Business in the USA has been growing overtime as the years go by, that includes the import/ export loan businesses. A loan is a short-term recourse cash advancement which enables your business to meet sudden payment requirements, either through a loan insurance letter or an import/ export documentary collection. The USA markets have been known mainly for importing or exporting goods to and from other countries at the same time trying to cope with financial issues by applying for loans, some of the benefits of imports and export business loans include:
- Bridges the gap between paying for the imported goods and demanding for faster payment, hence it improves on the business’ cash flow.
- It improves your bargaining capabilities with overseas marketers/ suppliers, therefore coming to terms with the faster paying system.
- It builds your business reputation and ratings through prompt payments to the suppliers.
Export- Import Bank of the United States
The Export- Import Bank of the United States has helped a lot of small business over the years to establish themselves, some of its function include;
- Finance all import/ export goods and products in America.
- Supporting the USA small business system.
- Helps decrease federal deficit by ensuring all the taxes have been sorted out.
Importing goods from overseas is not as easy as you think, thus finding most individuals making a calling, placing an order and waiting for the product to arrive. Some of major banks in the USA that offers loans include:
American saving banks: Through this bank you can finance on whatever you want and that includes taking loans: they include personal loans, import loans and saving secured loans. For import loans one is allowed up to $50,000 from $2,500 through various fixed repayment terms.
Bank of American: This bank helps grow small business by providing financial support; it provides a working capital and enables a business to purchase equipment overseas.
Barclays: It is an international bank which offers import-export loans to help sustain your business. They have specialized trade expert based mainly in the UK and overseas and they understand the importance of trading between countries.
Before taking business loans for import services, you should consider the following:
Availability of local market for your imported products: It can either be through resale or manufacturing purpose, before importing goods from other countries you should make sure that you have availability of market for your products, ensuring profitability and sustainability to your business.
Legal: Can you import goods and products from Asia to the USA? Before taking such a major step, make sure that the products are legal, some items have restrictions for example medicines, chemicals and much more.
Cost of importing: Before pertaining to any loan requirements, you need to calculate on all the costs and charges required before you do any transaction with an oversea company. They include: Transport, GST, insurance cost, custom duties, levies, storage, and finance changes. You need to identify the tariff charges on the imports excluding shipping by calculating the origin of the products, and the value to find out the payable amount.
Determine whether importing goods is cost effective: You have taken an import loan so as to get goods from overseas to the USA; the first thing you need to consider is whether the imports are going to be cost effective for your business. Take note of the additional charges that will be required in your overall import costs that includes the cost per unit from the oversea factories, then adding it all up. Discuss it with your financial advisor to come up with all the calculations of the costs incurred, carry out a market research to learn more about your competitors.
Determine whether you can afford to import: If you cannot afford the import costs it is okay to take up on business loans; considering the cost on transport and shipping, and it being more costly ordering larger objects as compared to smaller items. Working capital also takes up almost all in your bank account. Yes, importing goods is very cash intensive; hence, you need a loan for your business.
What are the risks of importing?
For a greater success in your importing business, you need to consider the risky nature of it, they include:
- Due to the distance hard to deal with quality control of the product.
- Time consuming.
- Again, due to time taken to deliver your goods it might lead you in a situation whereby inferior goods can be sourced out.
Exchange rate fluctuation: Obviously a potential risk, it affects the overall import cost which can either be in or against your favor. To bypass this problem you need to talk to your suppliers to deal with the currencies, carry out a forward purchase, and adding an exchange rate on your side, that is like dealing with the risk by yourself.
Find a reliable and honest supplier: Remember to always think twice when the offer is too good to be true. A reliable supplier who will deliver right on time and will not disappear with your cash. Before dealing with oversea suppliers you should always consider the language barrier, to get pointers and to avoid misunderstandings you need to took to your suppliers and get it all sorted out.
Terms and conditions required: You need to understand the trading terms and conditions before signing for an important order; both parties must each come to a mutual agreement. The vocabulary mostly used in the export/ import business in this aspect is Incoterm formulated by the International Chamber of Commerce. The custom requirements must also be considered before you start importing products that includes having permission for custom entries or availability of a custom broker to assist you in the paperwork formulation.
The two kinds of imports and export loans include:
Loan against imports: This is usually undertaken when you want to trade on the documentary collection terms, or get products without any trade instruments. This loans enables you pay for the collateral goods ordered, for the meantime the goods is the bank’s property until you pay back the loan required, but they can be used for manufacturing before being paid for.
Clean import loan: Unlike loans against imports, this does not require for you to pay on documentary collection terms and it is mainly based on the supplier’s cash invoice.
How to get an import and export loan
In order to inquire business loans you need a few requirements. Import/ export loans are transactional agreement used for delivering goods between suppliers; however, there is requirement on the business credit history when acquiring for a loan, but your bank has to ensure that you have been in business for at least a year or so, or similar transactions must have been done in the past.
For these transactions to take place the lender must review the contract or documentation proofs of past transactions and basically the loan is funding the received goods before they are collected. The document must also have some details of the specific transaction.
In conclusion, for inquiry of a business loan in the USA you will obviously require a leeway agreement for the terms and fees; the terms are the payment period plus the interest rates. Once all has been sorted your business is ready to proceed, remember business loans give you the opportunity of obtaining a working capital which gives your company profitability and sustainability.