Category: export funding

Advantages of an Export Overdraft

Transportation processAn export overdraft refers to a financial arrangement that allows exporters to advance the value of their sales invoices to hasten their collection and thereby receive cash prior to their maturity. This of course comes with a fee but one that’s free of debts making it a favorite option among entities of varying industries and sizes.

Using export overdraft has proven monumental if not successful for many and that’s thanks to its various benefits and advantages. Today, we’ll dig a little deeper through each one and find out why this method is the cool kid on the block.

It’s predominantly and significantly quicker compared to other options. Where other financing methods take weeks or even months to process and approve, an export overdraft takes as little as a few day’s time with some providers able to hasten it up to 24 hours.

It’s non-discriminatory in terms of credit score or entity size. Majority of financing options in the market require companies to have adequate asset-based collateral and a strong credit score. This can be particularly tricky for small to medium scale enterprises, startups and recovering businesses. But because an export overdraft is a type of receivables-based financing where the sales invoice is used to derive the needed resources, the company’s credit score or size isn’t the deciding factor. Instead, the creditworthiness of the customer to whom the invoice is attached to shall be the final judge.

It hastens collections and cash receipts. Exporting adds a financial strain to business as it demands more funds for the additional production and labor hours. Additionally, majority of importers choose to defer their payment until goods have been received or resold creating receivables. Although not exactly a bad thing, receivables lock up cash within invoices, holding them up until maturity which can be a threat to liquidity for prolonged periods of time and when in bulk. Because of the way an export overdraft is designed, it allows exporters to expedite their receipt of cash through the advance thereby tying up sales and cash inflows, improving liquidity, and strengthening working capital.

It comes free of liabilities, interests and collateral. An export overdraft arrangement is no liability because it is not one. As an asset transaction, it merely sells the rights (as well as transfers the burden) of collection to the provider for an agreed upon fixed fee or percentage of the total invoice value.

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

On this page, you will learn more on export funds.

The Benefits of an Export Overdraft Arrangement

OverdraftDomestic sales can only do so much. The lure of international trade is real and the reason behind it is obvious, out there in plain sight. Opportunities abound but so do challenges; for instance financial risks, liquidity and collection. Luckily, there’s this thing we call an export overdraft arrangement.

An export overdraft is a type of financing particularly directed at entities that wish to take advantage of the world market without having to undergo the usual repercussions or threats that accompany it.

To export means to abide by international trade protocols and country-specific laws. It requires meticulous documentation, new market penetration, added collection responsibilities and of course the ability to dodge credit, interest rate and foreign currency risks. Let’s not even get started about receivables and cash availability.

But despite such challenges, entrepreneurs still want to do it. The cons may be present but so do the pros and they abound just as much if not more. But a smart business owner will want to mitigate such risks and challenges to the best they can. After all, who wants them tagging along with success? Nobody.

Export overdraft is a method that allows exporters to advance the value of their export sales invoices thus allowing them to receive cash almost immediately without having to wait for maturity. More often than not, receivables will lock up cash for prolonged periods of time preventing their immediate use and at times putting liquidity and solvency at risk. The longer a receivable remains outstanding, the higher the risks of non-collection. Cash sales are still there but majority of importers opt for deferred payments. They prefer to pay only until the goods have arrived to them or until they have been resold.

Because cash is received immediately, there’s less likelihood of losses due to the fluctuation in foreign currencies and delayed or default payments. Moreover, the duties related to collection shall be borne by the export overdraft provider. This includes all administrative duties and paperwork related to the job. Of course, this provides utmost ease for companies not only in terms of time and effort but also resources.

Export overdraft therefore also helps entities focus more on the income generating activities and operations instead of the backend duties. Plus, providers having had experience and expertise will often have a better grasp about a particular country’s culture, language and laws when it comes to invoices, payments and collections.

Finding an Export Funding Institution That’s Right for You

exportfunding1The international scene can be pretty brutal. It’s a beast. With competition at extreme levels on top of all the meticulous documentation, financial risks and other challenges, it can be too overwhelming for business owners. But why do many still want to export? Simple. The costs may be high and tasks aplenty but the opportunities are bigger than the two combined. One of the means by which companies get to minimize if not eliminate scrupulous documentation and threats is by virtue of what we call an export funding.

Export funding involves the use of a financing institution, who in exchange for the right to collect against export sales invoices shall provide the company with an advance of their value. In other words, cash shall be received before the invoice matures and prior to the customer sending in payment. Moreover, the burden of collection and documentation shall be shifted to them.

But even such a tried and tested method can’t be deemed bullet proof especially if companies fail to contact and partner up with the right provider or financing institution. That said here are three very important points to remember when finding an export funding institution that’s right for you and your business.

