ANOTHER POPULAR form of finance finding a ready market in South Africa is factoring and invoice discounting.
Basil Midgley, head of International Business Centres, says that as members of international factors (FCI) they are currently investigating the feasibility of offering this product to their clients.
The FCI network was established in 1968 to assist exporters to minimise payment risks and settle trade transactions on their behalf.
The bank provides details of the buyers, in select countries throughout the globe, to the international factoring group, which undertakes credit assessments on the buyers. The FCI then advises which creditors' book debts they are prepared to purchase.
The risk is thus removed as the exporter would know for that particular customer the international factoring operation would pay them 70%-80% of the value of the export on delivery. International factoring would then collect 100% of the invoice when the tenor expires. This would be passed on to the exporter less the costs involved and interest.
The customer benefits as he gets money straight away to cover his production costs, with FCI assuming the risk, pending payment of the full invoice value.
Midgley believes that the IBCs have an important role to play in encouraging exports.
The beauty of factoring is that it provides a cheaper means of debtor financing with the transactions guaranteed by FCI.
Standard Bank also offers clients forfaiting through Standard Bank London.
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