Understanding Hybrid Payment Methods and Export Financing
What Do We Understand by “Hybrid Payment Methods”
We call hybrids products that have a double function, being both means of payment and financing instruments for exports. They allow the exporter to access the collection of outstanding debts, discounting certain amounts of expenses, commission…
Export Factoring
Factoring is a service offered by banks and some companies that provide advanced financing to their clients (exporters). Holders of credits in their favor for purchases or sales. Under the guarantee of these sales, the bank or company advances the amount of the transaction, so the bank becomes the owner of the invoice pending payment. Legally, it’s a payment formula, where the legitimate owner transfers his rights to the bank, first receiving the money in advance and the others taking charge of managing the collection in the term indicated.
Parts
- Assignor: the exporter, the beneficiary of the means of payment
- Factor: the bank or company that will accept the assignment of the credit
- Debtor: the buyer of the merchandise that has to pay
In both cases, they are banking products. In the case of confirming, is a pure hybrid method which, supported by various means of payment, makes it possible to obtain financing that the exporter is not looking for, but which is offered directly by the importer’s bank.
Export Confirming
Is a hybrid bank product, where the importer’s (debtor’s) bank notifies or confirms to the exporter can advance the collection of the bill of exchange due at any time it wishes. Confirming is a good formula for the exporter, that avoids having to look for a bank that will accept the credit, and it’s also an important marketing element for the importer.
Parts
- Importer: usually are large companies, and it’s also the debtor credit
- Confirming bank: the importer’s bank, and has the importer as a client
- Exporter: the beneficiary of the confirming, The bank has offered it you will provide it to you at a competitive price, and it saves you commissions
Characteristics
Is a banking contract. The confirming contract entails costs for the buyer himself. The confirming contract thus fulfill two functions: Payment management to satisfy the exporter’s outstanding receivable and Financing exporters by granting a partial advance payment instead of full payment.
It’s Operation Is:
- The importing company, has previously contracted the confirming service
- A purchase and sale transaction takes place, with some means of deferred payment
- The importer periodically informs to his bank all the forward transactions it carries out, providing information from the exporters and agreeing to the bank offering confirming
- The importer’s bank (confirming) notifies to the exporter that the remaining balance can be paid is cash without further formalities
- The exporter, can accept the confirming arrangement and collect
- When the due date arrives, the bank will collect the amount from the importer
International Guarantee and Surety Instruments
General Notions. Guarantees are classified generically as follows: Personal guarantees and Real guarantees. The need for its existence. The monetary flows involved in all the operations that are made, they need to be insured, guaranteed, and this is based in a number of factors: Language difficulties between the parties, Cultural ignorance, The lack of legal uniformity, The political instability of certain stats or regions, The risks inherent to any purchase and sale are maintained; breach of contract by either party that the goods contain hidden effects.
The Concept of Guarantee Instruments and Guarantees
That concept, includes all those guarantees that respond exclusively to the payment of exports or the guarantee of means of payment, as well, as the repayment of advances received by exporters. All guarantee instruments are guarantee instruments. First demand or demand guarantees (totally independent of the sale or legal transaction that gave rise to it, depending solely on the receipt of a written request of other document agreed by the parties) These are the most common in international trade, given the greater ease with which they can be executed -Contractual guarantees