Getting finance for exporting
Getting the right finance is fundamental to your exporting success.
In writing your export plan you would have determined the different costs involved when starting as an exporter.
For example, an exporter will generally need to make payments for purchases of raw materials, wages and other inputs to manufacture goods prior to receiving payment from the buyer.
This means that your cash flow will be greatly affected and access to additional capital might be necessary.
Preshipment and Postshipment
Exporters have two distinct finance periods that are differentiated by the shipment, the:
- First period is the finance required to prepare the goods for shipment, known as Preshipment.
- Second period is known as Postshipment and covers the period following shipment of the goods, including any terms extended to the buyer.
In seeking to balance out the mismatch in cash flows, exporters will use a mix of two broad approaches, the :
- First of these is to seek finance through negotiation of trading terms with suppliers and buyers that will closely match the timing of payments against expected receipts.
- Second is to seek financing from financial institutions.
Whichever way you choose to manage your cash flow, financial planning is very important.