Financing Facilities for Exporting Company - Research Paper Example

our meeting with the local banker resulted in a discussion on different facilities which may be available to us as an exporting company. The following section will discuss what our local banker can offer to us as an exporting company.
Financing Facilities for Exporting Company

During our discussion with the banker, we came to know that an exporting company can have access to different sources of finance to help it achieve its overall organizational objectives. The first source of finance identified by our banker was for the purpose of meeting our working capital requirements including sourcing raw materials, managing our receivables as well as paying our overheads and salaries. Our banker informed us that exporters often enjoy concessionary rates of interest on such working capital facilities because they help bring the country the precious foreign exchange which is essential for managing the balance of payments of a country.

The export-related financing for meeting our working capital requirements, however, was related to our ability to take the new orders and financing, according to bankers, will be limited to the number of orders we receive.
Another important source of finance identified by our banker was the discounting of letters of credit which we receive from our buyers in the international market. As one of the conditions of our dealings, we will ask our customers to open a letter of credit in our favor thus providing us added security and safety. According to our banker, once we ship the goods, we can bring that letter of credit to him and he will be able to discount the same by deducting some nominal charges and releasing the proceeds of the letter of credit. Discounting, according to him, will allow us to receive our funds quickly rather than to wait till the maturity of the export letter of credits received from our buyers in the international market. (Hill)

Our banker has also informed us that it can also offer us hedging for the foreign currency received from our international buyers. Through hedging, we can book the foreign currency rates in advance at favorable prices thus hedging ourselves from potential negative movements in the foreign currency rates.
Finally, the banker has also informed us that he can issue us international bank guarantees against any collateral or security in cases where we may be required such facilities in order to fulfill our commitments with our suppliers. Since we are a new company therefore we may be required to get a guarantee in favor of our suppliers till from a reputable bank till we establish our reputation in the market.
We believe that all of the facilities would be of our use, however; the discounting facility will be more appropriate and suitable for us to manage our liquidity in a more efficient manner.