Designed specifically to facilitate international sales, export finance is the perfect funding system for growing businesses that are expanding their overseas customer base.
A good export finance solution will not only help the seller to cover the cash flow gap between shipping goods and getting its invoice paid, but will also seek to de-risk the process and smooth the bureaucracy.
At the same time, in its more flexible forms export finance can also be great value for money, because you only pay for what you need. Here are five major advantages of export finance that no exporting business can afford to ignore:
It’s Available to Everyone
The actual financial arrangements involved in export financing can vary. In some cases, pre-shipment export finance allows a firm to raise money in order to complete the order, long before an invoice can be sent. On the other hand, invoice discounting and export factoring depend on an invoice being issued, but can be designed not only to speed the payment but to guarantee it as well.
Crucially, though, all these systems are essentially forms of cash flow finance, and they do not depend on a business’ credit record or its ability to post security. Instead, the international purchase order acts as a sort of guarantee to the finance provider – the exact extent of this depends on the arrangement – and export finance is therefore available to anyone with a verifiable overseas buyer.
The Funding Grows as Fast as your Market
A further advantage of export finance’s order-oriented nature is that it always reflects your prospects, not your past. This means that if your business is taking off overseas, the funding can increase as quickly as your order book.
With a smart fintech provider like TIM, you can even use export finance in conjunction with supply chain finance, or import finance, to further ensure you always have enough money coming in to deliver on your orders. The faster you expand, the more funds become available, so your business is never being held back by lack of funds.
It Removes DExport Risks
There are a number of risks that can be daunting for the first-time exporter, and can cause headaches even for experienced international business leaders. Currency fluctuations are one such risk; non-payment and disputes are another area of concern. Export finance can serve to neutralise both these risks and allow you to concentrate on making and selling your product.
Export finance solutions such as factoring and invoice discounting can see the finance provider take on the risk and responsibility for getting the invoice paid – this funding arrangement is known as ‘non-recourse’. Alternatively, suitable insurance can be provided as part of the package. And it is usual for the finance provider to assume the forex risk.
You Don’t Pay for Finance You Don’t Need
With a flexible fintech provider like TIM, you decide when you want to raise finance on an export order. If you don’t need the money, you don’t need to put the order or invoice forward. If you do, you do so on the basis of paying a single, pre-agreed fee.
It’s that simple. There are no account fees or interest payment and the finance is paid off automatically when you customer settles their bill. Unlike with a bank loan, you are never paying for money that you aren’t using.
You Improve your Cash Flow Management
The culture of late payments in B2B transactions creates cash flow problems for many Australian businesses. If you send an invoice when you deliver a product, but then have to wait 30, 60 or even 90 days to get the money, that’s a significant funding gap you have to cover: but with export orders, that gap can be even bigger, especially as you have to factor in shipment times.
With flexible export finance, you decide exactly when you get paid, and can raise significant amounts of working capital by getting your money on time. Get in touch with TIM to find out how flexible export finance could work for you, and get your international business plans off to a flying start.