One of the most common ways of financing exports is by obtaining credit from commercial banks (much like you would finance your domestic activities). Although this tends to be a traditional source of finance, most smaller exporters complain that banks are not very receptive to their financing needs and are far too bureaucratic in their procedures. Bank credit also tends to be relatively expensive. You may want to read more about dealing with banks.This credit may be in the form of an overdraft that you negotiate with the bank or it may be a loan for a specific project, although prefer not to finance individual orders as they prefer to establish an ongoing business relationship with customers.

Although many entrepreneurs may complain that getting financing from a bank is like drawing blood from a stone, the reality is that banks are the key source of exporting financing the world round. Banks are not reluctant to provide financing. Indeed, providing financing or credit is one of the main ways for them to earn income for themselves. At the same time, banks do not want to simply throw their money away and so they take great care in considering and analysing the requests for financing that they receive from prospective exporters. In so doing they take many factors into consideration.

To begin with, they look at the business history of the company asking for financing. If you have had a rocky relationship with your bank and have struggled to pay back money in the past; or if your business is currently struggling to make ends meet, then do not expect a open-armed welcome. Your bank will require considerable convincing that you will make a success of this venture.

If this is your first time venture into exports, your bank may be more reluctant to assist you (or will at least want considerable assurance of your likely success). Your bank is certainly not likely to give you money unless you can show the thought and effort that you have put into this venture already. They will want to know:

  • What research have you done?
  • What plans have you made (they will almost certainly want to see your export plan)?
  • What makes your product so special?
  • Why have you selected this particular country?
  • Who have you spoken to?
  • How will you market your product?
  • What sales/profits do you expect and how long will it take to achieve these sales?

Do not view these expectations in a negative light. If you can convince your bank of your case, then you stand a good chance of success. If your plans are not thought through, are very thin, or are unrealistic, expect a frosty reception from your bank. The best is to go back to the drawing board and do your planning properly.

If, on the other hand, you are able to put a clearly thought through export plan on the table that shows the research you have done and the export plan you intend following, and if this plan is realistic, the banks will almost certainly consider it favourably. Be particularly realistic about what you hope to achieve, the sales you will achieve, the profits you will make, the time it will take and the effort involved. Banks know exactly how difficult exports are. Indeed, our suggestion is that if you do not have a well-formulated export plan on paper, forget about approaching your bank!

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