What’s the biggest challenge I hear from our small business exporters today? “How do I get financing.” Especially when they don’t know the foreign buyer or the country is risky. On top of that, there are so many financial products and services available today, that it’s hard to decipher them, particularly when sometimes these products work best in combination with each other.
So what is a small business to do? Here are 2 things that any small business can do to get more financing today.
- Insure your Accounts Receivables: One of the easiest and cheapest to access financing is to insure the invoices that your buyer owes you, your accounts receivables, often the biggest assets your company has. Insuring these receivables guarantees their value, which makes your banker comfortable enough to lend against these amounts.
- Increase your access to financing through guarantees. Consider a small company that just won the biggest contract in its history. Ramping up production and staffing to deliver usually means huge expenditures. Unfortunately, standard underwriting principles typically set limits for financing based on a percentage of revenues for the past three years – not enough for a company undergoing a major expansion to supply a big, new buyer. But by applying a guarantee to the contract or to your bank financial, they can deliver the cash you need to make this big leap forward. Generally, this means sharing the risk.
Chris Dallaire is the Vice-President, Small Business Solutions, at EDC.