All you need to know about Export Finance

All you need to know about Export Finance

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For every country it is really important to promote exporting, without exception. This is why every country should have programs designed to help exports, this way they will promote both exporting and those companies involved in exporting. Exporting plays an important part in every country and explaining why is not really necessary, many powerful economies depend completely on exporting, like South Korea and China. And pushing this has lead countries to better levels of economy on its own. So financing exports should be a priority in most economies, especially those who are having economic problems.

Image courtesy of Moyan Brenn at Flickr.com
Image courtesy of Moyan Brenn at Flickr.com

A strategy while exporting is not only to promote the exporters, but give guarantees to foreign buyers. The country must encourage and give loans to foreign buyers so they have a secure path to some products and services. Before exporting you have to make sure someone will buy it and this is a strategy that has shown results in the past. These loans are given only to trustworthy buyers and are usually promoted by the government of the exporting country.

One of the most important factors when exporting is making sure the buyers favor the products of our country. And like we mentioned before the government works in this by securing loans and credit to foreign buyers so they use it only in the country’s products. They give this credits using tax money, but they are later recovered as the foreign buyers that get the loans use them only in the products of the country, paying companies in the country, and also are recovered through interest rates. The tax payer doesn’t receive an immediate benefit, but this later shows greater benefits to both the country and the people. The economy grows, it slowly eliminates trade deficit and creates local jobs. This way the country’s producers will be able to grow and the people will benefit from all the jobs generated by the growth of such companies.

Image courtesy of sodaro,k at Flickr.com
Image courtesy of sodaro,k at Flickr.com

Some countries, like the United States, have used this strategy for a long time and it has helped them improve the infrastructure of the companies of the country. By improving the infrastructure, companies will be able to produce more and that will help both the company and the country. By using this strategy the country will be able to export a lot more and at the same it will be able to handle an even bigger number of products, improving economy in two different ways.

Another issue resolved by this strategy is knowing which buyers will be trustworthy with payments and loans. Sometimes the differences between countries make it hard to control buyers, as the laws affecting both sides of the transaction are different and in case of frauds and problems, they will be harder to resolve. So take into account that export finance also has risks, as the ability for local companies to recover what they lose from this transactions will be very limited.

Now, talking from the point of view of a company, exporting may present some problems that accompany all kind of overseas business and all this should be taken into account. The shipments obviously take longer to reach the buyer and some factors may delay this time even longer. The transactions also take longer, because they have to go through a different process of validation and must be evaluated by the country. So prepare to wait longer to get paid and remember that this can play an important role in the profit of loss on a transaction. Exporting finance can help companies with these problems, as the government will be involved in most of these transactions and they will help fasten the time of the transactions. This way exporting finance can give a serious advantage against competitors and can clearly put some companies in better economic situations.

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