Export Finance is a powerful and useful financial solution to help businesses take their goods global.  

If you are looking to expand into new, oversea markets, it is important that you not only understand what Export Finance is, but also what sort of goods are eligible for this specific financial tool. 

What is Export Finance?

Export Finance is a working capital solution designed specifically to help businesses like yours sell goods and products overseas. 

With a tailored Export Finance solution, you don’t have to endure a cash flow gap between the moment of production and/or shipment of your goods and the time when you actually receive payment from your international customer, i.e., the importer on the other end. 

Gaps in working capital can be debilitating for exporting businesses. The time spent waiting for overseas payments can prevent further growth and operational continuation.  

How Export Finance Works

While there are various forms of Export Finance, the most basic solutions are all aligned in mitigating the risk of exporting activities and ensuring access to the capital owed to you. 

To this end, there are two main forms of Export Finance. 

1. Pre-shipment Finance 
These financial solutions help to cover the costs of production, including raw materials and labour, before you export your goods overseas. 

2. Post-shipment Finance 
These solutions help to bridge the cash flow gap between actual shipment and receiving payment. For example, a letter of credit which guarantees payment following the fulfillment of certain conditions, is an example of post-shipment finance. 

The Benefits of Export Finance

Export Finance provides businesses engaging in international trade with a number of benefits. 

Improved cash flow is, of course, an important advantage. Export Finance ensures you can keep your business running smoothly without having to wait for payment from the importers. 

It also allows you to mitigate the risk of non-payment. In the exporting business, this risk can be significant so having reassurance of payment is critical. 

Lastly, it can help to increase sales potential but empowering your business to expand to new markets without having to worry about the upfront costs or delayed payments affecting access to working capital. 

What types of goods are eligible for Export Finance?

For specific financial advice, please get in touch with one of our lending specialists here at ScotPac. The following guide should be understood in general terms. 

Basically, Export Finance is available for tangible goods that can be produced, insured and shipped internationally. 

Goods that are Eligible for Export Finance 

1. Manufactured Goods 

Manufactured goods, such as machinery, electronics and tools, are ideal for Export Finance. They are tangible, meaning they have a physical form, which makes them easy for a financial provider to value, insure and track during exporting. 

The relatively stable ‘shelf life’ of these goods means that they do not deteriorate or degrade quickly. Goods that spoil easily or quickly can be difficult to export due to the risk of spoilage before it reaches the buyer. 

Lastly, the production process is standardised and automated. Manufactured goods are produced in batches which makes both valuation and risk assessment even easier. 

2. Raw Materials 

Raw materials are also a suitable candidate for Export Finance. This can include construction materials, minerals and even some agricultural products. 

Raw materials are graded in standardised quantities and qualities. Having industry-accepted and specific categorisation guidelines makes valuing the goods for Export Finance easier. 

Similarly, raw materials are common goods for export meaning there are established trade routes. The more established the trade route, the more readily available the financing and insurance options. 

Lastly, raw materials of all kinds are in consistent and reliable demand globally. This gives both parties in the international trade agreement and the finance provider peace of mind. 

3. Consumer Goods 

Consumer goods, especially fast-moving consumer goods, are eligible for Export Finance. Goods such as clothing or furniture can be produced at scale and are therefore easier to finance. The standardised quality and measurable quantity allows for easier valuation and more risk mitigation.  

As with manufactured products, many consumer goods are generally long-lasting and far less perishable than other items. Some consumer goods, such as fresh flowers, are more perishable however and more difficult to finance accordingly.  

Goods that are Not Eligible for Export Finance 

1. Perishable Goods 

As iterated above, perishable goods such as fresh food have a shorter shelf life. This creates numerous challenges when exporting. The delivery timelines can mean there is a higher risk of spoilage before reaching the buyer. 

For that reason, there may be insurance limitations or even exclusions. Standard cargo insurance policies can vary so it is important to speak with the ScotPac team to find out more. 

Another aspect to consider is the tendency of the market to fluctuate. Perishable and fresh goods are often subject to rapidly changing supplies meaning that prices can change rapidly and significantly. This makes it more difficult for financial providers to make an accurate valuation of the goods. 

2. Services 

Services are generally not eligible for Export Finance. Whether it is consulting or education, or anything else, the intangibility makes valuations and risk assessments more complex. Goods with a physical form are easier than services. 

Delivery is also a challenge. The difficult nature of tracking service delivery makes it harder to secure Export Finance compared to physical goods.  

If you are interested in ‘exporting’ your business’s services, speak to our team today to find out what other financing solutions might be more suitable for your needs. 

3. Custom Goods 

Highly customised, unique or one-off goods tend not to be eligible for Export Finance. Again, much of this comes down to the difficulty in valuations. The more unique features and bespoke characteristics of the goods, the harder it is to determine a standardised and fair market value. 

There are also limited resale options associated with custom products. If financing is based on (re)selling the goods to recoup costs if necessary, this will increase the associated risk. 

Lastly, there are insurance challenges when it comes to specialised products. Whether the insurance costs are higher or coverage is simply unavailable, both instances will also increase the risk associated with exporting the goods. 

Contact ScotPac Today to discuss Export Finance 

Our experienced and expert lending specialists can help address your business’s specific finance needs. Give your local ScotPac office a call today to discuss the type of goods you are looking to export, discover which financing options are right for you and ensure your business has the access to the working capital it needs to grow. 

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