Exports and international markets
Export finance and risk
Export finance and risk
If you’re considering expanding into international markets, we can help you work out the best options for your business and understand the risks involved with trading overseas.
Exporting products and services can be challenging and may have a significant effect on your company’s finances and cashflow. The costs involved in setting up and running an export operation and the extended sales cycle can be a big investment at first.
Accessing export finance
If you’re thinking about starting to export, accessing external finance could help you cover the costs of working capital demands, and smooth out the process for completing sales and receiving payment. Securing export finance could also allow you to offer better payment terms to customers, making you more competitive in your target markets.
Find the best finance option for your business
If you’re considering expanding into international markets, we can help you work out the best options for your business. Our Finance Readiness specialists work with Scottish companies to find the right route to funding for them.
We have also published a series of guides explaining different funding options and what you can do to become investor-ready.
Managing financial risk
Expanding into overseas markets can feel like a step into the unknown. Although a great opportunity to grow sales, it can be expensive to get a foothold at first, with control over stock, fluctuating currency and financial market conditions all potential challenges to operations.
It’s vital to understand the market conditions in the countries and markets you are considering for exports. Our market research team can provide you with insight into any country or market to help you understand the trading environments in each.
We also recommend this webinar, produced by Bibby Financial Services, which explains the financial risks of exporting, including what to look out for in contracts and terms and conditions, the importance of International Commercial Terms (‘Incoterms’) and how a financier can help you overcome risks.
The top three global trade credit insurers provide a range of resources to manage country risk:
- Euler Hermes provide country risk reports by geography and quarters
- Coface provide Country and Sector Risk Assessment maps and reports
- Atradius report on credit risks and financial conditions of key industries and markets.
UKEF have a number of products to help businesses domestically and overseas manage their credit risk.
Trade credit insurance can be used to help you to protect your cash flow from loss due to credit risks involved in exporting. These articles by Open to Export introduce Trade Credit Insurance and explaining why insuring can help mitigate against non-payment.
Great.gov.uk has published guidance on insuring against non-payment and managing non-payment.
UKEF have a number of products to help businesses domestically and overseas manage their credit risk.
If quoting or pricing your goods or services in the local export market currency, you need to be aware of and manage exchange rate fluctuations and risk. There are three main types of currency risk to be aware of: Transaction, Translation, and Economic risk.
You can adopt risk management solutions and establish foreign exchange (FX) management policy to help to mitigate this risk. These resources will help you get started:
- Taking and making payments in foreign currencies (article)
- Managing currency risk in the Brexit age (article)
- Managing currency risk in emerging markets (webinar)
- Forward rating and how to avoid losing out on currency fluctuations (article)
- Find foreign exchange rates issued by HMRC on a monthly basis in CSV and XML format
- Moody’s produce a list of countries by credit rating, showing long-term foreign currency credit ratings for sovereign bonds
Great.gov.uk has published guidance on insuring against non-payment and managing non-payment.
Understanding methods of payment
Having the ability to offer and accept different methods of payment can help you to be paid on time, in full and mitigate against non-payment. While business to consumer transactions usually involve payment at the point of sale, business to business sales payments can be more complicated.
Principal payment types
The main payment terms used in international trade are:
- advance payment – the safest and most secure method for an exporter, receiving payment in full before releasing a product or service
- letter of credit – a guarantee from your buyer’s bank, promising to pay if the buyer can’t, subject to terms and conditions of sale being met
- bank collection or documentary collections (D/C) – your bank collects payment from your buyer’s bank on your behalf; used primarily for shipments by sea
- open account – the least secure method for an exporter, goods or services are shipped, then an invoice issued with terms for payment stipulated (e.g. 30, 60 or 90 days, or upon fulfilment).
The Exporting is Great website explains these options in more detail.
It’s best to talk to your bank about the solution that fits best with your exporting plans.
Open to Export resources
Open to Export provides free information and advice from the Institute of Export & International Trade to help businesses export and expand. Their webinars and articles on payment terms include:
- What you need to know to get paid (article)
- How to get paid on time and in full (webinar)
- Methods of payment (article)
- Letters of credit (article) and documentary letters of credit (article)
A more detailed guide to letters of credit is available from Trade Finance Global.