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UNDERSTANDING EXPORT FINANCE

Ask any exporter and they will tell you that any export you undertake, takes 3 x times longer than you thought it!

Here are 6 main reasons you may need to raise additional funding: 

  1. Buying the raw materials to actually fulfil the export order – this seems obvious but once you have an export order, you’ll be working against a specific schedule especially if you plan to ship the goods, or they are destined for an exotic market that may need certificates of origin legalised by embassies, or technical certificates verified by testing authorities. These all take time and money to complete and one, you need to be sure that your price covers all these additional costs and two, you have the money at the given time to proceed. 
  2. Once you’ve delivered the goods or service in the way you agreed, and hopefully, contracted with your fabulous overseas buyer there may be a gap in time between finishing the contract and actually getting paid for it. 
  3. Tenders are notoriously difficult to quantify in terms of money needed to make an effective pitch. You may need help with the cost of developing complex propositions and to do it successfully, especially if it’s a large project. 
  4. Funding your international marketing to take your product or service into a new market or to sustain activity in an existing market may lead to the need for additional funds.
  5. Any seasoned international trader will tell you about the need to visit overseas markets both in the initial research, launch and to maintain a dialogue and successful relationship with your customer.
  6. Finally, you may need to spend time and money to research and development (R&D) to make your product suitable for export markets and sometimes adaption for specific regions.

There are many financial products available to raise money to export. The right financial product will depend on what it’s for and the size and stage of your business. You can either borrow money or get someone to invest in your business (also known as raising equity).

In this knowledge zone, we’ll go through the different options available. 

BORROWING

  • bank loans – these may look at the collateral you can provide to support a loan 
  • export finance – see other articles 
  • alternative finance platforms
  • Crowdfunding or peer-to-peer finance
  • asset-based lending


Should decide to borrow money, don’t forget to think about the cost of the money and perhaps even look at insuring that risk. This suits many companies because as long as you can maintain the monthly repayments you will be able to continue with your own strategies and business plans. 

RAISING EQUITY

Sometimes, if you don’t have a long credit history or you can’t borrow through other means, it makes sense to look at raising equity.

A person or company may invest in your business for a share of the profits. This is called equity finance and can include:

  • venture capitalists

  • business angels

  • an initial public offering (IPO)

Equity investment is usually sought by businesses that want to grow quickly. However, any investor will:

  • want a share of the business – this is a loss of control and is sometimes hard to do but if you want to grow and you need funding it’s a good option. Do take advice and think about what this means. 

  • want some control or input into the business

  • but they often bring useful knowledge, contacts and expertise

Your bank or financial advisor should be able to help with questions about finance.  

USING YOUR RECEIVABLES TO HELP WITH FINANCE

  • Increase Working Capital 
  • Access Cash tied up in receivables 
  • Reduce DSO (Daily Sales Outstanding)
  • Replace Debt
  • Improve Balance sheet metrics
  • Securitisation of Receivables
  • True Sale Transactions 

CREDIT INSURANCE

  • Exporters mitigate default risks
  • Exporters obtain better rates with Funders
  • Funders benefit from Capital weight relief
  • Funders benefit from Risk transfers


Indeed if you need any help on any of these issues – we’re here to help. 

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