Here is How to Finance Your Import / Export Business

Here is How to Finance Your Import / Export Business

Getting into international trading can be a very profitable business for you and your team of co-workers. But this is not the type of business that you can start with a low capital because it requires plenty of investments. To become an import trader, you will need to research the market and identify the best opportunities. But even researching the market requires some funds to be invested in the process and also a good team to work with.

Once you get in the middle of your import export career, funds will keep flowing from your sells. It means that you will keep reinvesting the small profit you make at the beginning of your activity until you can create a profitable chain. But to get here, it takes time and a lot of work with a long-term perspective of success.

If you are a beginner in the import-export business, you might need some finances to get you started until you get there. And here are some ways to receive legit funds for your international trading!

1. Use Your Inventory to Secure a Loan

If you already have an inventory, you might also have the answer to your financial problems. You can use your inventory by evaluating the goods that you have and be able to get a loan based on their value. It is a great solution to finance your business by using your inventory without even selling it. And you can do this in more than one way. You can use blanket inventory lien, floor planning, or field warehousing. You can choose any of these inventory financing types according to your business’s needs.

When you are planning for an inventory financing, there are also several aspects that you need to consider. A good credit record is one of the main points you need to cover before being able to use your inventory for the benefit of your business. Second, you will need to create a list of all the products in your inventory and their objective value. It means that you have to list them for what they are worth and not for how much you would like to sell them. And last but not least, you will need a financial plan that shows how you are going to use the funds in case you obtain them and more importantly, how are you going to pay it back.

You should consider inventory financing only if your products are selling well based on your marketing analysis and previous sells. However, if your inventory is not so successful or it is not updated, it might not be the best solution for you. The person or company who is looking to give you the funds you need will not be so thrilled to help you if your inventory doesn’t have the right potential of supporting such an investment.

2. Access Commercial Finance from a Private Company

Another way to obtain funds is by going the old fashion way and contact a private company to help you. Since business funding is a real problem for many companies, you might be able to find a solution by using one of these private credit companies faster than let’s say a bank. You will be required to fill in a contract with very specific clauses and stipulations. And to make sure that this contract is fair for both parties involved, you can always have a lawyer look over it which can only be recommended considering that finances are involved. Most likely you will be required to pay back a certain amount of interest based on the value of your loan, and you will be given a timeframe to cover the debt. All these details will be discussed between you and the finances provider during your negotiation phase.

Before you access such a loan, you have to do an objective analysis of your business and its perspectives to see if you afford to pay back in due time. Analyse your import opportunities and evaluate them for the long run to make sure that you have everything under control. Once you are sure that you can manage such debt and your business is not at risk, you can consider such a loan as a viable possibility. However, if you have the smallest doubt about your future possibilities to pay back the load you seriously have to reconsider this option.

3. Make A Deal with Your Manufacturer

When you are getting into import-export goods type of business, you will be dealing with a lot of manufacturers. First, you will be interested in finding the best manufacturer at the best price and with the highest quality products to fill your inventory and get your business going. If you have funds to pay for the goods you are buying from the manufacturer, your financial issue is solved. But if you don’t have the funds, you might be able to negotiate a deal with the manufacturer that works for both your benefits.

Some manufacturers will allow you to pay less for the goods if you are ordering a large quantity of them which will save you a lot of investments and financial trouble. Other manufacturers will even give you the goods without any payment up front but with a contract in place between the two of you.
It is one of the best deals you can establish with them, but it comes with a variety of risks as well. The contract will state a date of payment which will come from you selling the goods that you obtain from the manufacturer. And this date should be respected unless you want additional legal problems.

Once you start export products, you can keep in touch with your manufacturer and let them know how the process is going. If you build a relationship based on trust and good communication, chances are you will be successful in this type of collaboration. It is one of the best and easiest solutions for small business funding, especially when you are at the beginning of your import export activity.

Manufacturers don’t like to take unnecessary risks though, which is why it is important to build your case in an advantageous way for them as well. Give them warranties and explain to them that they don’t risk to lose their goods because you will provide them with the payment as soon as possible. Once the manufacturer trusts your ability to honor the contract between you two, they will be open to help you when you need. Plus, after the first agreement is made, the next ones will be much smoother and less stressful for both you and the producer.

