5 ways to safeguard payments when selling overseas

5 ways to safeguard payments when selling overseas
Enterprise Nation
Enterprise NationEnterprise Nation

Posted: Tue 22nd Oct 2013

If you're thinking of selling overseas, especially to emerging markets like China and Brazil, then one of the many things you need to consider is how to safeguard payments should something go wrong.

This type of trade finance - as its known - presents a complex web of insurance, guarantees, loans and bonds for small businesses to consider. So, we asked Paul Croucher from the Government's export credit agency - UK Export Finance - for five tips for our readers. Paul Croucher is Head of Trade Finance and Insurance Solutions at UK Export Finance.

  1. Consider the risks. International trade has massive benefits for small businesses, but it also presents some pretty big challenges. You might need extra funds to cover the delay from when you start making the goods until the customer is due to pay for them, and there is a greater risk of an overseas customer paying late or not at all. The commercial sector offers a range of working capital loans to make sure you're covered for these eventualities.

  2. Don't give up if the bank says 'no'. There are a number of reasons why banks might turn down a small business's request for trade finance.  For example, there are particular countries and overseas customers that they won't deal with.  Don't despair. UK Export Finance may be able to work with your bank to increase its capacity to help. As the UK's Export Credit Agency, it offers to share financial risks that banks are unable or unwilling to accept on their own.

  3. It's OK to ask for an advance payment. Inexperienced exporters are often apprehensive to ask for some payment in advance, even though it might have been needed to cover their suppliers. Our advice is that advance payments are very common in export deals, especially for lower-value sales, so asking is unlikely to endanger the deal. Though be aware that customers may well ask for a contract bond or guarantee from your bank in return for the advance payment. UK Export Finance can also help with this by sharing the risk with the bank.

  4. Explore your options. There are various trade finance solutions that help protect small businesses against non-payment or assist them with cash flow. For example, 'Letters of Credit' or simple insurance policies. Take control of the way you finance international trade so that you can strengthen your negotiating position and reach a deal that works for you.

  5. You're not alone. UKEF has put an export finance adviser in place in every region of the UK, and helped over 100 exporters to fulfill contracts worth over £750 million. Feel free to call UKEF, and if it can't help then it will act as a gateway to signpost you to someone who can.

The UKEF national helpline is 020 7271 8010

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