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On the Bibby Blog this week, Mark Lindsay, Managing Director of Trade and International at Bibby Financial Services talks about navigating international payment terms.Mark Lindsay

As increasing numbers of small and medium sized enterprises (SMEs) look beyond the UK to new markets and new opportunities, it’s the old, familiar problems that can make or break their growth plans. Payment terms can vary dramatically between nations, so it’s best for small business owners to be prepared.

We all know late payments are an issue in the UK but there are many countries where, as an exporter, you are likely to wait even longer. In Spain or Italy for example you can expect to wait, on average, up to 75 or 67 days respectively for settlement, compared to markets such as Germany (24 days) or Sweden (30 days), where things can move a bit more swiftly.

Equally, when SMEs import products into the UK they can find suppliers often request testing payment terms. For example, many exporters in China will request a down-payment of around 30% when an order is placed and then request full payment before the goods are shipped.

Making sure a business has access to the right level of capital to continue operating, while also seeking to grow can therefore be a challenge. On a basic level, having money going out on one term and coming back in on another can create a gap in cashflow that needs very careful handling.

One Bibby Financial Services customer that has successfully juggled the challenges of importing and exporting  is Ripmax Ltd, an importer and distributer of radio controlled models and feature film memorabilia.

Nick Moss, CEO of Ripmax Ltd explains: “As we have grown our business we have had to become more creative with our cashflow. On the one side, when importing goods, we often find ourselves paying for them before they arrive in the UK. On the other side, when selling our products to retailers, it often takes up to 60 days to receive payment. This leaves a gap in our working capital.”

A combination of invoice discounting and trade finance has helped the business to manage payment terms on its imports from Japan, China and the Far East and the business has recently secured exclusive European distribution rights for one range of products.

Cashflow management
For businesses like Ripmax, managing cashflow doesn’t need to be a barrier to trading across different markets. Whether importing or exporting, we have financing solutions to help manage your cashflow gap.

For those importing goods into the UK, Bibby Financial Services’ Trade Finance offers a means of paying your international suppliers upfront. We also cover the cost of shipping, VAT and import duty to make sure you get the products you need, taking the hassle out of international imports.

When you’re exporting, our Export Finance offer is a specialist product that recognises the higher levels of capital involved when exporting and provides working capital against invoices raised. We provide funding for the invoices owed to you and then use our network of offices around the world to chase payment from your customers.

Growing your business internationally can present considerable challenges, but managing your cashflow needn’t be one of them. With the help of specialist financing, taking that first step into overseas markets should be seen as a great opportunity, made on your terms.

If you’d like to learn more about trading internationally, you can join us alongside the Institute of Export at Henley Business School on Friday 11 December. Find out more about the event here.