Exporting Your Goods
Pre-Shipment Financing
Especially when your firm is new to exporting, there are a number of costs that you will need to cover even before you ship your goods to your customer. The following six questions and answers can help you identify any appropriate pre-shipment financing options that would be appropriate to pursue:
What is the difference between “financing for export” and “export financing”?
Why should we consider external pre-shipment export financing?
What options exist for pre-shipment export financing?
What if we need some immediate cash?
Before seeking pre-shipment financing, what should we analyse?
What information will we need to produce in order to get pre-shipment financing?
What is the difference between “financing for export” and “export financing”?
“Financing for export” refers to how you fund the development of a new export initiative and applies particularly to firms that a new to exporting. It is addressed through your development planning in your export plan.
“Export financing” refers to specific financing mechanism related directly to export transactions and/or export orders.
Why should we consider external pre-shipment export financing?
- Acquire additional working capital to underwrite the costs of modifying your product for export
- Provide additional funds for fact-finding trips and primary market research
- Cover the costs of performance bonds, export insurance, etc.
What options exist for pre-shipment export financing?
- Extended operating line of credit from your bank (usually secured against discounted accounts receivable)
- Transaction-specific financing from government agencies, such as:
What if we need some immediate cash?
If you have been in business at least two years and need funds to promote your company in a new foreign market, attend a trade show, or increase production capacity for an export order, EDC, in partnership with Mercantile Finance Services Ltd., can provide unsecured loans of up to $50,000 with flexible repayment terms of up to two years through EXPORT Express Credit.
Before seeking pre-shipment financing, what should we analyse?
- The credit needs of your buyer
- The shipment and insurance terms
- Your cash flow projections to identify any gaps that might affect your business in the course of this transaction
What information will we need to produce in order to get pre-shipment financing?
- Details of the export sale that has been (almost) finalized
- Buyer risk, including relationship history
- Contract terms
- Payment and financing arrangement
- Timeframe
- Recourse and risk mitigation plans
- Production plans and timeframes
- Contingency plans