International Business Finance
Cash flow management is important when exporting.
Click on the following link to learn more about the necessity of taking care of cash flow when trading abroad.
To avoid cash flow problems, payment methods need to be chosen carefully.
Each has advantages and disadvantages.
Prepayment by the importer
Ideally, an exporting business will want to be paid by the importer before delivering the goods. This creates a risk to the importer, so it is also possible for an exporter to arrange for them to receive an instalment in advance and receive the remainder when the goods have arrived.
Letters of credit
These are letters from the bank, guaranteeing that invoices will be paid on time. This is one of the safest ways as it reduces the risk to both the importer and the exporter.
Export credits
Export credit provides finance to exporters against export orders. In other words, a credit company pays a percentage of the value of the order to the exporting business. This funding enables exporters to fulfil orders and meet production costs before receiving payment from overseas buyers.
Bank loans
A bank loan is a relatively simple way to finance foreign trade but the bank may want to see a trading plan and, of course, the loan will have to be paid back with interest.
Watch the video to learn more about ways of financing international trade.
You can also read Business Wales' guidance here.