  1. Prepare ahead of time. This involves having to carefully assess your needs. At the same time, preparation includes research. Lots of it. The internet is a good place to start. Most if not all established companies have their own websites where they provide a list of their services as well as their terms and rates. Read about feedbacks and reviews from past and present customers too. That should give you a very good idea about the institution you might be working with in the future.
  2. Be accustomed to their processes. As you sell the right to collect against export invoices, you give them the right to demand payment from your customers. You allow them into your business at one point. Do their corporate values and procedures align with yours?
  3. Find out if they’re experts in your industry. Each company falls under a specific category or line of industry. It would be best to work with an export funding institution that’s not only seasoned but also has adequate experience when it comes to handling invoices of organizations like yours. Getting a provider that has experience and expertise in your line of business will make it easier for both parties to agree upon terms, discuss related topics and other similar concerns.

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How to Plan Your Export Funding

export fundingExport funding has become one of the most widespread financing methods that aided a great number of businesses in putting themselves in the realm of international trade. It is a tried and tested tool that delivers the benefits of foreign trading such as growth and market expansion without the often prickly threats of financial risks (e.g. currency, interest rate and credit risks), strict legislations, scrupulous documentation requirements, collection hiccups and liquidity setbacks.

Not only has export funding been a ladder to small and medium scale enterprises and startups but it has also acted as a life saver for businesses in recovery. Even already established organizations find benefits in it, further increasing sales and strengthening profitability in a global scale.

To truly benefit from such financing medium, companies have to plan for its use from start to finish. After all, even a tool as great as it would fail to succeed if used incorrectly. In order to achieve its full potential and maximize the benefits that it gives, here is some expert advice on how to plan an export funding.

First, determine its effects on finances. Is the business really ready for exportation? Before thinking about whether or not to make use of such method, determine if the organization is really ready to trade on the international market. This is no joke and so operations as well as finances must be taken into consideration before anything else.

Second, determine needs and goals. It is crucial to identify the company’s needs in the export trade. Moreover, goals must be set. An endeavor won’t exactly be one if there is no end goal.

Third, identify territorial requisites. Each country that the business wishes to export to shall have its own set of rules and regulations. What these are and how to achieve them must be looked at and examined to determine if they are worth all the trouble and if the benefits of trading in such market will be greater than its costs.

Fourth, weigh out the alternatives. Is this financing medium the best option out there? There are many ways by which entrepreneurs can trade and bring their products overseas and export funding is only one of them. Part of planning its use will have to be scrutinizing if it really is the best option to take.

Lastly, find a trusted export funding company. They must not only be prompt in terms of providing for the invoice advances but must also be seasoned enough to handle overseas transactions. Their knowledge, skills and resources must be beyond par.

Export Funding Tips

export-fundingExportation in its simplest explanation means sending goods for sale or exchange in other countries. In business, such transaction is a sign of growth and expansion. You’d think that if given the chance, everyone would jump in on the opportunity without batting an eyelash. Unfortunately, that’s not how reality works. There are many factors to consider before the jump. Foreign trade is no joke. It is serious business to say the least and one of its most challenging facets has something to do with export funding.

When a business decides to place itself in the foreign market, it doesn’t come for free. There are costs to it. First of all, the company will have to study and make various researches regarding a particular country’s market. Products may have to be modified to suit the market’s needs, culture, traditions and preferences. Second, part of operations will have to delve into the international scene which obviously comes with costs. And let’s not forget about freight costs, currency exchange differences, tariffs, taxes and duties. All these and more will require adequate export funding.

With that said, businesses need to gear up in terms of finances. Below, are some tips we’ve gathered from the experts.

·       Always start with a plan. – This is the first step to everything. Make sure that you don’t dive head first without a strategy otherwise you’re only opening yourself up for losses and turmoil. Exporting is no joke as we’ve said earlier. This only means that ample caution must be taken when engaging in it. A plan not only acts as a map but also serves as a reminder to keep your eyes on the prize.

·     Know your sources. – There are many options when it comes to financing. The key here is to determine which ones would bring in the most benefits at the least cost and disadvantage. Research, examine and analyze before you choose.

·    Estimate expenses. – Make a careful analysis of your needs to come up with an effective estimate of possible expenses. This should aid in determining the costs to expect and prepare for.

·  Budget wisely. – When resources have been acquired, make sure that they are allocated as efficiently and effectively as possible. This is where budgets and financial plans come in handy.

·  Be prudent. – When using your export funding, practice prudence. In accounting, this is where you expect the worst where expenses are best overstated and income understated in cases of doubt. This should prevent the likelihood of shortages in funds and overestimation of sales.Visit

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