An Export Factoring facility is a great way to expand your International Dealings. There is, however, a benefit that is rarely used or explored, which has the potential to enable you to FULLY HEDGE your FOREIGN EXCHANGE RISK. Its power comes from one of the textbook ways of hedging foreign exchange risk - by having equal and opposite assets and liabilities in the nominated foreign currency

To show how Export Factoring can hedge your currency fluctuations we will assume the following example:

1. 1. Your domestic currency is AU$
2. 2. You are selling to an international customer in US$.
3. 3. You have a domestic Factoring facility (or confidential receivables finance facility)
4. 4. You have an Export Factoring facility in place
5. 5. You are turning over AU$10m per annum domestically
6. 6. You are turning over US$2.5m per annum internationally
7. 7. Your customers take 60 days to pay domestically and 90 days internationally

Without any form of Export Factoring you will be exposed FULLY to Foreign Currency Risk

By factoring your overseas invoices and receiving up to 80% up front against your overseas invoices you can convert the received funds at the spot rate immediately upon receipt.

But here comes the clever bit..........

You factor your overseas customer invoices but you ask the Export Factor to fund 100% of the overseas invoices and apply a manual "retention" for the over-financed portion of the invoice (i.e. the balance over 80%) against the facility (i.e. availability of cash) from your domestic ledger. In this way you have 100% hedging against currency risk and the factor is not over-exposed (i.e. is happy with the level of funds they have advanced to you).

The end result of the clever use of an Export Factoring is to remove your exchange rate risk .

If you want to talk with INDEPENDENT, EXPERT ADVISERS with OVER 23 YEARS experience in the Factoring business (including the LAST RECESSION) then you can by-pass all the free assistance and information in our web-site and contact us directly below on :

1300 79 30 60

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