Misconceptions on Export Finance

export-financingMany domestic and local companies find the international market promising which it really is; however, it is at the same time pretty intimidating with all the scrupulous documentation, country specific legislations, international laws, liquidity drawbacks collection hitches and financial risks that come with it. Exportation when done right however can bring about exceptional growth and endless opportunities. One way for entrepreneurs to achieve all of it while dodging the aforementioned drawbacks is through the help of export finance.

The export finance sector is one of the most in demand financing providers when it comes to foreign trade. It aids companies in the documentation, collection and liquidity issues that it would otherwise face had it ventured on its own.

But just like any other financing alternative out there, it comes with its misconceptions. Many business owners do not fully understand how it works or what benefits it provide thus disabling them of its advantages. To prevent that from happening, we have come up with a lies versus truth list to iron out the facts.

Lie: It’s only for big companies.

Truth: Export finance was designed to aid small and middle scale enterprises, startups and even businesses in recovery for their foreign trading endeavors so saying that it’s only for established organizations is one huge fiction. It’s available for all companies regardless of size and industry.

Lie: It is expensive.

Truth: On the contrary, it saves up on costs. With the aversion from credit, interest rate, currency and similar other risks, it actually helps reduce the losses that a company might face. Furthermore, it provides for a team that caters to the entire collection function thereby freeing the company of having to further invest on an extended arm in each country it seeks to export to which obviously requires a huge amount of additional capital.

Lie: It hurts creditworthiness.

Truth: Many have confused export finance with a loan. It is not a debt or anything near it. In a way, the aforementioned service is closely akin to a receivables financing medium but instead of a domestic transaction, it tackles an international perspective. Exporters get to advance the payment that would otherwise be received at a much later date from the importer who often opts to send in pay only upon receipt of goods or after they have been resold. This not only releases locked up cash within the sales invoice allowing it to be reinvested and used for operations, further strengthening working capital and liquidity. 

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