Out of the 30 million companies that are based in the US, less than 1% actually export their products or services. That means our country has the lowest percentage of exporters in the world.
Of the companies that do export, they’re mostly (97.6%) small and medium sized businesses, but the amount they represent is less than a third of the value of the US export goods. So in other words, the huge conglomerates that make up only 2.4% of the exporting business in the country actually account for two thirds of the export value.
In 2012, the value of US export was estimated at $2.2 trillion. So that means the large exporting companies (2.4%) made $1.47 trillion, while the bulk (close to 98%) of the exporters which is comprised of small and medium sized exporters made only $733 billion.
Clearly, there’s a lot of room for expansion in this industry, and more companies should participate in the export business.
And it’s here where factoring companies can actually help. They offer their basic financing assistance, but they can also provide services and products that can help ease the worries of US companies who are new to exporting.
There are 5 ways in which factoring companies can help:
- They can offer working capital financing. This is the main advantage of working with factoring companies. The application process is fast, and the requirements are less stringent than what banks ask for. There’s even no need for collateral.
- Clients can get credit protection. If you’re going into business by exporting overseas, you’re protected even if your foreign buyer is unable to pay. It’s a version of non-recourse factoring.
You get this protection because the factor is normally in charge of investigating your buyers. They investigate your foreign buyers, so if they give their approval then that means the foreign buyer does have the capacity to pay.
- The factoring company takes care of collecting your accounts receivable. Again, this is a standard service offered by factoring firms. The factor collects the payment and then forwards to you the rest of your money after it has deducted the cash they advanced to you and corresponding fees.
- They help you in understanding the foreign commercial code. They do things differently in other countries, so you may not have a clear idea of their rules that govern commercial transactions. But your factor can help you comply with all these rules so that you’re not bogged down by the details.
This is a crucial feature or service offered by the factor, because complying with unfamiliar commercial guidelines may not be easy. But now you can stop worrying about it because your factor can guide you through the process.
- You get complete records for your bookkeeping. That goes for all stages of the transaction.
So if you’re having nightmares because of your newly established exporting business, see if you can find factoring companies willing to help.