Using trade finance to grow

Do you own a small business that’s selling overseas or importing products and equipment into Australia? Trade finance can help you make the most of opportunities without tying up your valuable working capital.

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If you see growth opportunities for your enterprise abroad as well as at home, you’re not alone.

From primary producers to software start-ups, Australian businesses continue to hold their own on the world stage.

Latest research shows our nation’s business owners are alive to the possibilities of foreign trade.

Almost 90 per cent of the 941 internationally-active respondents to Australia’s International Business Survey 2017 expected the financial outlook for their business’s overseas operations over the next two years to improve or remain the same.

Three quarters of respondents planned to expand into additional overseas markets during this period.

A survey of small to medium exporters by export credit agency Efic revealed similarly upbeat sentiments, with rising confidence that trade growth will contribute to business expansion.

The trade finance advantage

Trading internationally can pose a cash flow challenge for Australian business owners. Lack of access to funding is frequently an impediment to their embarking on international projects or export ventures.

Sellers of goods typically want to be paid as early as possible while buyers seek to settle as late as they’re reasonably able.

Trade finance can be a useful facility to help both buyers and sellers manage payment lags within a trade cycle.

A trade loan is a flexible short-term borrowing facility linked to a specific import or export transaction. Solutions can be tailored to suit your business’s size and trading cycle, from seven to 180 days.

You can use a trade loan to maximise your cash flow while you grow your overseas supplier and customer bases. It can be an attractive and cost-effective alternative to an overdraft facility, unsecured loan or borrowing against your home.

Greg Wilcox, owner, Pritchard Pacific.

Pritchard Pacific: small business scoring big contracts

Queensland-based Pritchard Pacific is a small business that’s found a profitable niche designing, installing and maintaining heat transfer and process cooling solutions for industrial manufacturers, developers, commercial property owners and government agencies across Australia. Contracts range in size from $5,000 to $5 million and the company works on up to five projects concurrently.

Heavy equipment is built to order by global manufacturers both locally and internationally, and the time between order and installation can be up to 20 weeks. Pritchard uses trade finance from NAB to plug the funding gap.

“Typically, we’ll need to secure materials and major pieces of equipment ahead of time, so we can complete prefabrication work in our Brisbane workshop, prior to onsite installation,” Pritchard Pacific owner Greg Wilcox explains.

“Our trade finance facility allows us to procure the items we need from our global suppliers and settle the accounts according to normal 30- to 45-day trading terms.

“Our contracts with customers generally state that we’re paid 30 days after the end of the month in which a solution is delivered and installed. The trade finance covers us for that period in between.”

In the past, Pritchard self-funded major projects but doing so constrained growth.

“Using your own money can hold you back,” Wilcox says.

“If you’re a business owner looking to expand, you don’t want to be tying up all your working capital – you want to be funding technological development and business expansion.”

“As a company, we’ve been automating and going through technological changes to ensure we’re well placed for future growth, while maintaining our run rate with existing projects.

“Trade finance has allowed us to grow our business and do business at the same time, without having to fund everything ourselves.”

Access to NAB’s team of trade finance specialists helped ensure Pritchard Pacific received a tailored solution that met its trading requirements.

“NAB demonstrated that they were endeavouring to impart as much knowledge as they could about the product and process,” Wilcox says.

“They did a very good job and, once we got into it in earnest, it was simple and straightforward.”

Like to learn more

To learn more about NAB’s trade finance solutions, contact your NAB Business banker, a NAB trade and working capital specialist or visit NAB’s Trade Finance page.