Is export factoring right for your business growth?

Despite overall growth in the Indian economy, exporters are struggling to secure finance. It is claimed that available credit for small businesses has dropped by 5% in the last two years.

The Federation of Indian Export Organisations (FIEO) said a lack of credit is a "major obstacle" for Indian exporters, with rising prices and political tensions.

With traditional credit becoming harder to obtain, could export finance be the key to growth?

That’s what we look at in this article.

What is export factoring?

Export factoring lets you sell your unpaid invoices to a finance company for cash.

You receive a large portion of the invoice value upfront. The finance company collects payment from your customers. They use a non-recourse export factoring agreement. Once your customers pay, you get the balance, minus the finance company's fees.

This method provides a vital source of working capital for Indian exporters who may struggle to obtain finance from risk-averse banks. 

Export factoring can be key to your cash flow and growth. It does not require collateral. It lets you get funds quickly.

Is export factoring right for your business?

To see if export factoring suits your business, assess your goals and situation. Here are key factors to consider:

The nature of your business

If you export goods, understanding the challenges of international trade is essential. Longer payment times and varying customer reliability can strain cash flow.

Export factoring can help by converting unpaid invoices into immediate cash. This flexibility lets you invest, offer discounts, or improve payment terms to your buyers. You can also react quickly to market needs without waiting for traditional payment processes.

By freeing up cash tied to invoices, you can focus on building customer relationships and growing your business.

Current cash flow 

Are invoice payment schedules impacting your cash flow? Export factoring provides quick access to funds in unpaid invoices.

With these funds, you can better manage your daily operations and grow steadily.

You can reinvest the cash in your business. For example, increase stock levels or invest in marketing to attract new clients.

Prioritizing growth over traditional financing

If you want to grow but find traditional bank loans too slow, consider export factoring. Banks often require credit checks and collateral so export factoring could be a better option.

A finance company, like Stenn, removes the burden of collections. This frees up time to focus on business development and customer relationships. This allows you to explore new opportunities that may have been out of reach due to limited cash flow.

Understanding your customer base

Customer reliability is key to determining if export factoring is right for you. Finance companies check your customers' creditworthiness, not your business. If you have dependable clients who pay on time, export factoring can be highly beneficial.

A strong customer base improves your access to funds and supports long-term growth. If your business exports goods, has cash flow issues, and works with trustworthy clients, export factoring is ideal. It gives you the capital needed for growth while simplifying operations and helping you stay competitive.

Why export factoring is ideal for Indian exporters

Indian exporters, especially in smaller North and West Indian cities, often struggle to get traditional finance, like bank loans. These problems include banks being careful about giving loans, not wanting to increase credit limits, and asking for collateral. 

Export factoring provides an alternative that addresses these pain points. If you've hit your credit limit or want to work with new buyers in the U.S. or U.K., export factoring can help. It offers more flexibility than traditional finance, like loans from regular banks.

Also, export factoring can help if your business is too small for traditional financing.

The right finance partner can provide access to smaller financing amounts, allowing you to sell new products or add new buyers easily. This flexibility lets growing businesses use the cash and freedom that export factoring provides.

How export factoring leads to business growth

Export factoring can drive your business growth. It offers several benefits, including receiving up to 90% of the unpaid invoice value immediately.

Immediate cash flow

• Quick access to cash: Convert unpaid invoices into cash. This lets you cover costs, pay suppliers, or invest in new opportunities.
• Take advantage of opportunities: Quickly buy materials for large orders without waiting for customer payments.

Focus on core business activities

• Focus on growth: Free time and energy by outsourcing collections to a factoring company.
• Concentrate on sales: Focus on customer acquisition and developing growth strategies.

Reduce financial risk

• Non-recourse factoring: If a customer doesn't pay, you're not liable. This lets you take on larger orders and add new buyers.
• Confident investments: Minimize financial risks, enabling more secure investments in growth initiatives.

Flexible financing options

• Flexible cash flow: Factor any unpaid invoices you choose, based on your needs.
• Adapt to market demands: Quickly factor invoices to access cash for new opportunities or big orders.

Improved customer relationships

• Better payment terms: Offer customers more flexible payment options or discounts without straining their cash flow.
• Increased loyalty: Stronger relationships often lead to repeat business and loyalty.

Scale your business effectively

• Simplified cash flow management: Quick access to funds helps you scale operations smoothly.
• Support growth: As your business grows, hire more staff, increase inventory, or invest in marketing.

Improve your competitive edge

• Quick response to opportunities: Immediate cash access lets you invest in new products or marketing.
• Attract new customers: Temporarily lower prices to win contracts and gain market share.

Reap the benefits of export factoring and drive your business growth

Export factoring is a powerful financial tool that can drive your business growth. Export factoring can help grow your business. It provides cash flow, reduces risks, and lets you focus on core activities.

At Stenn, we understand the unique challenges faced by exporters. Our export factoring services provide fast cash with no need for collateral or long approvals.

Contact us today and get the cash you need to improve your business performance.

Get funding now