Export Funding is a type of financing that has gained so much traction and following as it helps businesses go into the foreign trade without being weighed down by the strings and risks that usually attach to it.
When planning to export one’s goods, businesses need to factor in a lot of elements. This includes having to face the additional financial risks (e.g. credit, foreign exchange, interest, etcetera), the additional operational costs, collection burdens and country specific laws to name some. These alone are enough to terrify entrepreneurs and make them resign back to their domestic operations.
That should not be the case. There is a way to manage all that risk and burden and that is through export funding. This financial medium allows companies to work alongside a financial institution that shall bear the collection responsibility, have country specific market knowledge and expertise thereby avoiding the financial risks all while providing the advance to an export sales invoice.
In a way, this is akin to factoring but on an international scale and with added merits. Some providers can even arrange to release the invoice themselves to do away with language barriers and abide by the laws and regulations of specific nations. Plus, the fact that companies need not spend on a new office space and added labor is a huge advantage.
Furthermore, the advancing of the invoice value allows for entities to hasten their collection and not hurt its cash flows and working capital. Its cash grows as sales increases and money would be made immediately available and not stuck within the customer invoices. Remember that importers tend to defer their payments up until the goods have been delivered to their doorstep or until they have been resold. This can leave exporters with heaping piles of receivables which can be a problem in terms of liquidity.
At the same time, the chance to go into the international market and trade brings in a lot of opportunities. Among others there’s the decrease of seasonal losses, extension of product life cycles, bigger markets, larger sales and profits, lower per unit costs, maximization of asset usage and the list goes on.
Should you pass or should you go for it? That’s a question for you to answer on your own but if export funding is the tool that could help expand and grown your business then we say, why not?