HSBC business banking column - Business Leader News

HSBC business banking column

Cindy Condon

Exclusive to the Weston & North Somerset Echo, HSBC’s Cindy Condon discusses how trading internationally is becoming more common for small and medium sized businesses and how firms in North Somerset can also benefit from this opportunity.

While the domestic market may remain difficult, more small and medium-sized enterprises (SMEs) are taking advantage of the opportunities presented by trading internationally. In times like these, we have to be realistic about the economy but many commentators believe it is international trade that will continue to drive growth.

Before becoming involved in international trade, like all business decisions, companies need a clear idea why they are doing it and what they want to achieve. It could be to access a better value supplier, find new customers or there could be a number of other reasons for looking at global markets.

Which markets are right?

Once a business has decided that international trade is the way forward then the next thing to look at is which markets are right for the business.

In 2012, the top trading nation will remain the USA. It alone accounts for some $2.64 trillion in trade value, although China is rapidly closing the gap.

These are however not the only markets and new areas are opening up, with Egypt, India, Vietnam, China and Brazil driving growth as they industrialise rapidly. UK businesses should be encouraged to continue to look for future opportunities outside of our natural trade partners in Europe.

Correct skills in place?

Checking that the correct skills are in place within the business is critical. These may include things such as appropriate languages and familiarity with foreign currencies. If the business doesn’t currently have this knowledge then they may need to find external help to support them.

Accessing funding

Looking for funding to move into export markets should be treated the same as any application for funding with businesses concentrating on five key areas:

• A strong business plan,
• Realistic budgets and forecasts using last year’s figures,
• Demonstrating good cashflow management skills
• Being transparent about why funding is needed and how it will help the business to grow.
• The lynchpin of accessing finance is seeking professional advice. Having a strong working relationship with your relationship manager at your bank is a good starting point.

Export risks

There are always possible risks while exporting, including the time it takes to complete a sale or receive a payment, differences in regulation and differences in business practices. Research and preparation are the best ways to be prepared for any possible dangers.

Much of the research needed has already been done by banks like HSBC, accountants, lawyers and organisation like UKTI, so speaking to them as a first port of call is a good idea. There are also a range of financial products that help companies manage some risks, these include such as invoice finance and using foreign currency accounts.

Tackling credit risk

As far as tackling credit risk is concerned there are options for companies trading internationally. Some companies expect payment before exporting, others use bank guarantees or give open-account terms. There is a case to be made for letter of credit, still used across the world to facilitate most trade.

The final piece of advice for businesses looking to trade globally is to go out and talk to people who are already doing it and those people that have expertise through an established international network.

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