Without trade financing, there would be no Indian spices, clothing, or jewelry in the United States. Or Apple’s iPhones in China, not to mention any other international product at a respectable distance from its origin.
In fact, according to Investopedia, the World Trade Organization (WTO) estimates that global trade has expanded 80% to 90% thanks to trade finance.
For this to continue, companies need to include trade finance in their business development strategies.
how do you do that? Learn how you can integrate trade finance into your business development strategy.
Integration of domestic trade finance into market penetration and market development
Market penetration and development are key parts of a business development strategy. Market development involves selling more of your service or product to repeat customers.
While market penetration is about expanding your product or service to other cities and counties, it can also involve financing internal trade. You may also have to renegotiate local and regional business deals.
For example, let’s say you sell jewelry. A company from a nearby city may buy your jewelry and sell it to its customers.
You have a long history with this client. And know that your product is selling fast in your customer’s store. In this case, you can propose to sell more jewelry to the customer at a wholesale price.
After negotiation, the customer agrees. However, despite the long positive history you had with the customer, the customer may not feel comfortable paying you before exporting the jewelry.
This is where a commercial financier or banking institution comes in and provides a letter of credit promising that you will issue the jewelry upon payment.
Consider the internet and brick-and-mortar stores
If you’re already selling more of your product or service to customers, maybe it’s time to expand to another channel like the internet?
If you run a successful online store, maybe it’s time to start a physical store too?
This way, your customers have more options to purchase your products.
Especially when it comes to traditional stores, trade finance can help you secure new import and export business deals – especially when multiple currencies are involved.
Create a new product or service for repeat and new customers
With repeat customers, you double the number of products your repeat 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 repeat customers before jumping into new ones, as it involves more risk.
Again, trade finance can help develop greater confidence during this period of growth. Since letters of credit can be created by trade financiers or banking institutions, specifying the terms that the importer and exporters must follow.
Final thoughts on your business development strategy
Know that growth does not happen in one day; It is difficult for companies to jump from market penetration to providing new products to new customers.
This is why we recommend that you approach growing slowly. However, know that trade finance can help increase the number of clients you trade with, no matter where they are.
What do you think of trade finance? How has it helped your business? Share your thoughts, comments and feedback with us.