What does e-commerce factoring mean? What is the process of e-commerce factoring?

What does e-commerce factoring mean?

Factoring business evolved from the export agency transaction mode, which originated in the British wool textile industry in the 14th century. At that time, British wool textiles were sold on consignment basis by professional agents. These agents sold goods to foreign buyers and guaranteed the buyers' commercial credit to exporters. At that time, due to inconvenient transportation, foreign trade business activities were relatively slow. Without reliable agents abroad to assist, it would be difficult for any export enterprise to succeed.

Factoring charges:

1. Service commission: generally 1%-1.5% of the invoice amount of the service;

2. Importer's credit investigation fee: For each credit line application, regardless of whether it is approved or not and the amount approved, the factoring company will charge a certain credit assessment fee (usually US$50). In addition, if the factoring company provides financing to the exporter, it will also charge a certain amount of financing interest.

What is the process of e-commerce factoring?

Case: The business process of international factoring itself is not complicated. Below we will introduce the business process of international factoring by taking the most commonly used double factoring in international factoring as an example.

The exporter is Company A, a Chinese pressure cooker manufacturer, and the importer is Company B, a large supermarket in France.

1. After negotiation with Company B, Company A intends to trade on open account (OA, 90 days).

2. Company A contacts a domestic bank (a member of FCI) and applies for international factoring business, and provides the bank with background information (trade contract) related to this credit transaction. After the bank reviews and agrees, the two parties sign an export factoring contract, and the exporter transfers its accounts receivable to the bank. The bank, as the export factor, is responsible for the operation of the factoring business.

3. A domestic bank selects a French bank (also a member of FCI, and the two parties usually have signed an agency factoring agreement) as the import factor, and the accounts receivable are transferred to the French bank again. At the same time, the French bank investigates the credit status of Company B and determines a certain credit line based on its credit status. Company B places an order within the credit line with the payment condition of open account.

4. After the goods are exported, Company A will send the original invoice, bill of lading, certificate of origin, quality inspection certificate and other complete documents to Company B, and according to the requirements of a domestic bank, it will give the copies of relevant documents to a domestic bank. According to the requirements of Company A, the domestic bank can provide financing to Company A at 80%-95% of the face value of the export invoice.

5. A domestic bank notifies a French bank of the relevant documents through the FCI electronic data interchange system. The French bank collects the payment from Company B before the due date of payment stated on the invoice and delivers it to a domestic bank, which then pays the balance to Company A.

6. If 90 days have passed since the due date stated on the invoice and Company B still has not paid for the goods, a French bank will pay 100% of the face value of the invoice (this is one of the most important functions of factoring mentioned earlier, that is, the factor provides 100% credit guarantee for the exporter).

This is the end of the introduction to e-commerce factoring in this issue. If you want to get more information about e-commerce factoring, please pay attention and we will continue to answer your questions~