Banking tips for small businesses: Q&A with RBC’s Jason Storsley

Banking tips for small businesses: Q&A with RBC’s Jason Storsley

Why and how should Canadian SMEs consider going global?

There are lots of good reasons to consider international expansion. Canada is just over two per cent of global GDP. And all countries are at different levels of maturity in their economic development. So you may be a Canadian company that has a very salable product, certainly in Canada, but also globally or regionally, in specific countries that may make a lot of sense given their state of economic maturity.

A sound business plan is absolutely key. You need to understand your market, your client, and your product in the context of that market and client. Everything changes once you get out of your home border.

Do many of your clients export?

We are seeing more set up operations, especially with online providers. The Amazons and Alibabas of the world are making it easier to do business internationally.

Who should a SME turn to for help?

You are going to need accountants who are used to doing business outside of your local borders. Same thing with legal advice. Some countries, China would be one of them, require a local presence. This means you need to have a subsidiary with a local presence within China. You’re going to need to get some legal advice from a firm that has expertise in setting up a business and having business operations in the jurisdictions that you’re interested in.

How does foreign exchange risk come into play?

You may be in a position where your product is produced domestically, but it is sold elsewhere and you are paid in another currency. So a shift in that exchange rate could make for a very bad deal or, worse, a very bad year if things move against you. It’s very important to understand foreign exchange (FX) risks and to have a FX strategy.

That is a great discussion to have with your banker. It is also a discussion point to have with an accountant and a lawyer.

When it comes to international trade, how important is your banker?

When you are dealing internationally, it is very important to have all of your banking in one place – your domestic currency bank account, with your foreign currency account, your credit cards (which likely will be in Canadian and U.S. dollars) – all integrated in an online banking platform. You will be transferring money between them; you will be buying foreign currency; you will be sending wire payments at times. You want an integrated portal of information to the best extent possible.

How complicated is it to set up a bank relationship abroad?

Be aware of timelines when you are dealing in other jurisdictions. You are used to opening a bank account – if it’s personal, you can do it sometimes online, and a business account can be done within a day.

In some jurisdictions in the world, you might be looking at three to six months to set up a local bank account. You may require a local presence. A local presence doesn’t just mean a business name that’s incorporated there. It may mean local physical people presence. It may mean a joint venture.

So be aware of the timelines when dealing in other jurisdictions – they are longer than here in Canada. The advice will take a little longer, the options in front of you will be more complex, and you’ll need some guidance around that.

What can take longer?

Ongoing filing requirements are likely going to be required. For example, other jurisdictions will want to understand your ownership structure – who has beneficial ownership, who has equity investments in your company. A lot of these are going to be filing requirements before you can begin to do business there, and then you may face ongoing maintenance filing requirements to continue operations in some jurisdictions.

Are there places in the world known for more red tape?

Some less developed countries have less developed regulatory requirements. However, some less developed countries actually have more requirements. The onus is on the business owner to do his or her diligence.

What do you hear from clients that surprised them most about exporting?

There are two things I hear most commonly. One: ‘I had no idea it was going to be that different from just setting up a business in Canada.’ And secondly: ‘I never could have done this on my own. The advice that I’ve received from my banker and the references I received around accounting and legal expertise in these areas have been instrumental in helping me get started and be successful in my operations.’

Categories Small Business Insights

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