Factoring Financing for Agricultural Exporters

Factoring financing for agricultural exporters is a unique and challenging niche when it comes to accounts receivable financing. Understanding the issues involved is key to the process.

Factoring for exporters is highly dependent upon the stability of the finance market. Currently, there is not much stability. We might be able to arrange factoring financing for agricultural exports, but then again we might not. The reason is primarily due to the risk involved.

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Factoring is a fairly straightforward type of financing, but it is unique in one way. The factoring lender is not all that interested in the party applying for the factoring financing. Instead, they are more interested in the party that has to pay the invoice. To this end, the credit and viability of that party is a front and center issue in the risk analysis.

When you export agricultural products, the customer is obviously in another country. This adds a significant amount of risk for the factoring company. If the customer does not pay your invoice, how will the factoring company recover the advance it gave you? A majority of factoring companies will simply refuse to enter the deal, but others deal with the risk and move forward.

The credit markets are in fluctuation at the moment and will be for some time. Risk is a huge issue. Even if factoring financing for agricultural exporters can be arranged, you should expect to carry a large chunk of the risk. You’ll most likely be asked to guarantee the invoice payment. The advance on the invoice will probably also be in the 50 percent range with the remainder being issued only when the invoice is actually paid.

Is factoring financing for agricultural exporters possible? Typically it is, but this is not a typical time in the markets. Contact us to learn more about your options.