Here is How to Finance Your Import / Export Business

4. Get a Loan from a Bank

When it comes to traditional funding solutions, banks are the most common partners for companies worldwide. However, it seems harder to access business finance from a certain bank due to the number of regulations that they have. Also, the bank will check into your possibility to pay back the loan and the financial potential of your import-export business. After a serious analysis, you might or might not obtain the funds that you ask for. Sometimes, the bank might give you a different amount than what you ask for or none at all. If you do get the loan, it will come with an interest and a schedule of payments that you need to respect to avoid further consequences.

When you do business with a bank, you have to expect very little possibility to negotiate the terms of such a contract. Banks have strict norms that they need to consider, and it is not much you can do about that. Unless you feel very secure on the future of your business, you shouldn’t consider going to a bank to access new funds because the consequences can be dramatic if you can’t honor the initial agreement. When you are looking for solutions on how to finance a business, the banking system should be considered only if you are an expert in your type of business and not a beginner. Get a financial consultant and an accountant to advise you during this type of process and help you make the best decision for your business.

It can make a big difference for you especially if you are not familiar with the financial norms used by different banks in your country. Also, pay attention to how you are securing the potential loan. Usually, the bank will ask you for some warranty just in case you find yourself unable to pay back the loan.

Before trying to access a loan from a bank, make sure to have your folder together and be aware of your possibilities of accessing the best financial deal. Have an expert look over your papers before submitting them to the bank manager. They will be able to analyze your chances of success and also let you know the risks that you are exposing to during such a process. It is important to realize that once the contract is signed there is no turning back and its clauses need to be respected by both you and the bank institution.

5. Access Government Financing Programs

In many civilized countries, the state offers some sort of support system for owners of import-export companies. And with a little luck and research, you might be able to access such funds. But it is not an easy job to access government funds especially if your business is not developed enough or you don’t have a good team to work with. Usually, state programs are available for a limited period each year and, as you imagine, there is a waiting list to access them.

You will need a well-established plan that represents your business and your perspective for at least the next year if not more. You have to be very descriptive regarding your inventory and your import export opportunities and justify accurately, your need for new funds. Based on such data, the government will analyze your folder and provide you an answer.

There are bigger chances to access state finances if your company develops an activity that benefits the state, the country or the economy of the country of residence. For instance, if you are planning to import or export goods that can have a positive impact on the market and can open other doors for further international trading. To get to this level, you will have to identify certain opportunities that you want to pursue and make sure to have a marketing plan in place as well an economic one.

There is no need to try to access government funds if you are a beginner in the matter of international commerce and your business is just being implemented. But if you are in this field for a while and if you are aware of the opportunities that you can reach, it is worth a try! Chances to benefit from government funds are small but not impossible. And don’t get discouraged if you are not successful on your first try. The more you perfect your strategy, the more your chances will increase from year to year, and you will find new ways to develop your company!

Ways To Save Funds During Your Import Export Process

Even if you are not in the situation to need complete financing support, there are ways to prevent such a situation. You can save your funds as your business is developed and avoid being in such a strict financial need. The first thing to consider when you want to do a smart internal economy inside your business is the reinvestment strategy. It means that you will keep reinvesting only the profit you make from your sells without adding additional funds to the process.

Restock your inventory only within the limits of your previous sells and don’t make any significant debts! This strategy might be challenging if you have a team of co-workers to pay and different facilities and utilities to take care of such as rent, electricity bill, etc. but it can be done at least for the beginning phase of your business, and it is worth it on the long run! Small businesses find it easier to apply this strategy to their expenses is not significant ones on a monthly basis.

Another way to save money is by ordering large amounts of goods that you can resell. Most producers will give you a great price if you order hundreds or thousands of items at once which will translate into a bigger profit for your business. Your best chances of success in this strategy are by ordering goods from countries like China or India because their prices are already much lower than the European market or the one in the United States. Also, if you are trading with Africa, your profit can be a significant one because exporters can sell tonnes of goods at once.

Since Africa is such a populated country, the demand for certain items is also very high, especially if we talk about foods. Importers and exporters can develop entire careers based on the African market especially in countries like Nigeria and South Africa! Moreover, Africa imports and exports goods all over the world, supplying different industries and fields of activity from gems and oil, rice and other foods.

These aspects make your possibilities endless once you enter the import-export business and your chances of reaching the profit that you want increase tremendously. All you need to do is to identify the right possibilities that each market offers you and do your best to negotiate the best price.

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