Arranging for capital is the basic requirement of an import/export business. There are several methods of financing your export business venture. Some of these are listed below:

  1. Standard bank loan: This is one of the most convenient options for raising finance. However, banks need to be convinced about the soundness of your plan. Present a well-thought-out business plan, listing your anticipated fixed and monthly expenses, along with your revenue projections over a period of one to five years.
  2. Vendor financing: This method of financing is more suitable for importers. The selling company lends money to the buying company so that the latter can buy products from it. By doing this, sellers increase their sales, even though they are, in essence, buying their own products. Since this method carries risk for the selling company, you need to provide an honest appraisal of your prospects, along with risks and opportunities, to the supplier.
  3. Loan from Ex-Im Bank: Ex-Im banks, typically, lend to bigger players, but they are now increasingly supporting smaller players. You will, however, need to prove that you have firm orders for your products from a foreign client. The bank will then provide you a short-term loan.
  4. Factoring accounts receivable: This method is suitable mostly for short-term working capital loans. With this method, companies looking for finance sell their accounts receivable to a factoring company. The factoring company gives you an advance payment for accounts receivable. Factoring is a relatively expensive source of financing, but the advantage is that the factoring company takes on all risk of default by the customer.
  5. Pledging accounts receivable: You can also pledge, or assign, your accounts receivable for raising finance. This means that you use your accounts receivable as collateral to obtain cash.
  6. Private venture funds: Private venture funds could invest in your company, for the long-term or provide short-term finance. You could get funds at a mutually acceptable rate of interest, or you could share your profits. Though this method of raising finance eats into your margins, it significantly reduces your risk.
  7. Loan against assets: A common method of raising finance is a loan against assets. Re-mortgaging your home, taking out a second mortgage, using credit card loans are easy methods of funding. If you have an established import/export business, you may also be eligible for a line of credit.
  8. Self-financing: This is one of the most common methods of financing your import/export business. Not only are your own savings, investments and retirement accounts a good source of funds, they are also completely hassle-free.
  9. Friends and family: Tapping your friends and family for funds is another easy option, provided you have good rapport with them.
  10. Investors: Individuals willing to risk their capital in exchange for a good return on their investment are a good source of funds.