Import Factoring

Import Factoring refers to an agreement between an importer and a factor, under which the factor provides services such as credit guarantee, accounts receivable management, and financing to support the importer's purchases from overseas suppliers on open account (O/A) terms. In this model, the exporter typically assigns the receivables to an export factor, who then entrusts an import factor to conduct a credit investigation on the importer and establish a credit limit. The import factor assumes the importer's credit risk; if the importer fails to pay at maturity, the factor must compensate as agreed. It is commonly used when the importer wants to simplify payment procedures and extend payment terms, while the exporter needs to mitigate foreign exchange collection risk. Notes: The importer must pay factoring fees, and the factor may require collateral or impose limit restrictions; compared with letters of credit (L/C), factoring is more flexible but more costly; unlike export factoring, import factoring focuses on the importer's credit assessment and risk assumption.