An overview of export financing. This article is part of "A Basic Guide to Exporting", provided by the U.S. Commercial Service, to assist companies in exporting.
Last Published: 10/20/2016
Export financing is often a key factor in a successful sale. Contract negotiation and closure are important, but ultimately your company must get paid. Exporters naturally want to get paid as quickly as possible, whereas importers usually prefer to delay payment until they have received or resold the goods. Because of the intense competition for export markets, making a sale often depends on your ability to offer attractive payment terms. You should be aware of the many financing options open to you so that you can choose the most acceptable one to both the buyer and your company. In many cases, government assistance in export financing for small and medium-sized businesses can increase your company’s options. Before making financing decisions, you should consider:
 
  •  The need for financing to make the sale. In some cases, favorable payment terms make a product more competitive: A buyer who had preferred buying from someone else might buy your product instead because of shorter or more secure credit terms. On the other hand, a sale can be lost if the competition offers better terms on a similar product.
  • The length of time the product is being financed. The term of the loan required determines how long you will have to wait before you receive payment from the buyer and influences your choice of how to finance the transaction.
  • The cost of different methods of financing. Interest rates and fees vary, and an exporter may expect to assume some or all of the financing costs. Before submitting a pro forma invoice to the buyer, you must understand how those costs affect price and profit
  • The risks associated with financing the transaction. The riskier the transaction, the harder and more costly it will be to finance. The political and economic stability of the buyer’s country can also be an issue. To provide financing for either accounts receivable or the production or purchase of the product for sale, the lender may require the most secure methods of payment—a letter of credit (possibly confirmed) or export credit insurance or  a guarantee.
The need for pre-shipment financing and for post-shipment working capital. Production for an unusually large order or for a surge of orders may present unexpected and severe strains on your working capital. Even during normal periods, inadequate working capital may curb an exporter’s growth. However, assistance is available through the public and private sectors.

Many sources can help in determining which financing options may be best for you:
  • Your banker
  • Your local U.S. Commercial  Service office
  • Your local U.S. Small Business Administration office
  • Ex-Im Bank • Your state export promotion or export finance office




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