This article was first published in the July August 2012 Irish edition of Accounting and Business magazine.
When Bibby Financial Services surveyed businesses they found Irish exporters are over reliant on temporary finance solutions to fund overseas activity. The survey findings revealed that 25% of business owners surveyed were found to be relying on bank overdrafts to fund export activity, followed by 14% on credit cards and 11% on personal savings.
The results highlighted the fact that many Irish business owners are struggling to access flexible funding solutions. It is a somewhat obvious conclusion to draw that the Irish business community are working with temporary funding solutions and are missing out on real opportunities as a result.
Admittedly, with the conflicting credit availability reports from small business associations and traditional lenders pouring in, confusion and uncertainty is ever present in the economy. It is clear a more concerted effort amongst lenders, government agencies, business groups and financial advisers is required to provide increased support to Irish SMEs, particularly around raising awareness of funding options available to them and support systems that exist. While we have been beating the same drum repeatedly, more needs to be down to help SMEs, who are the key to economic recovery. It is vital that businesses are equipped with all relevant information to enter overseas markets.
Now, given the continued lack of access to flexible finance, more and more businesses are moving away from traditional lenders, with many SMEs and start-up businesses looking beyond traditional ways of doing business and considering trading overseas as a viable option. Some businesses are hesitant about taking their business to the next level and are uncertain about what exporting entails, yet there are many opportunities for growth in overseas markets.
When embarking on export activity many Irish businesses come across initial obstacles such as length of time involved securing new business, travel and associated upfront costs, putting a strain on working capital. However, more and more businesses involved in exporting are finding effective support in export invoice finance, which is providing them with adequate and flexible funding to maximise opportunities.
Export invoice finance not only helps businesses control their spending, it also enables businesses to progress with confidence to take on new business and make significant on-going investment, safe in the knowledge that their cashflow needs are being met.
Moreover, global invoice finance players are well placed in establishing the correct and appropriate levels of funding. For exporters, it is imperative that they understand international business risk and, through export invoice finance, businesses can have international credit searches carried out on their behalf and establish a global rating on both new and existing customers.
While businesses can, of course, maintain their credit control and all elements of their customer relationships themselves, opting to use a comprehensive management service can help overcome problems associated with any language barriers that may exist in certain markets with the assistance of a highly-skilled, multi-lingual credit management team.
With global invoice finance providers, businesses can also reduce risks associated with the uncertainty of fluctuating exchange rates their wide networks of international bank accounts allow for fast and efficient payment in different currencies. In fact, leading invoice finance providers who have a global footprint can utilise worldwide knowledge, experience and presence to assist clients with various exporting challenges and provide on-the-ground assistance through expansive networks of offices in leading markets.
For those businesses considering trading overseas, it is important to seek out all the support mechanisms available. Businesses across all sectors, whether they are in the initial planning stages of export or wanting to build on already existing export activity, don't have to work on their own. This is not to say there isn't a lot of work involved, but in the end, the benefits will far outweigh the initial stumbling blocks.
Graham Byrne is managing director, Bibby Financial Services Ireland. Phone 01 297 4911.