What SMEs need to know about export finance

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Amongst the key barriers that prevent small businesses from entering the export market, such as political risks, linguistics and access to markets, access to working capital continues to be one of the leading challenges. 

Zak Sivalingum, FNB Regional Head for Gauteng East, says there are several avenues available for SMEs to access export finance, depending on the stage of the business. For smaller businesses, export finance is commonly utilised for three key needs; working capital, cash flow and meeting contractual obligations.

Firstly, the business will require working capital to expand or complete the ground work required, such as research, sourcing of raw materials, input costs, traveling to meet customers and suppliers, amongst other activities.


Secondly, the business needs adequate cash flow to maintain business operations while building capacity and resources needed to meet the requirements of its export activities.

Thirdly, modifying the existing product range and its quality to meet demand and contractual obligations with customers can also place immense pressure on cash flow.

“Given the diverse nature of businesses and their respective sectors, their export finance needs often vary. Generally, there are two finance avenues that SMEs consider when entering into the export market – bank finance and government incentives,” says Sivalingum.

Businesses can get assistance from banks and lenders in the form of secured and unsecured credit such as a business overdraft, business loan, selective invoice discounting and asset based finance.

Moreover, there are a range of cross border finance solutions to help SMEs with their export activities, cash flow constraints and the facilitation of large export contracts.

The government also provides a number of incentives through the Department of Trade and Industry (DTI)’s Export Marketing and Investment Assistance (EMIA) scheme, to South African manufacturers and exporters – subject to certain terms and conditions.

The scheme was set up to compensate exporters for costs incurred in the facilitation of business activities aimed at promoting economic activity and GDP growth, while attracting Foreign Direct Investment (FDI) into the country.

“Finally, export credit insurance and risk-hedging solutions also play an important role in the planning and financing of export activities. SMEs entering the export market should protect their businesses against a number of risks that can potentiality impact them in foreign destinations such as country risks, exchange rate volatility and crime etc,” concludes Sivalingum.

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