Exporters will inevitably incur certain costs which are not normally encountered in domestic business activities. The time between production, delivery and receipt of payment is usually longer for international transactions and the costs of financing transport, distribution, promotional activities and overseas travel must be funded.
The amount of finance required to undertake export activities will vary from business to business and will depend upon the market entry strategy which is adopted, however the following elements will need to be considered:
Funds will be required for the purchase of raw materials, components and parts prior to manufacture.
Finance will be required to fund operations during the period between the despatch of the goods and receipt of payment
Businesses must have access to finance for day-to-day operations such as labour costs, equipment maintenance and overheads. Exporters will also need to fund expenditure on items such as market research, hosting overseas customers and charges for export documentation.
Most commercial banks and other lending institutions offer export finance to qualified borrowers and many have specialist international departments which advise businesses on all aspects of raising capital for the funding of overseas activities. These also include advice on currencies and measures which can be taken to minimise the risk of currency fluctuations through mechanisms such as forward exchange contracts.