Financing your expansion abroad

The reason why many businesses struggle to launch and succeed in other countries is because they are trading on normal cash flows and don’t exploit some of the foreign trade instruments that are available to them. If you are fulfilling large orders, then it may be difficult to get any sort of payment up front, so you may need something like a letter of credit, but these can often take a long time to draw up.

Often businesses expect payments to arrive in the same time as they do in the UK, but many countries have very different payment terms to the UK, so don’t expect payment in 30 days. Getting paid on time and quality of goods could be covered by a documentary credit.

You need to prepare for funding your expansion and this will require a fully thought-out business plan, which contains forecasts and a clear indication of your expansion plans.

Your business finances will need to be strong to support any type of overseas expansion. Often businesses will seek an export loan to finance the expansion, but you also need to factor in demands on cash flow, foreign exchange complexity and longer payment terms.

Financing your expansion abroad

Things like overdrafts, although more common in the UK
may not exist in many other countries around the world.
Simple actions here like opening a bank account overseas
can be a lot harder abroad. There may be rules in place
where you can’t form a company without a bank account.
There will be due diligence involved in being able to open a
bank account in another country, so you must allow time
for this.

One stream of financial support worth considering is the government’s export credit agency, UK Export Finance,
which seeks to ensure finance is available for UK
businesses looking to export.

Again, work with your bank and your accountants to advise
you on cash flow, payments, foreign exchange and finance
for your venture.