Struggling to come to (Inco) terms with financing imports? Help is at hand


If CIF and FOB sound like call signs from Thunderbirds you may need help as well as cash, and you may need it FASt!

It’s a funny old world when it comes to international trade. Stick a stretch of water between buyer and seller and it’s not just the mother tongue of each participant that can be hard to understand. Centuries of bartering between countries has produced a set of code-like protocols to determine who pays for what, at what stage of the transaction the risk in the goods passes and who is responsible for keeping the taxman happy on both sides of the pond.

My money lies over the ocean

If just those three examples weren’t enough to worry about then perhaps the biggest conundrum is how to pay for something that might spend 2 months on the deck of a container ship before you can even think about selling it on. And when you can offload it you will no doubt have to wait a further 30 days for payment of your invoice (if you’re very lucky). Oh, and just to add to the woes, what’s been going on with any exchange rates during all this time?

All of that may sound like the perfect excuse to hoist up the barriers and deal only with UK suppliers, but it doesn’t have to be like that – there are ways to finance your imports.

Credit where credit’s due

For every problem there is a solution and a number of trade finance companies exist that are willing and eager to guide buyers on shipping terms and currency dealing and probably most importantly are happy to fund the whole cycle.

To initiate the procedure a client usually needs to have a confirmed order from a customer that is unlikely to struggle passing a creditworthiness check. With that, plus the subsequent order to the overseas supplier, the trade finance company can arrange payment for the goods by the preferred means, such as raising a letter of credit. The goods can then be shipped to the UK and delivered to the end customer who in turn will make payment for them to the trade finance company. The margin in the deal is then paid to the client.

Time is money (and profit)

Of course there are fees attached to financing imports and there needs to be a decent margin involved between the purchase and sale price. It also goes without saying that the longer the shipping time the higher the cost of credit becomes.

All of these aspects can be covered in a preliminary discussion along with other available bolt-on products such as invoice finance which works particularly well as a method of repaying the trade element of the cycle earlier than your customer might.

So, if you are considering venturing abroad with your business it could pay to speak to one of our team. After all, trading overseas doesn’t have to be all foreign.

 

by Steve Leeves