Looking to grow your business through exporting, but don’t want to put your house on the line? Provident Inventory Finance’s Matthew Nolan shares some tricks of the trade.
There are many good reasons for trading abroad. Most importantly, you’ll substantially increase your potential customer base, stimulate business growth, and open new opportunities to diversify.
While the lure of profiting from exports is attractive, they can come with unmanageable payment delays from overseas purchases. The use of export finance to enable overseas sales has been common practice among Australian SMEs for many years.
Until recently, however, export finance options have been restrictive. The most common is the traditional bank overdraft facility. While useful, an overdraft can be an expensive and restrictive cash flow solution, as it doesn’t take into consideration the value of the stock funded. Importantly for many SMEs, overdrafts are usually secured against property, in most cases the family home.
The good news for SMEs looking to grow their business through export, is that alternatives have now become available outside of traditional lender’s real estate based finance.
One of these major advances in finance is the stock you intend to sell can now be used as leverage to access finance. New funding channels, such as inventory finance, allows ambitious exporters to finance their stock purchases without having to put the family home on the line, with payments aligned to when the sales income is received from overseas buyers.
Securing cash flow financing for exports can also be made less reliant on your property as security if the buyer is of good financial standing, the relationship is stable and you’re using documentary credits. This can allow for an increase in your finance facilities to assist growth, without the normal levels of real estate security.
If you’re selling to major overseas buyers, export factoring is another option available for Australian exporters that also doesn’t require property as security to fund overseas sales.
Funding overseas trading really is much easier than it was a decade ago. If you’re keen to explore the alternatives, it really is just a matter of doing the research to find the best solution for your business.