Lee Waters, regional trade director at Lloyds Bank, shares some practical tips to help local firms looking to export for the first time.
The latest statistics from HM Revenue and Customs have highlighted the scale of international demand for the South West’s products.
In the year to June 2019, regional exports of goods totalled almost £21.5bn, with local firms selling to all corners of the world – exports to South Korea were valued at nearly £79m, for example, while exports to South Africa totalled more than £20m.
Capitalising on international trade opportunities can deliver real benefits to businesses. As well as opening up new revenue streams, exporting – particularly to multiple markets – can help increase firms’ resilience by offering a degree of protection against fluctuations in trading conditions at home and overseas.
For South West firms looking to export for the first time, there are a few simple steps they can take – and tools they can use – to help make the process as straightforward as possible.
Research, research, research
One of the first steps to trading overseas is identifying the right markets to target. There’s no ‘one size fits all’ approach to international trade, and analysing local trends, tastes and market competition is essential to determining where the strongest demand for products or services lies.
Legal requirements can also differ from one market to another, and businesses will need to carefully consider how these could impact their operations.
Wherever businesses look to trade, having the right insight is essential. At Lloyds Bank, we’ve developed our International Trade Portal, which gives firms access to everything from information on market conditions and duties to details of trade shows and potential business partners to help inform their export strategy right from the start.
The Department for International Trade (DIT), which has trade experts based across the South West, could also offer firms a valuable source of support.
Manage the risks
Trading overseas, particularly with new partners in new markets, can expose firms to new elements of risk.
Fortunately, there are a range of tools, such as letters of credit, documentary collections or guarantees that can help businesses trade with confidence.
For example, a documentary letter of credit guarantees that an exporter will be paid provided they fulfil the delivery conditions agreed with their overseas buyer. The security this offers could be particularly valuable to new exporters in circumstances where export relationships with new partners are still being developed.
Meanwhile, documentary collections provide a simple, lower-risk way to collect payment for exported goods. Effectively, the use of documentary collections means overseas customers can only take delivery of goods once they have paid for them or accepted a bill of exchange to pay at a later date.
Keep your cashflow healthy
Export deals can take longer to complete than domestic trades, in part due to the distances involved.
Slower deliveries, and as a result slower payment, can put a squeeze on firms’ cashflow by lengthening their working capital cycle – the amount of time it takes to turn their assets into cash.
Here, a specialist tool like post-shipment finance could be useful. Post-shipment finance can advance payment for goods once they’ve been shipped to a customer, bridging the gap between production and receiving final payment. This in turn can boost firms’ financial flexibility, freeing up cash to invest elsewhere.
Considering elements like these as part of a thorough export strategy can help firms build a strong foundation for overseas success. But they don’t have to go it alone.
At Lloyds Bank, we’re by the side of businesses as they pursue their international ambitions. Last year, we helped more than 6,000 UK businesses export for the first time, and in 2019 we’ve committed to lending up to £1.5bn to South West firms to help them prosper, both at home and through international trade.
There’s opportunity for the South West’s businesses abroad. With a plan in place, and support at hand, more of our local firms can set out their stall on the global marketplace.