Export Funding Options to Consider

export-funding-ukEntrepreneurs all have a common dream: growth and expansion. In every industry, businesses strive not only for profitability but also for longevity and to do that growing one’s enterprise becomes part of the long term plan. One way to do so is by taking things to the bigger stage or in other words the world market. But that’s not an easy feat considering that exportation not only comes with a lot of work but also added costs. In comes export funding.

There are many ways by which business entities can finance their export projects and ventures and below are only some of the options available.

  • BANK LOAN – Perhaps one of the more common options, it refers to a long term borrowing, often of a large sum, from a banking institution. The amount loaned referred to as the principal shall be repaid in equal installments with interest for a specific period of time. Despite being a very popular option, not all exporting companies make use of it due to the weight of the liability. Plus, those with poor credit scores or inadequate assets (e.g. startups, small to medium scale enterprises) may find it hard to get an application approved due to the strict terms and conditions governed by it.
  • INTERIM FINANCING – This short term funding is very useful in terms of immediate needs. As its name suggests, it allows businesses to derive the needed cash to fund for their emergency or short term liquidity requirements while their main source of resources are not yet ready or are still being arranged (e.g. mortgage, proceeds from a sale, etc.).
  • INVOICE FINANCING – This asset based financing is different from the first two options in the sense that it is not a liability. In other words, there are no debts or loans involved. Here, cash is derived by advancing the value of a sales invoice (receivable) or a bulk thereof before their maturity date thus prior to payment and collections. This export funding option can further be split into two types as follows.
    • Discounting makes use of the invoice/s as security or collateral against the advance. Collection shall remain as the entity’s responsibility and once they have been completed as scheduled and as mandated by the stipulated maturity date, it shall then repay the provider for the amount advanced plus fees.
    • Factoring on the other hand involves the sale against the invoice’s collection. The advance is received similarly but shall only constitute to a majority percentage with the remainder less fees only to be forwarded upon payment completion. The burden of collection shall now be borne by the provider.

At the end of the day, the type of export funding chosen should complement the business entity’s needs.

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