What is receivables finance?
Receivables finance is funding secured on a company's unpaid customer invoices: a lender advances cash against the invoices now and is repaid when the customers pay. In export trade the main forms are factoring, forfaiting and loans against insured receivables. Example (round numbers): a Brazilian exporter has 150,000 dollars of invoices due from US buyers in 60 days. A factor advances 80%, or 120,000 dollars, now and pays the balance, less its charges, when the buyers pay.
- Receivables finance turns unpaid customer invoices into cash before they fall due.
- Export factoring is usually without recourse, so the factor takes the risk that the foreign buyer does not pay.
- The US Trade Finance Guide states factoring advances are generally limited to 80 percent of invoices, and collection factoring usually costs 1 to 4 percent.
- Forfaiting buys medium and long-term receivables, typically for capital goods, commodities and large projects.
- Insured receivables are easier to borrow against; EXIM's export credit insurance covers up to 95 percent of invoices.
How receivables finance works
The seller ships on credit terms and issues an invoice. A finance provider buys the invoice or lends against it, pays the seller most of its value now, and collects from the buyer at maturity.
| Form | What the provider takes | Typical use | Points from the Trade Finance Guide |
|---|---|---|---|
| Export factoring | Short-term foreign receivables, bought at a discount | Continuous sales of consumer goods on open account | Usually without recourse; advance generally up to 80%; collection factoring 1 to 4%; generally not available in developing and emerging countries |
| Forfaiting | Medium and long-term receivables, bought at a discount | Capital goods, commodities, large projects | The forfaiter assumes all the risks; developed in Switzerland in the 1950s |
| Lending against insured receivables | Receivables covered by export credit insurance | Working capital lines | Lenders are more likely to include insured foreign receivables in the borrowing base |
Sources: ITA Trade Finance Guide, chapters 6, 10 and 11; EXIM, Export Credit Insurance. As published on 29 October 2026.
Where a business meets it
Exporters meet it when buyers demand open account terms of 30, 60 or 90 days and the business needs cash to buy materials for the next order. Distributors and trading companies with many customer invoices use it to smooth cash flow. The Trade Finance Guide notes that factoring suits small and medium-sized exporters in periods of rapid growth but is less suitable for new exporters, because factors generally do not take on a client for a one-time deal and require a certain volume of yearly sales.
Common mistakes
- Not checking recourse. With recourse, the seller repays the advance if the buyer defaults; without recourse, the provider takes that loss.
- Comparing only the advance rate. Compare the total cost, including discount, commission and fees.
- Ignoring cheaper protection. The Trade Finance Guide notes factoring is generally more costly than export credit insurance.
- Weak paperwork. Keep proof of delivery with every invoice so a buyer cannot dispute it later.
Related terms and how Helm handles it
The buyer's side is supplier finance; both sit within trade finance. Helm arranges trade finance, including supplier finance, receivables finance and working capital, case by case; see trade finance.
Open a Helm account
USD, EUR and GBP accounts in your company's name, with a named account manager.
Open accountQuestions
Is export factoring with or without recourse?
The US Trade Finance Guide states that export factoring is regularly done without recourse, so the factor takes the risk that the foreign buyer cannot pay. Check the agreement, because terms vary.
How much can I borrow against export invoices?
The US Trade Finance Guide states that export factoring advances are generally limited to 80 percent of the invoices factored. The rest, less charges, is paid when the buyer pays.
What does export factoring cost?
The Trade Finance Guide states that collection factoring usually costs between 1 and 4 percent, depending on the country, sales volume and paperwork. Discount factoring varies with the time and amount advanced.
What is forfaiting?
Forfaiting is the sale of medium and long-term receivables to a forfaiter at a discount, for cash. The forfaiter takes all the risks, which lets exporters of capital goods offer extended credit.
References
- International Trade Administration: Trade Finance Guide (2022 edition)
- Export-Import Bank of the United States: Export Credit Insurance
- International Trade Administration: Methods of payment
This guide is general information for businesses, not financial, legal or tax advice. Rules, fees and timings were checked against the sources listed on the review date and may change.