What are the 5 Key Benefits of Export Finance?

It’s hardly an exaggeration to say money keeps a company on track.

You, as an exporter, can use money from your financial sources to make initial investments. You’ll have to come up with the money to get your business ready for production, whether to meet regular working capital needs or deal with an emergency.

If an exporter needs money, they can get it through various export financing options. Financing your business requires careful planning and finding a solution that works for you now and in the future is essential for a future-proof business.

What you need for Export Financing

You need to know why you need the money to decide where to look for export financing. There are a few situations in which investments are necessary:

1. To initiate an Export Company

You’ll need funding to establish a brand-new export enterprise. Financing needs are always a factor to consider, whether you want to buy existing companies like manufacturing units, rebuild and upgrade your lines of business, or expand/improve your facilities and equipment to reach the international market.

2. To Promote the Growth of the Company

Other times, expanding your export firm may necessitate raising substantial new capital, which could require searching for and securing massive new sources of capital. Imagine you want to enter a brand-new export market or open up a new set of offices to handle many new export products.

3. In Need of Immediate Funding

Your primary working capital needs will most likely be marketing and general business operations. Loan solutions like pre-shipment financing can provide the necessary funding to fit the buyer’s credit duration, allowing you to accept new business.

Working cash needs may also arise at times to facilitate inventory preparation. If your cash reserves are healthy, you can compete more effectively in the marketplace and gather the financial ability to embark on new enterprises.

How Do You Know If You Need Export Financing?

As was previously said, there are several points in an exporter’s business cycle during which they might require export financing.

• Early Shipment
• After Shipment
• Invoice factoring and financing for the entire working capital cycle
• Funding is required in the event export benefits, and subsidies are cut off.

5 Advantages of Export Financing

In addition to helping the seller bridge, the financial gap between the shipment of products and the payment of the associated invoice, an effective export finance system will also reduce the associated risks and streamline the administrative processes. Still, paying for what you need makes export financing an excellent bargain in its more adaptable versions.

Listed here are five of export financing’s most significant benefits that no exporting company can afford to overlook.

1. Every Person Has Access To It

Export financing can be arranged financially in a variety of ways. Pre-shipment finance allows a company to obtain funding to fulfill an order well before when an invoice would generally be received. The issuance of an invoice is a prerequisite for invoice factoring and export factoring, but these services can be tailored to facilitate and even guarantee payment.

Most importantly, though, these methods are all akin to cash flow financing and thus do not have any requirements regarding the borrower’s or the borrower’s credit history or collateral. Instead, the finance provider will view the foreign purchase order as a guarantee, making export financing accessible to anyone with a verified overseas customer.

2. As Your Market Expands, So Does Your Access To Capital

Moreover, because export financing is order-oriented, it always considers your future goals and plans rather than your past performance. It means that funding might grow at the same rate as your order form if the business is booming in foreign markets.

3. Risks associated with Exporting are eliminated

Even for seasoned international business leaders, exporting has a variety of dangers that can be intimidating for a first-timer. One of these dangers is the possibility of a currency’s value decreasing or increasing. Using export financing, you can avoid worrying about either of these things and focus on getting your goods out.

Non-recourse funding refers to an arrangement in which the financier has all risk and obligation for collecting on an invoice, as is the case with export finance solutions like factoring and invoice discounting. Alternatively, insurance that meets the employee’s needs can be included in the package. In addition, the lender will typically take on any currency risk involved.

4. Finance Is Free Of Charge To You

You can choose precisely whenever you want to use your fintech provider to secure financing for your export order—no need to place the order or submit the invoice if you do not need the funds. If you decide to go on this course, you’ll be expected to pay a flat rate as part of the deal.

That’s how easy it is. When the consumer makes a payment toward their bill, the finance is immediately repaid without any additional action required on their part. Unlike traditional bank loans, you won’t have to keep paying back funds even if you don’t spend them.

5. You Make Smarter Financial Decisions

Businesses often have trouble keeping their finances afloat due to the common practice of B2B customers making late payments. When you ship a product and then wait 30, 60, and even ninety days to get paid, there’s a substantial gap in your budget that needs to be filled; when dealing with export growth, that hole might be significantly worse. To boost your company’s working capital, flexible export finance allows you to set the terms for when you get paid.

Author Bio:

Mr. Mehul Goyal is a professional DGFT Consultants with experience of more than 30 years and specialization in the field and is offering DGFT Consulting Services all over India.  He is working with many importers and exporters even before DGFT was instigated in the markets.