When you ask just about any entrepreneur on the face of the planet, they’ll tell you that one if not the biggest dream they have for their company is to go global. That’s no surprise. Who doesn’t anyway? But that’s no saying that it’s an easy job. It’s actually pretty tricky, arduous and risky even. Luckily, brands that aim to export their products found help through export funding. Why? Read on to find out.
Diving into and tapping the international market sounds like a dream. It opens up a lot of opportunities. For instance, there’s a bigger market. This allows potential for increased sales and with that profits too. Per unit cost of production can also decrease and seasonal losses will be avoided. There is better risk diversification as well because the business is supported by both domestic and international markets.
But as we’ve said earlier, exporting is serious business and it comes with costs, a lot of work and risks.
First of all, there are the added administrative expenses. Either increased labor hours are required and there’s a need for more capital to fund for equipment and office space or the company needs to set up a satellite office to facilitate off-shore accounts. Remember that collection will be done over massive distances. Luckily with export finance, the provider will shoulder the collection function so there’s no need for added administrative costs and capital.
Second, trading internationally involves a lot of meticulous documentation. Invoices for instance can be tricky because language barriers can be a pain most of the time. The entity also has to conform to the laws, regulations and standards of each territory it wishes to bring its products to. But with an export finance arrangement, all of these documentations will be handled by the provider’s team who has been trained, are educated and are experienced about the laws, customs, traditions and language of various countries.
Third, export finance allows companies to diversify their risk as well as minimize if not avoid them. One of the method’s main services is the advancement of the value of export invoice sales thus allowing the company to make use of its resources immediately and as sales occur. This removes the risks of cash flow and liquidity issues. It is also because of this reason that credit, foreign currency and interest rate risks are best avoided.
Check out workingcapitalpartners.com to learn more about financing.