International Marketing Practices

Chapter 5: Financial Aspects of Export Operations Calculating and anticipating export finance needs is particularly important when entering an international marketplace, especially as a small to medium sized forest products producer. This chapter outlines sources of financing, financing assistance, financial instruments in exporting operations, and exchange rate issues affecting international trade. Financing Options for Export Operations Costs associated with international trade can vary depending upon the agreed Incoterms, the country of origin, the country of final destination, and a variety of other factors that can affect the cost of shipment, export and import duties, insurance, loading, unloading, etc. As a small to medium sized firm looking to export, you may be discouraged by assumedly high costs and risks associated with international operations. However, there are a variety of opportunities — like loans or grants — that can facilitate your operations by providing accessible funding through financing. The different options to finance an export operation are described in this section. Personal Funds It is unlikely that a lender or investor will completely finance a new venture, thus it is possible that funding for new ventures will come from the personal savings of the business owner or their family. When a majority of the business is financed with personal savings, the owner has more control; however, this type of financing is also risky no matter how much planning is carried out. One especially risky and expensive way of financing new ventures is to get cash advances on a credit card, which should be avoided at all costs. One very common source of new business financing is borrowing from friends or family, which can be in the form of debt or equity capital. Regardless of the funding sources, entrepreneurs are strongly encouraged to have written agreements with clear information about the amount owed, interests to be paid, and mode of repayment. Funds From Operations Before resorting to external financing, a company must first determine whether it has enough funding from internal sources, such as those listed in the box on the next page. Financial need should be summarized in four components: working capital required, additional fixed assets needed, marketing, and financial contingency [182].

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