The import and export business is still one of the lucrative types of trades you can get into. However, importing is still a risky business to get into.
If you are still interested in entering the foreign trade industry, one of the first things you have to do is to secure the best available export and import financing solutions. With these solutions, you will have access to the working capital required for your venture as well as enhanced cash flow since you can get the assurance that all pertinent matters are effectively settled with suppliers and payments are promptly received from buyers.
There are different import financing options to choose from today. Businesses can use them on their own or two or three more in conjunction. Below are three of the most popular options you can choose from:
1. Accounts receivable financing. This option pertains to the selling or pledging of your company’s account receivable, at a discount, to a bank, financial institution, or an accounts receivable financing company who may assume a risk of loss. Under this solution, you receive a portion (usually 80% to 90% of the face value of your receivables) in advance of payment from your customers in return for a fee, or interest, which will be paid to the commercial finance company. When the customer pays the commercial finance company, the appropriate fees are deducted and the remainder is rebated to you.
2. Purchase order financing. This import financing option refers to the assignment of purchase orders to a third party, a bank, financial institution, or commercial finance company, who then takes all responsibilities of billing and collecting from customers. Purchase order financing can be used to finance all present and succeeding orders to sustain and improve your company’s cash flow.
3. Inventory financing. Inventory financing pertains to a loan secured by the inventory of your business. This financial solution enables import companies to hold more stock without cash flow strain and to produce more sales. Most of the time, inventory finance is part of a purchase order and accounts receivable financing commercial finance package.
The three types of import financing solutions stated above can enable your business to increase its purchasing capabilities dramatically. With these options, you can accept larger orders and grow your business exponentially.
By choosing the right bank or financial institution, the import financial solutions you need can also be tailored to your business’ particular requirements.