May 2018
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  • export overdraftNo matter what time and age it is, finances are always a tricky subject especially when we’re talking business. Many entrepreneurs find themselves at a crossroads every time the topic presents itself and all the more when export trade is involved. Luckily, there’s something like the export overdraft to help smoothen out the rough waters.

    But what is an export overdraft to begin with? In its simplest sense, it is a financial arrangement that allows businesses to advance the value of their customer invoices from their export sales transaction prior to their maturity. Since a majority of importers opt to pay their purchases only after delivery or once the goods have been resold, cash is locked up for considerable periods often taking up to months until complete payment is achieved.

    Receivables, both from domestic and foreign sales, are an asset. They’re good but only to an extent. When they remain outstanding for prolonged periods of time, this can create a liquidity issue preventing the company from reinvesting in itself and using its resources in operations as should be. To hasten the collection without having to tarnish client-customer relationship, the export overdraft is utilized.

    Additionally, it is the perfect method for just about any type and size of business. It’s non-discriminatory in the sense that it does not bank on the company’s creditworthiness or number of assets to garner an approval and cash release. This is because the export overdraft is first and foremost not a debt. It does not require an asset-based or any other type of collateral. Additionally, it is the creditworthiness of the invoices being subjected to the service and the capacity to pay of the customers to whom they are attached. This makes it available not only to established exporters but also to startups, small to medium scale enterprises and even recovering entities.

    It’s relatively fast too and can be arranged in only a matter of days. This is a stark contrast to other financing options available in the market which can take up to weeks or even months to process.

    The export overdraft likewise aids in cash flow injection which in turn helps improve liquidity and strengthen working capital. The hastened collections also allow the business to further finance and support its growing operations without the need to borrow or incur debt. Plus, without any interests, the method only calls for a fixed fee which helps save on costs.
    Learn more about export overdraft on this page

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  • exporttradeAsk any entrepreneur this: Do you want to go global? Chances are they will scream yes in unison. The lure of international trade is too good to resist and why not? It offers so many opportunities and with a bigger market, a lot of potential is within reach. Plus, risk diversification can better be addressed. This is also the reason why export finance has become a go-to tool among dreamers.

    You see, exporting isn’t as easy as it sounds. Sure, the benefits seem endless and abundant but it also comes with challenges and not to mention financial hiccups. For instance, bringing one’s brand to a new country means having to look into that territory’s market potential. It also means fine-tuning the products to best fit the culture and taste of the people. Let’s not forget about marketing either. It takes a lot to introduce a new offering. All of these require funds. Immediate cash.

    There’s also the challenge of keeping cash flows at a healthy level. Majority if not all importers choose to defer their payment. They’d often wait until the goods are fully delivered or until they have been sold. This creates a slowdown in terms of collection thereby trapping cash within export sales invoices. Over time and when in bulk, this can pose threats to liquidity and cash levels.

    Add to this list the challenge of collection. Apart from the time lag, exporters will have to dedicate a new team to cater to the specific region it targets to penetrate. Administrative costs will have to increase as it will entail more labor hours and matching assets and equipment for said duties.

    And how can we forget about documentation requirements and the financial risks. Exporting comes with meticulous paper trail and not to mention legal requirements which are country specific. It also opens up credit, foreign exchange and interest rate risks which can prove to be very costly.

    The good thing is export finance helps address all of these concerns. It allows business entities that wish to trade globally to advance the value of their export sales invoices and therefore receive cash prior to maturity. This reduces if not eliminates liquidity issues, cash flow dilemmas and financial risks. It likewise provides immediate cash accessible for urgent use. Moreover, the provider shall assume the collection function and with it the labor, documentation and legal work, country-specific requirements, equipment and expertise needed to fulfill such tasks.

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  • export-financingExport finance is known to have helped so many companies who only then dreamed to expand and bring their brands to the international scene. If you’re planning to tap export financing to make your expansion dreams come true, here’s a little rundown on what you have to get ready for. Like any other financing option, providers will demand a number of prerequisites. Check out the list of requirements that most providers will have you prepare for.

    1. Books and Financial Documents

    Because receivables are involved, specifically export sales invoices, providers will want to take a look at the company’s books. They may want a rundown on credit sales procedures and terms to ensure that the business practices strong, efficient and reliable controls. At some point, certain providers may also want to see the financial standing of the business through its reports and statements.

    1. Goods and Services

    Exporting sounds exciting but it’s not all bread and butter. There are challenges and one of that would be making the actual sale. Will your offerings be marketable enough to garner profits? Will an importer be interested? Moreover, can you really render the goods and/or services that you promise you would? Because export finance involves providing an advance to the sales invoices, providers will first want to know if you can deliver. Because if you can’t, why would the importer pay?

    1. Customer Creditworthiness

    It is important that your client actually pays or has a good credit history. Do they take too long to pay or don’t they pay at all? Unlike traditional loans where the financial institution will look into your credit score, financial standing and require collateral, this medium will necessitate that customers possess a good credit score.

    1. Customer Financial Standing

    Can they really pay their dues or will they ultimately lead to bad debts? Providers will want to know. After all, they’re the ones collecting from them and buying the rights thereto. It would be a huge loss on their part so it’s no surprise if they will demand for a background check on the customer to whom the invoice is attached to.

    1. Export Receivables

    Of course, export finance will not be possible if there are no international or foreign credit sales to begin with. These receivables will have to be validated and double checked to ensure that they are indeed binding, particularly on the owing client’s part.

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