As businesses continue to supply overseas providers and open up new Markets for their products, the impact on cash flow cannot be underestimated. Businesses are now looking beyond conventional bank financing like an overdraft to more innovative procedures that allow funding to be provided off the back of current trade cycles. Businesses can then release capital that may be used to provide customer discounts or extend credit conditions leading to a competitive advantage for their business.
Tracey Davenport, Dating Manager with a leading European Commercial bank, experiences this regularly. Businesses realise they cannot support their suppliers and await customer payments from throughout the globe whilst taking care of daily operations all out of their overdraft. With companies entering export and import agreements in countries such as China or India, they need a way to handle these relationships while not placing pressure on their operational money. The challenge is educating businesses there is a better way to fund trade than through a limited and possibly costly overdraft facility.
Businesses continue to outsource their provider relationships in Traditional areas like the Far East, but new markets like Poland, Turkey and Eastern Europe provide a lower cost base alternative and quicker access to finished goods. The problem many companies find is having the support of the regional bank to give finance against bills of exchange, letters of credit and transaction documentation. King Finance Trade commented Businesses expanding into new states either through customer or supplier relationships need to be sure that the lender in that respective state is financially sound. The issue many banks have is that their corresponding bank system can be quite limited which has an overall negative effects. Firms that look to bridge their financing gap through trade finance need to reassess the partner banks their suppliers and clients use then locate the ideal lender to work with in their home country.
Trade finance services can be personalized to individual business Requirements resulting in improved financial management and improved cash flow. By way of instance, by raising finance against documentary credits – firms might have the ability to benefit from capital being released immediately. With Import Documentary Credit improvements, it might be possible to negotiate discounts from providers which could help improve gross margin for the enterprise. For an established import or export company, a trade finance solution could offer a low cost non-recourse fixed speed form of fund combined with improved sales opportunities. If Your Company is considering a new business partner or new export State, trade finance is a way to lower your risk and help enhance your Gains in the future.