Business Factoring is when Marcxell Finance purchases a debt or invoice from another company. Factoring offered by our company is also considered a form of invoice discounting in many markets and is very similar but in a different context. In our debt buybacks, receivables are discounted to allow a profit to be made when the debt is settled.
Our system of factoring is to essentially transfer ownership of the accounts to another party who then sues the debt. Marcxell Finance, therefore, releases the first part of a debt for an amount less than the total amount, giving you working capital to continue your activities, while Marcxell Finance pursues the debt for the total amount and makes a profit at the time of payment. As a factor, you will pay additional fees, usually, a small percentage, once the debt is paid. Marcxell Finance can also offer you a rebate to the indebted party. Our method is very commonly used by companies to accelerate their cash flow. This process allows you to establish up to 80% of the value of your business.
Lump-summing is the purchase of a customer’s receivables – the amount that the importer owes to the exporter – at a discount by paying cash. The buyer of the receivables must now be paid by the importer to settle the debt. This is a common process used to accelerate the cash cycle and to mitigate the risk to the exporter on 100% of the value of the receivable. Since receivables are usually guaranteed by the importer’s bank, the buyer releases the exporter from the risk of non-payment.
When a buyer purchases the exporter’s receivables directly from the exporter, it is a primary purchase. Marcxell Finance takes over your receivables and then they technically become a form of debt instrument that can be sold on the secondary market in the form of bills of exchange or promissory bills, which is what we call a secondary purchase.
In its simplest form, an exporter asks an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to prove that the goods have been shipped. The importer’s bank assists the importer by providing the exporter (or the exporter’s bank) with a letter of credit providing for payment upon presentation of certain documents, such as a bill of lading.
The exporter’s bank may provide a loan to the exporter based on the export contract. The type of document used in the process depends on the nature of the transaction and how proof of performance can be provided (i.e. a bill of lading to show the shipment). It is worth noting that Marcxell Finance only deals with documents and not with the actual goods, services or performances to which the documents may relate.