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Export financing

As an exporter you have to make sure you get your export financing right. Keep in mind that you must be able to fund your export contract, make sure you get paid, and more.

 

Five tips for financing

  1. Seek help from bankers, financial and export experts
  2. Explore available government grants and loans
  3. Know the grants and loans available from local government areas and private parties
  4. Factoring is a funding facility to consider for increasing your cash flow
  5. Protect your export proceeds against non-payment risk through Export Credit Insurance

 

Money needed

Export business requires sustainable funding over a period of time. The amount of money needed for export is largely dependent on your product and export destination(s). It includes components like marketing and market access, as well as (direct and indirect) working capital.

 

Marketing & market entry costs

Your export budget should cover all costs of marketing your products or services abroad, including the costs of market entry. The product components, requirements of the target market segment and different engagement / publicity needed to draw attention form the basis for marketing and market entry cost. Specific costs involve:

  • Hire dedicated staff member(s) for the export business
  • Regular visits to your targeted export destination(s)
  • Provision of samples to bring to target market

 

Working capital costs

Additional working capital costs are always involved during the export process. This means the amount of money needed to be available to effectively run your business. In practice, payment for the contract is received mostly after delivering all of the goods / service. Thus keep in mind you have to make additional direct costs like: raw material purchases, packaging, transportation, laboratory services, certification(s). Extra indirect costs should also be taken into account: overheads, personnel, plants and equipment, building.

 

Payment methods

There are different payment methods possible between you and your buyers. The main options are:

  • Documentary credit (e.g. Letter of Credit)
  • Open account (e.g. advanced payment, cash against document, deferred payment)
  • Documentary collections

It is advised to always check and discuss your options for payment with a financial adviser. This ensures you to have the right agreements on payment in your eventual export contract.

 

Funding options

There are numerous funding options available to help you in funding your export costs:

  • governmental export incentives
  • factoring
  • loanings (commercial banks / family and friends)
  • support of financial institutions

 

Export incentives

One of these include governmental export incentives. Nigerian exporters could get access to multiple different incentives. NEPC is administrating two of these incentives: Export Development Fund and Export Expansion Grant. Find out all about these incentives including guidelines & procedures, service timelines, fees & charges and other requirements in the export incentives pages.

 

Factoring

Factoring might be an attractive way to help your cash flow. Factoring is a financial transaction where the receivables (such as the invoice) is given to a third party, called a factor for a fee.

 

Loanings

Other ways of funding include loanings of friends and family and a wide range of loaning options at commercial banks. If you want to request loanings at commercial banks you would have to write a bankable proposal. When writing a bankable proposal take into account the following steps:

  • Familiarise yourself with the responsibilities of each financial organization
  • Prepare funding request based on their priorities
  • Get a copy of their template and use it to develop your proposal
  • Formally submit your proposal

 

Financial institutions

Financial institutions offer a lot of interesting funding options and are therefore a very important source of export financing. Find the main institutions for financial support to maximise and expand your export potential below.

Nigerian Export Import Bank

The Nigerian Export Import (NEXIM) bank offers a wide range of funding options for your export business. Among these: 

  • Direct Lending Facility (DLF)
  • Export Credit Insurance Facility
  • Stocking Facility (for manufacturing exporters)
  • ECOWAS Interstate Road Transit Scheme
  • Foreign Input Facility (for manufacturing exporters)
  • Local Input Facility

Check out the NEXIM-site to investigate your options in more detail!

Central Bank of Nigeria (CBN)

In addition to the NEPC administered export incentives, the CBN offers two interesting incentives as well:
  • Export Stimulation Fund (access through your bank)
  • Rediscounting Refinancing Facility (access through NEXIM)
Find all details of these funding options on the CBN website.