For many small to large sized businesses, finding a way to expand their market and move into new areas of sales potential means looking outside of the United States. Finding new international markets can open new doors, but it is not without challenges.
One of the biggest issues for companies in the United States doing business with international companies is the delay between producing the goods and the payment. This is often significantly longer than sales within the United States, which can create a significant cash flow problem for the seller.
The answer to this issue can be found in an export financing program. Understanding the benefits of this program can help any business to not only complete due diligence on the buyer, but to also receive an advance for working capital based on the invoiced amount to the buyer.
The Process
In an export financing program, the seller is not the business that the financing company will consider. Instead, they will focus on the creditworthiness of the buyer, as it is the buyer’s ability to pay the invoice that impacts the process.
The seller contacts the export financing program with information on the transaction. This allows the financing program time to complete due diligence on the buyer. However, funding cannot be released to the seller at this point based on an agreement to do business.
Instead, the funding will be provided based on the amount of the invoice once the product has been shipped. At this time, the funding program will release a percentage of the total amount of the invoice directly to the seller. This amount and all associated fees will be agreed upon prior to the shipment.
The seller then has working capital without having to wait for the international shipment to arrive and payment to be processed through the banks.
