If you import/export goods, you should read this

November 3, 2022

Export goods

These days, the global economy is more competitive than ever before. This creates a fast-paced environment where every second and dollar counts. These factors, combined with the recent economic instability all over the world, have caused many organizations to look for ways to cut costs and increase their working capital.


But what is working capital?


Simply put, it is the total difference between a company’s current assets and current liabilities. As an importer or exporter of goods, one of the best ways to achieve this is through trade finance.


The overall trade finance meaning covers all kinds of financial products that can be used to facilitate international trade. Trade finance products include trade insurance and export factoring. Export factoring follows the same basic principles as invoice factoring, except that it covers overseas transactions. If you import or export goods, this article might be interesting for you to learn about benefits that export factoring can have for your business.


Benefits For Importers

As an importer, one of your primary goals is to stabilize your supply chain. With all of the recent upheavals, this has only become a bigger challenge. According to a 2021 Statista survey, 57% of businesses cited supply chain disruptions and shortages as one of their top challenges. Furthermore, from January to November of 2021, $238 billion worth of cargo experienced “significant delays” outside the ports of Los Angeles and Long Beach. Is your organization prepared to handle delays like that? If your company already paid in full for your shipments, you could lose thousands or even millions of dollars. However, with invoice finance, this risk can be mitigated.


Instead of paying in-full at the beginning, invoice finance allows you to pay for your supplies in gradual payments, up to 120 later, thus minimizing the financial impact of delays in shipping.


Once you have made your purchase and the accounts receivable workflow has begun, this process starts with cash being sent to your international suppliers within three days post-shipment by your provider (this video explains the flow quite well and in simple terms).


You then can pay for your imports up to 120 days later. The supplier will ship the goods and issue the invoice. For international shipping, these goods will often be shipped via shipping containers on large ships.


You can then check the invoice against related documents, such as the bill of lading. This process can free up your working capital and ensures the continuity of your supply chain. Your suppliers will appreciate the infusion of immediate cash and this will strengthen your relationship with them.


That means, if you and your supplier get onboard for invoice financing, he might also consider giving you additional discounts on your items!


But there’s more: this system can also be beneficial because it can improve your competitive advantage by offering rapid payment terms to new suppliers. As you can see, financing foreign trade can be a great way to achieve more efficient working capital management.


Benefits For Exporters

Exporters sell goods to overseas buyers. Your goal is to cash in on these exports as quickly as possible and expand your working capital. Unfortunately, there are often delays that can cost your business. Research shows that 60% of invoices are paid late. Specifically, South Africa, Mexico, and Australia tend to pay around 26 days late. During the Covid Pandemic, the US and Canada paid invoices punctually just 29.1% and 54.2% of the time. It is imperative that your business have a way of weathering these kinds of storms. Nobody can predict the next pandemic, but invoice finance can be an excellent way to stay prepared.


According to the provider you choose, you will get a certain percentage of your invoice upfront. At Incomlend, for example, we fund 90% for exporters invoices immediately after the goods have been shipped. Your buyers will then pay us with extended payment terms. Finally, we will then pay you the 10% left from the amount received after deducting our fees. With invoice factoring, you never need to worry about payment collection because we handle it all for you.


Much like for importers, invoice factoring can help scale your business by liberating working capital. This money can be used to better cover your operational expenses and finance your next production cycle faster: paying suppliers, employees, and so on.


Unlock Opportunities

Do you want to know more about invoice financing? Find out if your business qualifies in a few clicks https://eligibility.incomlend.com/.