Exporting can offer both opportunities and threats to a business. Opportunities to generate high volume sales (albeit at lower margins) but the threats of default and problems occurring given the international complexity of the transactions. Whilst most export companies will have some some form of credit insurance to protect default risk, the usual payment cycle for exports can lead to higher levels of negative cash flow for both yourselves as the exporter or your international customers. Lets consider the diagrams below:

Negative Cash Flow for Your Business Through Exporting

1. 1. Under normal circumstances, credit terms with your domestic customers might be 30 days end of month. This gives your domestic customers a chance to sell your product to their customers and to give them the opportunity to get funds back from their customers to pay you.
2. 2. With export sales, however, the length of time taken to ship product overseas can typically take around 45 days. If you are happy to give your customers time to sell the products and generate cash from their customers this means credit terms will often be much higher - often 90 days or more.
3. 3. But what about your suppliers? If you have had your products manufactured in China, for example, the chances are you will be paying them via Letters of Credit or Telegraphic Transfer - in other words CASH UP FRONT.
4. 4. So there can, at worst be a period of negative cash flow where you have to pay for product before having received cash from your export customers.
5. 5. This can hamper your ability to grow as this cash flow gap needs to be funded.
6. 6. To get over this of course you can insist your customers pay you by Letter of Credit or Telegraphic Transfer to counteract your negative cash flow effect. But lets see how this strategy affects your customers.

Negative cash flow for Your Customers Through Exporting

1. 1. Whilst getting your customers to pay by Letter of Credit (as per the diagram above) can help you, it impacts upon your customers' cash flow.
2. 2. The length of time taken to ship product overseas from your warehouses can take around 45 days.
3. 3. Equally, your customers will offer credit terms to their customers - say end of month following - which means in reality their customers will take around 50-55 days to pay for the product.
4. 4. As a result, your export customers have around 90 -100 days of negative cash flow.
5. 5. This can hamper THEIR ability to buy more product from you as their own negative cash flow needs to be financed.
6. 6. Thus THEIR lack of cash flow can restrict YOUR growth.

This is where export factoring comes into its own to help you AND your customers expand more effectively. To see more go to the next section

The Benefits to Your Business and Your Customers of Export Factoring.

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