7th August 2012
Whether importing or exporting goods, there are numerous challenges you’re going to face throughout the life of your business. Clearly you need funding when you first start your enterprise, but even as it grows and evolves you’ll continually need financial help.
Where once this came from more traditional forms of lending such as loans from the bank, now there are more options to choose from, such as asset based finance.
Trade finance usually references all-inclusive funding packages for UK companies which purchase and then sell on finished goods. When you’re trading in this manner – whether importing or exporting – and you secure large orders this can leave you stretched financially at one of the most crucial times for your business.
Opting for trade finance provides you with a cash injection which can ensure you fulfill your orders with your suppliers while you wait for your own customers to pay. When you receive an order from your customer you need to order the goods from your supplier, who will then invoice you. A trade finance solution will provide you with the full amount to pay your supplier, enabling you to receive the goods and then supply them to your customer. You are then free to invoice your customer. As soon as you do, a percentage of the profit element of this invoice will be released to you through trade finance. The solution also includes a dedicated service to chase the payment for you from your customers. Once they pay, you receive the remainder of the payment – minus the trade finance fees.
The simplicity of a solution such as this is that it enables you to release funds to fulfill your orders, at the exact time when you need them, but you’re not borrowing anything over and above funds you are going to receive. All the money provided to you is in fact an asset you already hold.
A similar asset based finance service exists for those businesses exporting out of the UK. International export factoring boosts your cash flow by providing an injection of cash into your business against the value of your outstanding invoices. A full order book makes your business appear healthy, but it doesn’t always add up to money in the bank; which is essential to expand and grow. Export factoring releases a percentage of the value of these invoices immediately providing you with a ready flow of cash. In the same way as trade finance, once these are paid by your customers you’ll receive the remainder minus a fee.
Choosing export factoring can also allow your sales ledger will be placed in the hands of dedicated multilingual credit controllers tasked with chasing your payments. This removes the problem of chasing payments in a foreign language and enables you to get on with the day to day running of your business. Once again all the financial help you receive is based specifically on assets you are guaranteed to receive – an invoice is a contractual debt your customers have agreed to pay.
Whether importing or exporting; financial assistance is vital. Being able to secure asset based finance as your business grows, makes good, simple business sense.
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