 

     Suppose you are a toy exporter who has signed a factoring agreement with Bank A:

• March 21

   A big department store, Macy, in New York, U.S., sends you purchase orders for two thousand plush bears from your catalogue. On the same day, you send a request for credit approval to Bank A. On the same day, it transmits your request to a selected factoring company in U.S., Factor ABC in New York. The data are transmitted electronically, computer to computer, through the EDI link-up.

Case 

• March 22

    Factor ABC in New York requests credit information from various sources, including Macy itself.

• March 26

    Factor ABC makes a credit decision based on inhouse information and analysis of reports and financial received from Macy and other sources. On the same day Factor ABC communicates credit decision to Bank A via EDI.

Case 

• March 27

    Bank A informs you of the credit decision.

• April 15

    In less than a month, you are able to ship the order of plush toys to Macy in New York, together with your original invoice. On the same day you send a copy of your invoice to Bank A.

Case 

• April 17

   Bank A receives your invoice copy and relay the invoice details to Factor ABC in New York via EDI. On the same day, in line with the factoring agreement, Bank A advances 80% of the invoice value to you.

• April 20

    Once your invoice copy is received by Bank A, it will send you weekly reports with sales summaries, outstanding receivables and customer payment information.

Case

• May 20

    Your shipment arrives in New York. Macy accepts your shipment and agrees to pay your invoice upon maturity, in this case sixty days after shipment.

• June 18

    Macy pays the full invoice amount to Factor ABC, with four days delay. In turn, Factor ABC pays Bank A for your account. The payment information is transmitted by EDI as well.

Case 

• June 25

    Upon receipt of its funds from Factor ABC, Bank A credits your bank account with the remaining 20% of the invoice amount.

• July 1

    Macy, New York, sends you an additional purchase order. Since a credit line for Macy has already been established, you can ship the goods directly from your inventory.

International factoring