International trade can put more pressure on the trade cycle. Leigh Briggs, Regional Director, Corporate Banking, Global Trade and Receivables Finance, looks at the challenges of operating in a global supply chain and how support from HSBC can help ease the pressure points.
Whether you're operating purely in the UK or going abroad, the principles of managing working capital for a small business stay the same. Ultimately, you still have to get the right balance between making purchases and sales.
A key challenge is that lead times change when you are part of a global supply chain. They can be longer and therefore there is a need for more finance. Added to that, companies often have less control of stock and the ability to collect debts can be more stretched.
Receivables finance, where you can receive the proceeds of the sale upfront, is often a good solution as it relieves a lot of pressure on working capital. Import financing solutions are designed to make payment to your overseas suppliers before receiving payment from your buyers, unlocking funds to use elsewhere in your business. Additionally, export financing options are available to provide additional protection.
We have recently provided a range of solutions to a north west based wholesaler which imports copper and brass fittings from suppliers in China and Europe and sells to businesses in the plumbing & heating industry in the UK, Europe and Middle East. This comprises an import loan facility to help fund the purchase of stock and an invoice finance facility which releases cash immediately goods are sold to both domestic and overseas customers. We have also been able to assist with the foreign currency requirements to ensure they are adequately protected from fluctuations in exchange rates.
Strong links between the financial and physical supply chains are vital for making businesses more efficient and less open to risk. Many of the risks when trading overseas can be insured against or mitigated through the payment mechanism. These solutions can be tailored to match a business's working capital cycle and can be easily drawn down against individual transactions.
For more information on trading internationally and managing payment risks, visit our Export Resource Centre.