Today, Canada's businesses export over $400 billion in products annually to about 200 countries, ranking Canada first among industrialized nations for export volume as a percentage of Gross Domestic Product. Over the last two years, BDC has recognized this growing trend and has also increased export financing to small businesses by 30%.
It's not surprising that Canadian entrepreneurs are turning to exporting as a means to increase their revenue. By developing foreign markets, you may be able to:
- increase production volume
- develop a broader, more diversified customer base in different geographical markets
- preempt foreign competitors by bringing new products and services to their home markets
Assess your risk
Nonetheless, exporting can be a costly venture and it's important to carefully assess the business risk. Ask yourself these questions:
- Do you have clear objectives for pursuing export markets? (e.g., increasing sales volume by 15% or developing a specific customer base)
- Do you have a sound long-term commitment from your management team? Or is exporting viewed as a quick-fix for sluggish domestic sales?
- Could you be putting your domestic business in jeopardy by focusing on exports?
- Have you considered the extensive resources required (people and costs)?
- Do you know what level of return on investment you will see and when?
Plan for your growth
Long-term planning is crucial to success in any export venture. Here are just a few of the financing scenarios to consider:
Working capital to fuel your growth
Do you have the capital you need to take on new growth projects or access new export markets? Rather than dip into your funds for domestic operations, you can consider financing working capital for your export venture. For example, you may need to finance the production of new goods for exporting or the customization of products to ensure that they are successful in your target markets. Or, you may also require funding to bridge the time between shipment of products and receipt of monies from the buyer.
Complement your line of credit with BDC's long-term working capital financing; get the support you need to meet increased demand which includes additional inventory and increased accounts receivables.
Purchase equipment or retool to increase production
Are you able to meet increased production capacity in foreign markets? You may have to purchase equipment to address this need. In some cases, BDC provides up to 125% in financing for equipment purchases to cover additional costs such as training and installation. Flexible repayment schedules can allow you to defer principle payments until after the equipment is installed and performing optimally (up to 12 months). Progressive or seasonal repayment options are tailored to your business' cash flow.
When you purchase equipment, it is an ideal opportunity to improve productivity by reviewing and optimizing the layout of your space and considering automation of your production line. For example, you can optimize your inventory turnover, improve your setup and turnaround time, or analyze your production chain to reduce bottlenecks. The BDC Consulting has specialists to help you achieve this.
Purchase a new building or expand your facilities to create more space
Do you have the facilities or space required to handle increased production for foreign sales? A positive aspect of owning your premises is that you acquire equity and you can customize the space to your specific needs. If you decide that you want to purchase new or additional space, be sure that you have adequate long-term financing in order to maintain your working capital for other growth projects. Your banker or accountant can help you see if you're vulnerable to short-term pressures such as cash flow and if the long-term benefits are clear.
BDC can provide long-term financing at a higher ratio, up to 100% of the purchase price. Disbursement and repayment options are tailored to your business' cash flow.
