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Trade Finance As A Business Development Strategy
Your business will need to access corporate credit at different points in the development of it. This is something just about every type of business is in need of so do your homework early. You want to have something readily accessible even if you don't need to access corporate credit right now. Before you are successful in getting a corporate line of credit and a corporate credit card, you may have to apply with several different lenders. This is because to be very high risk for lenders new businesses are deemed.
The corporate trade finance that has been offered to them effectively is not handled by too many new business owners.
As a result, towards that debt every month they end up having to pay a large portion of their profits. When they do need it later on they also don't have the corporate credit readily accessible. This can prevent them from being able to pay for something that the business really needs and have the money to repair equipment.
The corporate credit that you have established should be viewed as a safety net. It is very nice to have it in place although most of the time you aren't going to want to access it. It means a lot in the eyes of the lender as you aren't relying on that corporate credit that has been extended to you. It tells them that you don't have to use it as your business is doing well enough.
Though when you really need it don’t let that statement scare you into not using the corporate credit you have access. In order to take care of something for your business sometimes you will need to use it. You definitely need to invest in getting it repaired if your production has slowed down or quality is suffering due to an equipment problem. Otherwise costing your business money in the long run you are going to end up with the other problems.
Incorporate Inland Trade Finance in Market Penetration and Market Development
Market penetration and market development are key parts of a business development strategy. Selling more of your service or product to repeat customers are involved in market development.
It can involve inland trade finance as you may have to renegotiate local and provincial trade deals while market penetration is about expanding your product or service to other cities and provinces.
For instance, let's say you sell jewelry. A business from a neighboring city may sell it to its customers after purchasing your jewelry. Structured commodity finance is also essential.
With this client you have a long history. And in your customers' shop know that your product is selling quickly. In which case, for a bulk price you could propose selling the client more jewelry.
After negotiating, the client agrees. However, the client may not feel comfortable paying you before you export the jewelry despite the long, positive history you've had with the client.
Providing a letter of credit promising that you will export the jewelry upon payment this is where a trade financier or banking institution comes in.
Final Thoughts about Your Business Development Strategy
Know that growth doesn't happen in a day; it's harder for businesses to jump from market penetration to supplying new products to new clients.
This is why approaching growth slowly is recommended. However, no matter where they are known that trade finance may help increase the number of clients you trade with. How has it helped your business? What's your take on trade finance?
Rusca Dimitri works in for a trade finance company for more than 20 years. He has good management skills and during his free time he writes short articles on Corporate Trade Finance and Structured Commodity Finance.
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