SME’s working capital requirement is growing because of increasing open accounts in international trade payments. Further, new BIS set of regulation, which allows a lower credit rating for SMEs compared to old BIS and therefore low credit worthy SMEs will experience hard times in getting bank loans. To this forfeiting and factoring could be an answer as these two financing tools are structured toward non-recourse financing. This means that exporters can sell or assign their export receivables without recourse bases to a bank, SME exporters further can get lower financing if the buyer’s credit standing is good. Also the advances from the bank are not recognized as bank borrowing in respect of accounting principle. Therefore the SME exporters’debt ratio is not deteriorated and the SMEs can easily accommodate open account or term credit based orders from buyers overseas. This study also suggests that Korean Civil Law shall be modified to protect factor’s position as a right creditor to debtor and protect factor’s position in accordance with International Conventions regulating factoring. The Korean Civil Law currently bans receivable assignment when the ban is agreed in the sales contract between and sellers and buyers.
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