How To Get Import Financing
Owning an import business is a very lucrative option for those who are looking to start a business of their very own. This is an option which turns a big profit, thanks to the relative inexpensiveness of the goods purchased from other countries and the high price for which they may be sold by the business once they are received. However, all of the steps which are necessary to begin one of these businesses can make it a rather expensive endeavor in the beginning, and because a small business may just be starting out, funding can be difficult to come by, and lines of credit few and far between. For those who still wish to pursue importing practices, there are several methods for import financing which may be of assistance.
The first option available to those looking for a source of import financing is factoring accounts receivable. When using this method, the small business owner will sell their credit accounts or accounts receivable to a third party lender such as a bank or accounts receivable accounting company. In return, the business owner receives advance payment (usually eighty to ninety percent of the face value) on accounts which they would otherwise have to wait for. This is a type of asset-based loan.
The next option is another asset-based loan. Financing using inventory can be a bit expensive in the beginning, but with the earnings that can be made by future imports it is well worth it. Business owners use their existing inventory as a type of collateral in order to secure a loan from a bank or other third party lending company. This does not affect the cash flow already on hand, as the loan is placed against the inventory itself. However, before making this agreement be sure that the loan payments are manageable or there could be problems.
The final option is purchase order financing, in which the owner of a business sells purchase orders or invoices to a third party company, who assume the responsibilities associated with the order and then pay the business owner the profits after taking their cut from the total. These arrangements can be expensive, and are normally only used as an option when bank loans are out of the question.
There are many options when it comes to import financing, but ensuring that you choose the right one can mean the difference between success and failure not only of the importing process but of the entire business. Therefore, speaking with a professional about your best choice is imperative.