Factoring operations can be broadly classified into two categories i.e., Domestic Factoring and International Factoring. When both the seller and buyer are in the same country, it is called Domestic Factoring. International Factoring is also called cross-border factoring or export factoring. Such factoring involves exporter, importer and their factors located in different countries. Unlike for feinting export factoring deals with short term export receivables, it is intended to boost export under open Account sales terms.
Export factoring is preferred to LC based Export because the latter is costly and involves examination of export documents applying 
“Doctrine of strict compliance”. All these make such transactions less flexible. Moreover LC is Transaction oriented and not ideal for repetitive transitions where fast delivery schedules are insisted. Export factoring is best suited to a regular pattern of trading amongst buyers and sellers of goods/services ‘Oper Account sales’ terms facilitate faster and regular dispatch of goods/services necessitating lesser dependence on working capital financing and lines of credit. The principle types of international factoring are:- 1. Two Factor system 2. Single Factoring System 3. Direct Export Factoring 4. Direct Import Factoring.
Two Factor System: This system involves four parties viz., exporter, exporter’s factor in exporting country, importer and importer’s factor in importing country. The exporter’s factor provides prepayment but the importer’s factor undertakes book/keeping and collection debt. The latter also undertakes to pay to his counterpart as per prior agreement, if the importer does not pay within the agreed credit period.
Single Factoring System: Under this system, as per the special agreement between the exporter’s and importer’s factors, the importer’s factor provides credit protection in case of debt-default by importer. But prepayment, book-keeping and collection responsibilities primarily vest with exporter’s factor. In case of difficulties in realization of debt, the importer’s factor is required to ensure recovery including initiation of legal proceedings. The cost of such recovery efforts is borne by exporter’s factor. If the debt still remains outstanding, the importer’s factor reimburses the exporter’s factor as per agreement. Here the factoring changes are lower than that of two factor system.
Direct Export Factoring: Under this system, the importer’s factor is not involved. The exporter’s factor provides all elements of factoring service. It is less expensive. But it calls for high degree of professional skill and knowledge about the systems, procedures, culture and languages of different countries, on the part of export factor.
Direct Import Factoring: Under this system, the exporter’s factor is not involved. Under a factoring agreement between exporter and the importer’s factor, the invoices representing this hipped goods are assigned to the latter. The importer’s factor undertakes sales ledger administration, collection of debts, providing bad debt protection up to agreed level and consultancy. It is cheaper but lack of proximity between the exporter and importer’s factor is the disadvantage.
Factoring evolved as a mechanism to provide liquidity to the seller against his receivable. The basket of services a factor provides includes credit assessment of customers (buyers), customer selection, sales administration, credit analysis, advancing funds against trade claims, servicing and collection of receivables and a host of related services including consultancy. Thus a factor is a professional in receivables management.
Factoring operations can be broadly classified into two categories i.e., Domestic Factoring and International Factoring. When both the seller and buyer are in the same country, it is called Domestic Factoring. International Factoring is also called cross-border factoring or export factoring. Such factoring involves exporter, importer and their factors located in different countries. Unlike for feinting export factoring deals with short term export receivables, it is intended to boost export under open Account sales terms.
Export factoring is preferred to LC based Export because the latter is costly and involves examination of export documents applying 
“Doctrine of strict compliance”. All these make such transactions less flexible. Moreover LC is Transaction oriented and not ideal for repetitive transitions where fast delivery schedules are insisted. Export factoring is best suited to a regular pattern of trading amongst buyers and sellers of goods/services ‘Opera Account sales’ terms facilitate faster and regular dispatch of goods/services necessitating lesser dependence on working capital financing and lines of credit. The principle types of international factoring are:- 1. Two Factor system 2. Single Factoring System 3. Direct Export Factoring 4. Direct Import Factoring.


