Kinds of Export Funding

export fundingInternational trade is no doubt part of any entrepreneur’s long term goal. It spells bigger markets, more sales, risk diversification and asset maximization to name a few. But benefits aside, it also comes with its own set of challenges one of which includes export funding.

It’s true that resources, a lot to be exact, are necessary when venturing into the global market. With factors like shipment, customs, tarriffs, taxes and added administrative and operational costs, business owners need to identify their needs and trace which export funding options will suit each one best. To help with such endeavor, we’ve listed down some of the most apt and effective options. Read on and discover what they are.

1. Bank Loan

Bank loans involve significant and huge sums borrowed from a bank or similar financing institution. A long term type of credit, it often spans from five to twenty years and sometimes even more. It has a stipulated maturity and is to be repaid on set intervals over the course of the period with interest. Because of its size and length, it requires property collateral and involves scrupulous and meticulous application.

2. Mortgage

This is somehow similar to bank loans in terms of length, payment terms and amount. The difference lies in the fact that where bank loans can be used for whatever venture, a mortgage is specifically taken out to purchase real estate properties.

3. Bridging Loan

Unlike the first two, a bridging loan is a temporary and short term financing. It is a type of interim financing thereby one taken out to fulfill and provide for immediate short term liquidity needs pending the approval and/or availability of a permanent and bigger funding source such as a mortgage, bank loan, sale proceeds, income or the like. It is most popularly utilized to provide for down payments and other immediate expenses.

4. Receivables Financing

This makes use of a company’s receivables or sales invoices to draw cash. It works by advancing the value of the invoices before their scheduled maturity date in exchange for a fee which is often a minimal percentage of the total receivable value. Receivables financing has two main types namely factoring and discounting.

5. Merchant Cash Advance

This last type of export funding option is one that makes use of credit card sales. It allows businesses to borrow a certain sum with the payment as a percentage of every month’s total credit card sales. What make this a great method is that the level o payments is directly proportional to credit card sales thereby allowing the business to pay only up to what it can afford to.

Export Funding

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