David Weatherhead, head of SME and mid-corporate trade at Lloyds Bank Global Transaction Banking, discusses how the UK’s businesses can prepare to trade overseas successfully.
There’s strong and growing opportunity for the UK’s businesses overseas.
According to the latest HMRC statistics, the country’s total goods exports grew to £342.6bn in the year to March 2019, a rise of 3.5% on the same period in the 12 months before.
British food and drink exports rose by 3.8% to £5.7bn while demand for British products stretched to all corners of the globe - sales to North America grew by 7.7% to more than £56.7bn, while exports to Japan soared by 12.3% to £6.4bn.
Tapping into this global demand can deliver real benefits for businesses of all sizes.
Exporting – particularly to multiple markets – can help boost firms’ resilience by offering a degree of protection against economic fluctuations both at home and abroad.
It can also open up lucrative new revenue streams. For businesses that experience seasonal peaks and troughs in sales, this can offer them a chance to boost their year-round income by trading with markets where demand is high at times when domestic demand may slump.
But whether a seasoned exporter or a first-time trader, there are a few things businesses should keep in mind to help ensure their export journey is as smooth 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 exporting, and by analysing local trends, taste and competition, businesses can determine the best demand for what they have to offer.
Understanding factors such as local customs and legal requirements can also help businesses prepare for doing business well in advance of making their first sale.
Here, having the right knowledge and insight is key, and businesses should be sure that they’re armed with up-to-date and reliable information to help inform their export strategy.
Working with a partner such as the Department for International Trade (DIT), which has trade experts based across the UK and overseas, could also be a valuable source of support.
At Lloyds Bank, we’ve developed our own International Trade Portal, which gives businesses access to valuable resources, from market studies and information on customs duties to details of trade shows and even directories of potential business partners, to give firms the information they need to start off on the right foot.
Trading with confidence
Trading overseas can mean dealing with the unknown.
As in the UK, firms should ensure they conduct thorough due diligence on any potential trading partners before any agreements are settled.
Meanwhile, there are a range of tools, such as letters of credit or bonds and guarantees – available from banks – that can help businesses to trade with confidence.
Keeping cash flow healthy
Cross-border transactions can take longer to complete than domestic trades, simply due to the distances involved and the extra processes – such as customs checks – that are required.
Slower deliveries and payments can put a squeeze on firms’ cash flow by lengthening their working capital cycle – the amount of time it takes to turn their assets into cash.
Fortunately, however, there are specialist financial tools that businesses can use to help tackle these issues head-on throughout the export process.
For example, once a business has a confirmed order, backed by documentary credit, pre-shipment finance can enable them to access a proportion of the funds in advance that they may need to produce or ship the goods.
Similarly, 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. In doing so, both tools give businesses the resources they may need to simultaneously pursue new opportunities.
Support at hand
Considering each of these factors in advance can help make the export process plain sailing. By making the most of the support and tools available, firms can put themselves in the best possible position for success.
At Lloyds Bank, we’re by the side of businesses to help them make their export ambitions a reality. Last year we helped more than 6,000 businesses export for the first time, and this year we’ve committed to lending £18bn to UK businesses to support firms’ plans for growth, both at home and through overseas trade.
With the world hungry for what we have to offer, now is the perfect time for businesses of all sizes to consider how they can make the most of opportunity overseas.
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