| By :
Kristin Gabriel
Most businesses worldwide are facing the challenge that the country has a relatively small population size of 22 million people. Therefore, in order to compete effectively in today's global economy. Any business needs to be able scale in order to build and generate sufficient market share. Local retailers are challenged by the threat of online retailers, which only goes to build upon this already daunting challenge. All in all, ingenuity is great enough and has the potential to create a globally successful business, so they have ventured overseas to carve out growth strategies with outstanding results in such diverse areas such as solar energy, mining and building materials and financial services. Currently in some countries the U.S. dollar is near its strongest historical levels so this advantage has never been more important than in the current environment. Even with Australian products costing more for customers paying in U.S. dollars or Euros, there is still a demand because of these products and their competitive advantage. Yet small-to-medium-sized businesses (SMEs) are still faced with the challenge of financing when selling to overseas customers because some overseas customers would prefer to be invoiced in their domestic currency. It is also hard to know whether the overseas customer is a good credit risk or not. Plus, the payment time frames can be even longer than what is experienced in Australia, especially for those product requiring shipping. There is, however, an active group of finance companies that are providing a solution to these challenges -- international invoice factoring services. Factoring is the financing of a business' invoices for cash flow or working capital. The accounts receivable of a business are often an over-looked asset which businesses can use -- for example as a form of collateral for a line of credit, and other assets. Not being able to get funding narrows the number of Australian companies who can adequately cater to this trend for having overseas customers. This is why invoice factoring companies who have offices overseas are in a position to provide the services required to offer cash flow finance using the invoices to international customers. With this type of presence they can conduct the necessary due diligence on the debtor and also initiate any collections activities in situations where the invoices are not paid. How does this work? The factoring services company can initiate the funds transfer in the currency where the customer is located enabling the Australian company to invoice in that currency. What's more, the factoring company will always do a credit check on the debtor - so, if the factoring company will not finance the invoice, then the small business should probably not be giving them credit anyway. Last, the whole point of factoring is to allow the small business to offer the necessary payment terms demanded by the customer without having to suffer the cash flow consequences.
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