Import businesses are often profitable because you are getting your goods at a low cost from another country and selling them at a profit in your country. However, the challenge is getting the cash needed to finance the businesses. Before you import, you will need money to pay manufacturers and shipping costs. To add to that, you might not get money immediately from your customers from the products you have already sold. In short, you will need a significant amount of cash to cover expenses for about four months before the business can stabilize.
Options for Funding Your Import Business
It can be frustrating knowing that you will get a profit from selling imported products but having to close down because you do not have the financing needed. You can avoid that by considering these import financing options.
In this type of lending, you sell your accounts receivable or credit accounts to the financing company. Accounts receivable are usually sold at a discount. This can be 80 to 90% of the actual value of the credit accounts. The financing company will then give you advance payment for a fee of 2 to 3%, hence saving you the wait till customers pay up.
While it can be expensive, inventory financing is an effective way to finance an import business. You use your inventory as collateral for a loan to import your goods. This enables you to bring in new inventory without affecting your cash flow as long as you manage to pay back the loan. Depending on your needs, the various types of inventory financing you can consider are floor planning, blanket inventory lien, and field warehousing.
Purchase Order Financing
This is a cash advance that you can get on your purchase orders. The lender pays the manufacturer for your goods directly, including the shipping fees. Once your customers receive their products, you send them an invoice, which they pay directly to the purchase order financing company. The company deducts its fees and pays you the rest. It is not as cheap as traditional banks. But if you have not had much luck with banks, you may consider this option for import financing.
You can contact Porter Capital Group for your import financing needs. We have different loan products to help keep your business running. Get in touch with us.