What do finance exporters need?

What do finance exporters need?

Whitney - May 17, 2018

 

Deciding to go international is a tremendous step for a company, and it could indeed lead to a fast, steady growth over the course of time. That being said there are many challenges the company would face along the path in terms of competition, differentiating customers and their different values, adjusting your products for the respective market and so on.

 

The Main Issue

One of the most arising problems, though, is the financing. Having a steady, uninterrupted cash flow is vital for the well being of every company. Sending a

parcel to Sweden

through dhl.co.uk/en/express.html">DHL might sound like a straightforward procedure, but in reality, it is not so. As a seller, you would want to be paid as soon as possible, while the buyers would want to delay their payment as much as possible unless they are the end customer.

In order to maintain a well-balanced process, third parties often join in the business venture when it comes to money handling and operating with the risk. The risk of being delayed with a payment or not being paid at all leading to legal lawsuits is the main factor each exporter should consider. The only way to mitigate the consequences is through well-planned financing of the export.

 

A Variety of Solutions

Letter of Credit

Considering all of that, actually sending a

parcel to Sweden

with a courier such as dhl.co.uk/en/express.html">DHL shouldn’t be so worrisome if the necessary precautions are taken. A good way to ensure for the well-being of the deal would be through a letter of credit. If your company is exporting goods to a company X, you would want to be ensured that you will receive the payment within a certain time frame. This is where you involved two banks, One on your side and one of company X’s side. That being said neither of the banks is directly involved in the deal. They make sure that all the predefined conditions on the contract are being kept. For example, that company X will release the payment once the delivery papers are received. This creates a safe environment for both parties, while the banks take no risk but charge a commission for the service.

 

Forfeiting

Involving a forfeiting company is usually a last resort solution for a company which has not received its payment. As such, the forfeiting company would buy all of the commitment. An example would be, a company X sends specific amount of goods or a price Y to a company Z. Company Z receives the goods but does not pay the price due to some kind of a reason – the contract might have allowed for a delay for example. Company X is tired of waiting and sells its right to receive the obligations to a forfeiting company for a much lower price, however one that is paid instantly. From there on the forfeiting company is the one that bares all of the risk and the full payment with all of the obligations revolving around it.

 

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