Finding financial packages to support exports

Posted on 18 Oct 2012

Martin Cooper, director at Lloyds TSB Commercial Finance, provides tips on how to find the right financial package to support exports.

Much has been made of the shifting fortunes of the manufacturing sector during this challenging period for the country’s economy, with the industry held up by many as a barometer for the UK’s potential for a sustainable recovery.

However, there are reasons for optimism within manufacturing. Not only is it the best performing UK sector in terms of overall sales, but manufacturing also has the strongest capital expenditure intentions according to Lloyds TSB’s latest Business In Britain report for the first half of 2012.

Exporting is a critical route to expansion for firms against the low growth domestic backdrop, with around half of the UK’s exports contributed by manufacturers.

Economic uncertainty in the eurozone, particularly among southern European states, has provided a catalyst for many manufacturers to engage with new markets, such as Brazil, Russia, India and China.

But before exploring these opportunities, research is vital to identify and mitigate against the potential risks, be they political, legal or financial.

Manufacturing businesses also require new, reliable sources of finance. They should consider the payment cycles of their overseas customers, their own procurement patterns and that their finance grows at the rate they do.

Asset-based lending tying loans to inventory, machinery and equipment are increasingly being sought by ambitious manufacturers looking to shore-up their finances and invest for growth.

Leverage against firms’ inventory, plant, machinery and property means that asset-based lending is well suited to manufacturers given their strong base of tangible assets.

Invoice discounting advances the value of issued bills, releasing liquidity to assist manufacturing companies in bridging the gap between paying upfront costs for materials and receiving payment from customers.

Trade finance facilities can also add an extra layer of security to transactions with customers in emerging nations, as well as easing the potential burden on cashflow involved in satisfying orders in additional markets.

Finance packages can be secured both pre and post shipment, meaning you can benefit from additional working capital to fulfil an order, and then receive payment early when you have dispatched the goods – providing ideal protection against potentially long payment terms of other markets.

Another layer of protection against the risk of non-payment from new customers overseas comes from credit insurance, which can be added to Asset-based finance solutions. This will help you protect cashflow if one of your customers goes insolvent while owing you money.

Growing manufacturers are a vital driver for economic growth in the UK, so it is essential that the industry is aware of the finance options available to them in order to enter new, high growth geographies.

Given their flexibility and close alignment with manufacturing firms’ capital requirements, we expect UK-based businesses to continue to source Asset-based finance and associated products to realise their overseas expansion potential over the coming months.