• On Export Finance and Global Expansion

    Filed under export
    Jun 8

    export-finance2Global expansion has been the great entrepreneurial dream on top of profitability. Success in both domestic and international markets spell sweet victory and everybody wants it. But the lure of exportation is a long, winding and bumpy road. It comes with risks and not to mention added financial resources. This is where export finance comes in.

    Export finance allows businesses to advance the value of foreign sales on credit thereby enabling them to realize cash prior to the invoice’s maturity. By hastening collection it minimizes credit, interest rate and foreign currency risks. It likewise improves cash flow, strengthens working capital and improves liquidity all while incurring no debt, interest and collateral as it isn’t a loan but an asset transaction. Moreover, several administrative tasks especially those as pertaining to collections shall be shouldered by the provider.

    The great thing about export finance is that unlike most types of financing available on the market, it remains non-discriminatory in the sense that it’s not exclusive to established entities alone. It may likewise be used by small to medium scale enterprises, startup businesses and recovering entities. The application process is faster with lesser documentary requirements to prepare and submit and as mentioned earlier, it’s not a loan to begin with.

    But why should entrepreneurs consider exporting in the first place? The benefits of expanding globally are aplenty and here are only some of them.

    1. It opens up and widens one’s market or client base. Although a company may already succeed domestically, its operations and profitability is limited because there can only be so much customers in a specific location.

    2. Unit costs are lowered and assets are maximized. In cost accounting, the higher the output of production the lower per unit costs are. Moreover, higher production maximizes the capacity of one’s assets and equipment thereby making more value our of them.

    3. There is risk diversification. Remember the eggs in a basket principle? If you put them all in one basket then chances are you’ll lose everything if the container breaks. The same applies in business. As domestic and international sales are not directly proportional and risks vary from country to country, poor sales domestically may be compensated for a strong international demand and vice versa

    4. Enjoy less seasonal losses. When it comes to products and services, businesses experience slopes and plateaus. Seasons are a factor here. For instance, iced drinks may not be highly sold during the winter months in South Korea but may be profitable all year round in the Philippines. Because countries vary in time zones, climates and seasons, businesses can avoid suffering from certain losses due o seasonal demand fluctuations.

    And when you’re ready to dive into the foreign market, remember that export finance has your back.
    http://workingcapitalpartners.com/

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