Without trade financing, there would be no Indian spices, clothing, or jewelry in the United States. Or Apple’s iPhones in China, much less any other international product at a respectable distance from its origin.
In fact, according to Investopedia, the World Trade Organization (WTO) estimates that international world trade has expanded between 80% and 90% thanks to trade finance.
For this to continue, companies must include trade finance in their business development strategies.
How do you do that? Find out how you can incorporate business finance into your business development strategy.
Incorporate domestic trade finance into market penetration and development
Market penetration and development are key parts of a business development strategy. Market development means selling more of your service or product to regular customers.
Although market penetration consists of expanding your product or service to other cities and provinces, it may involve financing of domestic trade. As you may have to renegotiate local and provincial trade agreements.
For example, let’s say you sell jewelry. A business in a neighboring city can buy your jewelry and sell it to its customers.
He has a long history with this client. And know that your product sells quickly in your customers’ store. In which case, you could propose to sell the customer more jewelry at a higher price.
After negotiating, the client accepts. However, despite the long and positive history you have had with the customer, the customer may not feel comfortable paying you prior to exporting the jewelry.
This is where a commercial financier or banking institution comes in, providing a letter of credit promising to export the jewelry upon payment.
Consider the Internet and physical stores
If you are already selling more of your product or service to customers, maybe it is time to branch out to another channel like the Internet?
If you have a successful ecommerce store, maybe it’s time to start a physical store too?
That way, your customers have more options where to buy your products.
Especially when it comes to physical stores, trade financing can help you secure new import and export trade deals, especially when multiple currencies are involved.
Creation of a new product or service for regular and new customers
With repeat customers, double the number of products that the regular customer imports.
And, with new customers, your new product or service will expand your customer base. It is important that you first create new products for your regular customers before jumping in to new customers, as it involves more risk.
Again, trade finance can help build more confidence during this growth period. Since commercial financiers or banking institutions can create letters of credit, the terms to be followed by the importer and exporters are established.
Final thoughts on your business development strategy
Know that growth doesn’t happen in a day; It is more difficult for companies to move from market penetration to supplying new products to new customers.
This is why we recommend that you approach growth slowly. However, know that trade financing can help increase the number of customers you trade with, no matter where they are.
What is your opinion on trade finance? How has it helped your business? Share your thoughts, comments, and responses with us.