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International factoring
1 Product Introduction:

International factoring is an integrated financial service whereby the supplier assigns its accounts receivable under cross-border transactions, and CMB as the factor provides services including financing, receivables ledgering, collection of receivables and protection against bad debts.

2 Target Customers:

Any customer engaging in international trades where payment is made via O/A and D/A (documents against acceptance).

3 Business Categories:

(1) Export Factoring and Import Factoring, depending on roles of factors

1 Export Factoring Export Factoring is an integrated service whereby the export factor provides receivables ledgering, collection, or bad debts protection for the seller (the exporter). Under export factoring, the export factor will, upon request of the seller, provide financing under invoices, namely purchase of accounts receivable.

2 Import Factoring Import Factoring is an integrated service of receivables ledgering and collection that is provided by the import factor upon request of the export factor, or a bad debt protection that is provided within approved credit limit.

(2) Non-recourse Factoring or Recourse Factoring, depending on whether the factor assumes the buyer’s credit risks

1 Non-recourse Factoring Non-recourse Factoring is a service whereby the factor assumes the buyer’s credit risks. This means that if the debtors go bankrupt, cannot pay accounts receivable, or unreasonably delay payment of accounts receivable (namely buyer credit risk incidents), the factor will assume bad debt risks. If the export factor has purchased the accounts receivable, they cannot launch any resource against the seller. Under such circumstance, the export factor can only make claims against the import factor (or the insurer) and the buyer. Nevertheless, in case of a dispute, the export factor may still claim compensation from the seller.

2 Recourse Factoring Recourse Factoring is a service whereby the factor does not assume any credit risk of the buyer, and only provides other factoring services. When accounts receivable become due but are not paid by debtors, the factor may reassign or charge back the accounts receivable to the seller. If the financing provided (if any) is unable to be fully recovered upon expiration of the factoring period, or other special incident takes place, the export factor has the right to require the seller to repay the financing.

(3) Notification Factoring or Non-notification Factoring, depending on whether the assignment of receivables is notified

1 Notification Factoring Notification Factoring is a service whereby the seller or the factor informs the debtor of the assignment of accounts receivable in writing.

2 Non-notification Factoring Non-notification Factoring is a service whereby the assignment of accounts receivable is not notified to the debtor, but the factor still reserves the right to notify the debtor under certain conditions.

(4) Two-factor or Single-factor Factoring, depending on the number of factors.

1 Two-factor Factoring Two-factor Factoring is a service whereby at least two factors work together to assume the buyer’s credit risks or provide accounts receivable collection and other services.

2 Single-factoring Factoring Single-factor Factoring means a factoring service provided by only one factor.

4 Product advantages:

(1) Receiving payment for goods in advance. Factoring can accelerate the exporter’s capital turnover, enhance cash flow and boost profits.

(2) Shifting credit risks. The factor assumes the buyer’s credit risks, which relieves worries of the exporter on receiving payment.

(3) Optimizing financial statements. Non-recourse Factoring can lower the exporter’s asset-liability ratio, improve its financial structure, and help the exporter get listed or attract investors.

(4) Free credit protection. The factor can provide the credit line to the buyer. The process is simple and fees arising from issuing L/C are avoided.

(5) Provision of integrated services. Factoring is an integrated service that not only provides financing to the enterprise, but also includes other services such as the buyer’s credit investigation and sub-account management. The credit investigation will help the enterprise to expand its market, while the sub-account management will help the enterprise keep detailed accounts based on source and use of funds.

(6) Reinforcing trade relations. The enterprise can use the factoring service to expand trade scale, and further reinforce the trade relations with customers.

All the contents stated above are for your reference only. Please consult the local branch of China Merchants Bank for further information. China Merchants Bank reserves the ultimate right of interpretation for the contents in this page.