Export finance offers a simple solution to anyone looking expand into new markets and grow your business overseas. When you deal with customers that are based overseas, the whole process can take longer than domestic home sales.
Not only are there increased times in terms of shipping and delivery, but payment terms can be up to 120 days. When your overseas customers don’t pay their invoices on time, this can add added pressure on cash flow.
This is why the export finance product offers a simple solution to these problems. It helps exporters to fill the gap between raising and invoice and receiving payment.
Export Finance definition
The definition of export finance is a funding solution which provides business financial support for expansion into overseas markets. This type of finance is a form of invoice finance which allows you to get access to working capital before you are paid when selling your products and services to overseas customers.
This helps you to overcome the cash flow challenges which can be created by the longer payment terms associated with selling overseas.
There is no set limit to the amount of funding available by using export finance. As your business grows and expands into new markets, the amount of working capital this is available to you will increase too.
How Does Export Finance Work?
The way export finance works is in a similar to factoring, this is whereby money is advanced against the value of unpaid invoices.
It export finance works like this:
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You provide goods to your overseas customers in the normal way.
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You invoice your customers for those goods as normal.
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You send the raised invoices to a factoring company. The factoring company pays you the bulk of the invoiced amount immediately, typically up to 80-90% of the value, after verifying that the invoices are valid.
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Your customers pay the factoring company directly. The factoring company chases invoice payment if necessary.
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The factoring company pays you the remaining invoice amount, less their fee, once they’ve been paid in full.
Benefits of Export Finance
For businesses who want to expand beyond the UK market, exporting offers a great opportunity for growth.
Here are the benefits of using export finance:
- Market-leading funding – A number of export finance providers will place restrictions on your funding levels. As an export funding specialist, we provide a greater level of capital against export ledgers. Confidence can be assured that you will get the funding you need, no matter how your overseas sales change.
- Unrivalled expertise – Our expertise is unrivalled in this market as we support exporters daily. Working with you to understand your business needs, we apply our knowledge and experience to the export process, allowing you to be secure and confident you are in safe hands
- Personal and flexible service – Support is offered by providing access to knowledge of shipping terms and overseas legal jurisdictions. This will reduce risks and help to run your business smoothly.
- A proven track record – We have a proven track record of working with exporters. We also work closely with The UK British Chambers of Commerce, UK Export Finance (UKEF), Institute of Export and The British Export Association. We have access to their network of professional support.
Key features of Export Finance
- No funding limit placed on international sales for one or more customers
- Release cash against the value of your invoices as they are raised
- Credit control service with foreign language speaking employees
- Let us manage your credit control or keep it in the hands of your in-house finance team
- Secure access to your account 24/7
- Bad Debt Protection in case of customer non-payment
- Currency rates available with our optional Foreign Exchange
- Support available wherever in the world your customers are
What are the risks associated with Export Finance?
Export finance is a broad term that covers a variety of financial products and services that are used to support the international trade of goods and services. While export finance can provide significant benefits for businesses, there are also a number of risks associated with this type of financing.
One of the biggest risks is that of currency fluctuations. When businesses borrow money in a foreign currency, they are exposed to the risk that the value of the currency will decline before the loan is repaid.
This can lead to unexpected costs and may make it difficult for the business to meet its financial obligations. Another risk associated with export finance is that of political risk.
This refers to the risk that political instability in a country could lead to changes in government policy that could adversely affect the business.
For example, if a country were to suddenly impose import tariffs on products from another country, this could make it very difficult for a business that exports to that country to continue operating.
Political risk can also include the risk of war or other violence, which could damage infrastructure and disrupt supply chains. businesses should be aware of these risks when considering export finance options.
Export Finance with Invoice Funding
As you would expect we offer a range of trade finance products, including export finance. Businesses looking for export finance quotation, the pricing will reflect the creditworthiness of your customer.
Some of the benefits we offer:
- Not tied into long-term contracts.
- We do not require collateral assets as security to support your application.
If you want to know more about our services, contact us. We’ll happily guide you through the process of export financing.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.