Insights and education

Insights and education

Learn more about factoring

Bilateral/direct factoring vs. network factoring

Factoring with Wells Fargo Capital Finance is provided via one of two options:

Bilateral/direct Network

Provided by a customer of Wells Fargo Global Financial Institutions or directly to companies.

Benefits

  • Exclusivity with Wells Fargo
  • Relationship-focused
  • Flexibility
  • Support with selling and strategic marketing
  • Less competition in pricing
  • Full scope of banking services available
  • Coverage on buyers in a variety of countries under one interfactor agreement with Wells Fargo

FCI has 274 members / 76 countries.

Benefits

  • Established international factoring rules
  • Arbitration
  • Standard documentation
  • Separate independent messaging systems

Factoring vs. letters of credit

Factoring Letters of credit
Flexibility High — changes can be negotiated between the buyer and seller Low — all changes must be approved by the involved banks
Financing Yes, at invoicing Yes, at receipt of letters of credit
Buyer's credit line Normally not impacted Reserved under credit line
Local payment by buyer Yes Yes
Documentation Minimal Varies
Fees Normally for account of seller Normally for account of buyer

Factoring vs. credit insurance

Factoring Credit insurance
Credit cover 100% 70%–90%
Financing Yes, at invoicing Yes, at receipt of letters of credit
Payment under approval 90 days Up to 180 days
Turnover Option of whole turnover or individual buyers Normally, whole turnover
Collection Included Normally seller collects
Financing Yes (without recourse) Yes (with recourse)
Accounts receivable management Yes No
Deductibles No Yes
Transparency of payments Yes No
Transparency of disputes Yes No

Percentage of factoring use by industry in the U.S. Textiles/Apparel - 30%, Business Services - 26%, Furniture - 3%, Transportation - 10%, Electronics - 23%, Other - 8%. Source: Commercial Finance Association, www.cfa.com

U.S. factoring volume figures ($ Billion): 2009 - 65.9, 2010 - 74.3, 2011 - 88.3, 2012 - 94.2, 2013 - 100.2. Source: Commercial Finance Association, www.cfa.com

International factoring volume (EUR Million): 2006 - 27,573, 2007 - 33,780, 2008 - 33,246, 2009 - 40,110, 2010 - 45,515, 2011 - 58,091, 2012 - 50,206. Source: Factors Chain International, http://www.fci.nl/about-fci/statistics/total-factoring-volume-by-country-last-7-years

How international factoring works


What is factoring

Factoring is a financial transaction where a business sells its accounts receivable arising from the sale of goods or provision of services.

A complete financial package with:

  • Credit protection on buyer's financial risk
  • Accounts receivable bookkeeping
  • Collection services
  • Potential financing for both the exporter and the export bank