Trading internationally brings a new dimension to business finances. Crossing borders can increase risks, so putting the right process in place to ensure prompt payment is critical and dealing with fluctuations in foreign currency exchange rate can make the difference between profit and loss.
Export Finance explained
When an exporter receives an order to supply goods or services to an overseas buyer, it can ask to be paid upfront. This is a safe way of exporting because the exporter knows it will get its money before the goods or services are delivered.
This approach might also mean the exporter may enter into fewer export contracts, as the payment terms may not be competitive. As buyers require time to pay, many exports of goods and services are sold on extended credit terms, as much as 180 days. This can have a significant impact on the exporter’s cash flow and introduce an additional working capital requirement. It also exposes the exporter to the risk of non-payment by the buyer.
Exporters can go to their bank for support, or a number of other specialist financial organisations that provide support including trade finance and payment protection including UK Export Finance. Such specialist organisations include trade finance houses, factoring and discounting companies and credit insurance providers.
Also consider: Payment Methods & Foreign Currency Exchange
Their mission: to ensure that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer
They are the UK’s export credit agency. They help UK exporters by providing insurance to exporters and guarantees to banks to share the risks of providing export finance. In addition, they can make loans to overseas buyers of goods and services from the UK. UKEF is the operating name of the Export Credits Guarantee Department (ECGD).
Export Working Capital Scheme - click here for more information
A crucial part of any transaction is ensuring you get paid. There are different payment methods which you should consider. These are:
Detailed information can be found by clicking here
Getting paid on time and securely is the most important financial consideration when embarking on international trade; using a letter of credit helps to avoid these pitfalls.
What is a Letter of Credit?
A Letter of Credit is a written guarantee by a bank assuring payment for goods. It will have strict terms specifying both the amount of money to be paid and within what time frame. If all the conditions are met, payment is guaranteed.
How can we help?
Hampshire Chamber of Commerce is working in partnership with Bristol Chamber of Commerce to offer a Letter of Credit Checking service. We also have members of the Chamber who offer this same service. If you would like to know more please contact the International Trade team on 01329 242420.
Hampshire Chamber of Commerce via the British Chambers of Commerce has partnered with exchange experts, Moneycorp to provide money saving foreign exchange to Chamber members. If you have international payment requirements Moneycorp can help you save hundreds, thousands, even tens of thousands every year.
Free foreign exchange health check
Free assessment of your business's foreign exchange requirments, to help you pin-point where you could improve your margins
Low transfer fees
Our fees start from just £5, a substantial saving over the £20-£40 that banks typically charge
Free account opening
Buy and sell any of 35 currencies
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