This is part 8 in a series of 12 step-by-step guide to help you succeed in today's global export market.FINANCING AND INSURANCE (a)Defining Your Financing NeedsThe first step in accessing the financing you need is to be able to define your needs. The following are examples of the types of financing you may require, as you prepare for entering international markets. You need financing for your company, (corporate financing), if:
b) You know that you can develop unique expertise that will enable you to gain clients internationally, thus you may require funding for both technical and market development. The question is:
You need project financing if:
b) You have been at the client's site for an extended period of time and the client has run into financial problems which may be country or client specific. The question is:
You need transaction financing if:
b) You have received an excellent contract for your services from a foreign client, but your domestic bank refuses to accept it as a solid receivable, thus you need to convince them or seek an alternative source of financing. The question is:
Financing and CompetitivenessAccessing competitive financing is critical to the development of your international business. Often it is the determining factor for presenting the most attractive proposal for a transaction or a project. In addition to providing competitive loan rates, financial institutions can improve your competitiveness in other ways as well, such as:
b) Working with EDC to present to your client, can enhance your credibility and give an early indication that your proposal will include an attractive financing package.
Meeting Your Financing NeedsThis section provides information on how you can look for financing to establish or expand your service business, access financing for an international services project, or access financing for a specific service export transaction. It is useful for your financier to understand that you, as a successful service exporter, will become a long term client, able to repay loans and help the financier to meet all its goals, including in some cases, job creation or poverty alleviation. During negotiations with financial institutions, you need to explain that a competitive proposal will enable you to win a contract and that a loanto you at the lowest possible rates will be more profitable than no loan. The key is to ensure that the financial services provider feels like part of your team. This is most likely to happen when you cultivate the relationship by maintaining regular contact, not just visiting when you need a loan. As you seek financing from external sources, estimate the cost not only in terms of interest and loss of control, but also in terms of management time required to apply for the financing and to maintain the relationship with the lender.
Working With Financing SourcesWhen working with any source of financing, be sure that you understand the aims of the organization, then present your information to show how you will help the institution or individual to achieve those aims.
Working with Private Sector Financing SourcesWhen working with a commercial bank, demonstrate that its contribution to financing your export will be secure by giving a clear overview of:
Working with Public Sector Financing SourcesWhen working with any public sector source of financing present your information to show how you will help the institution or individual achieve goals which may include:
Working with International Development Organizations on FinancingWhen working with an International Financial Institution, a UN agency, CIDA or a developmental Non-Governmental Organization (NGO), be sure that you understand the aims of the organization, then show how assisting with your project will help the institution achieve its goals. These, among others, could include the following:
Planning Your Approach to FinancingBefore approaching any organization for financing, whether for investment in your company or progress payment on an international sale of your services, take the time to prepare properly, even for an initial visit. This preparation should include preparing yourself, preparing your financing package and preparing your lender.
Professional advice can be useful in developing a financing plan. However, you should do most of the preparation yourself for the following reasons:
b) Preparing Your Financing Package c) Preparing Your Lender The above situation is true when exporters are dealing with local bank branches rather than the International Banking Centres in the major cities, and with local government offices where staff may lack extensive export-oriented training, particularly for exports of services. It is in the best interests of the company seeking financing, or other assistance, to be very well informed about all programs that are available. Unfortunately, it is often the case that:
Companies most in need of advice from knowledgeable commercial bankers are those that tend to be dealing with staff who lack relevant experience while large, competent exporters will likely be working with the knowledgeable staff of the International Banking Centres. It is recommended that service exporters conduct thorough research on the programs and services available from their commercial bankers. This could include reviewing web sites, meeting with the staff of the International Banking Centre operated by most commercial banks in most of the major cities, and asking, for example in Canada, the Canadian Commercial Corporation and the Export Development Corporation for suitable contacts in your commercial bank, then using this information to ensure that your local branch is aware of the full range of services it should be making available to you. |
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