International & Export Invoice Finance

International and export invoice finance is a short-term finance facility that allows businesses to sell their receivables to a factoring company, at a discounted price, in exchange for an advance on the value of their invoice.

Managing cash flow in international business

In an increasingly connected and globalised world, millions of goods and services are traded across borders. However, exporters still expect to get paid before they ship their products, whilst importers still expect to pay their invoices once the goods arrive.

For businesses dealing with international trade, these disagreements can cause large cash flow disruptions. Exporters can find themselves waiting 60 or even 90 days to get paid after the goods have been shipped.

How invoice financing empowers global business growth

This million-pound discrepancy can be mitigated thanks to international invoice finance and, more specifically, international invoice discounting or factoring. These finance facilities help companies fund international trade in two distinct ways.

Firstly, international invoice finance can help UK companies with overseas subsidiaries fund any international invoices they may have. For example, if you have a recruitment agency in the UK with a subsidiary branch in the U.S, you can use international invoice finance to fund national or international invoices from that branch.

Secondly, invoice financing can help fund any international invoices within the UK. If you are a global recruitment agency working with international clients, you can use export invoice financing to fund outstanding invoices.

Types of international factoring

  • Single factoring system

    A single factoring agreement is when two factoring companies, each in their respective countries, sign a contract stipulating that only one agency will perform all the financing functions.

  • Two factor system

    The two-factor system involves four separate entities; the exporter, the importer, an import factoring company in the importer’s country, and an export factoring company in the exporter’s country. The export factor is in charge of collating all necessary documents and ensuring the exporter’s payment, whereas, the import factor is in charge of collecting dues and verifying the credibility of the buyer.

  • Direct export factoring

    Under the direct export factoring model, only the factor in the exporting country is involved and it takes care of the entire procedure. This system tends to be the most cost-effective.

  • Direct import factoring

    This type of international invoice factoring is when the seller deals directly with the factor in the importer’s country. The factoring company in the buyer’s country takes care of the entire procedure instead.

Five different ways businesses can finance their exports

Export finance against collection of bills

One way an export loan can be financed is against the collection of bills. This method involves the exporter shipping their goods and handing over the documents to the bank.

The bank is also given instructions on how and when the buyer will fulfil their invoice. Once the buyer pays for the goods, the goods are cleared, and the bank can release the shipping documents. In this instance, the bank only acts as a mediator between the two parties.

Pre-shipment export finance

Pre-shipment export finance is a loan available to buyers when the exporter demands the payment for the goods before they are even shipped.

This type of finance, also known as packing credit, is provided to buyers who are purchasing raw goods for the manufacture of final goods, warehousing, or transportation of raw goods.

Post shipment export finance

Post shipment finance is a loan available to exporters who need to plug sizeable cash flow gaps between the sale of products and the payment of the invoice. Depending on the payment terms, exporters can find themselves waiting for as long as 180 days to receive the capital from their client.

In the meantime, the exporter may need to finance this order and pay for shipping charges, employee wages, or buy more stock. The exporter can take its outstanding invoice to the bank and, depending on the country of the importer, the bank can choose to purchase, collect, or even discount the bill.

Deferred export finance

Deferred export financing facilitates the purchase of goods for importers that need access to capital to complete the purchase. The first type of deferred export finance is supplier’s finance, here, the finance is provided to the supplier in instalments by a local bank. Secondly, there is also buyer’s finance, which is financing provided to an international buyer on behalf of the exporter.

Export finance against allowances and subsidies

Here, the government grants exporters subsidies so that they can sell their goods to importers at a reduced price. This is typically applied when an unexpected rise in expenditure occurs as a result of national or international changes.

Our Platform

Sonovate offers its customers an easy-to-use and centralised invoice finance platform. You can keep track of all credit checks, invoices, and timesheets from a single app.

With the click of a button, you have access to financial forecasting, timesheets, and many other features in real-time. If you’re interested in learning more about our services, book a consultation with us today.


What is back-to-back trade finance?

Back-to-back trade finance is when two separate letters of credit are used to facilitate and finance international trade deals. This back-to-back letter of credit minimises risk by adding an extra layer of security to the transaction.

The buyer sends the intermediary a letter of credit (LC) and this third party submits the primary LC to the bank as a form of collateral. Once the bank has received the primary LC, it then asks for another LC to be granted to the final supplier once goods are received. The secondary LC is only issued once the primary LC is received as collateral.

What is export trade finance?

Export trade finance is a short-term finance facility provided to companies that deal with international trade.

When a business exports goods or services, they need the working capital to fulfil orders as well as the assurance that they will be paid on time. Export trade finance includes a wide range of financing techniques, including asset-based financings, such as international invoice discounting and factoring.

For example, if an exporter receives a large order, the importer may not be ready to pay for this until the shipment arrives but the seller may need the cash in advance to produce the goods. This is where export trade finance can help mitigate the risk of delayed payments and bridge substantial cash-flow gaps.

What is import trade finance?

Import trade finance is a type of financing that helps buyers purchase goods or services on an international scale. It gives business owners access to the working capital they need to purchase goods and bring them into the country.

Paying for orders upfront allows business owners to negotiate better prices with their suppliers, foster healthy relationships with their exporters, and encourage faster shipping times.

Import trade finance allows businesses to pay their suppliers for their overseas goods or services without credit limitations or delays. Import trade finance also helps maximise profits, as it allows buyers to mitigate the risk of volatile currency fluctuations.

How does export factoring work?

Export financing allows businesses to receive an advance on the cash they are owed by submitting their outstanding invoices to a factoring company.

Once payment terms are finalised and an invoice is drawn up, this outstanding payment is passed on to the factoring company for review. As soon as the invoice is cleared, the factoring company releases up to 100% of the invoice value.

You receive the cash you need upfront that can be used to purchase more stock, pay for shipping, or simply cover expenses. The factoring company is then in charge of chasing after your international invoice. Once the debtor pays the outstanding amount, the lender will release the remaining funds, minus any deductible factoring fees.

International suppliers often need working capital in order to finance the orders they receive. Export factoring allows companies to engage in international trade as effortlessly and securely as possible.