Doing Business Globally: Unlocking Your Growth Potential with Trade Financing By Sarah Sandercock
C ompanies doing business across borders face a variety of challenges.Whether you are new to selling internationally or a seasoned exporter, your goal is to increase sales and profits while balancing the increased risk and complexities of global trade. Diversify Your Business According to the U.S. International Trade Administration, 95% of the world’s consumers are outside of the United States. Even more interesting, two-thirds of small- and mid-sized U.S. exporters only sell to one country. Global expansion reduces dependency on the US market and counterbalances our economic ups and downs. You may even find new market applications, extend a product’s lifecycle, or smooth out seasonality. Global expansion increases business complexity and risks, but are offset by potential profit growth. Many financial tools help an exporter mitigate risk and provide working capital to grow, from letters of credit and foreign exchange to trade finance solutions and government financing programs. Unlock Your Borrowing Potential Don’t wait until changing buyers’ needs or market conditions leave you scrambling for financing. Initiate discussions early with a bank that provides a complete range of international services, including trade finance, EXIM Bank and SBA lending, and other industry specific lending programs. For exporters, working capital is often critical to growing the business, yet traditional bank lines don’t finance foreign orders. An EXIM Bank or SBA facility provides liquidity by advancing against inventory and foreign accounts receivable, or even a single export order. International trade finance offers myriad financing possibilities. Consider trade payables finance which focuses on financing accounts payable.This option appeals to companies that may need specialty financing not available through traditional bank financing or government-backed programs. Don’t forget to utilize Letter of Credit (L/C) terms. Not only is the L/C a centuries-old risk mitigating tool, it may be discounted with your bank prior to maturity, speeding up cash flow. Be Flexible with Payment Terms In order to win sales globally, you must offer buyers attractive sales terms and payment methods. Understand the various international methods of payments, the levels of risk mitigation they provide you, and how they impact cash flow. Open
account, documentary collections, letters of credit, and cash-in- advance all have their place. Consider selling in the local currency. Quoting in US Dollars shifts currency fluctuations to the buyer — your product price will differ each time. Pricing in local currency is simpler for your buyer, gives you bargaining power, and eliminates the need for pricing concessions. A foreign exchange strategy will help you An experienced international banker should invest the time to understand your business model, the associated risks, and offer effective solutions to help you conduct your global transactions. Establish relationships with local, state and federal agencies that offer export assistance and educational programs. Participation with these groups provides market insight and best practices. Exporters that embrace globalization know there are both challenges and opportunities.The tradeoffs are worth it when successfully navigated.With the right business strategy, financial and trade resources, your company has set the stage to unlock growth and succeed globally. Sarah Sandercock is Senior Vice President - International Banking at Amegy Bank of Texas a division of ZB, N.A. (Member FDIC). Contact her at international@amegybank.com lock in your hard-earned profit margins. Work with Experienced Partners
Texas.Think.Global
2017 Texas Export Guide
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