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Trade finance as a business development strategy

Without commercial financing, there would be no Indian spices, clothing, or jewelry in the United States. Or Apple iPhones in China, let alone any other international product within any respectable distance of its origin.

In fact, according to Investopedia, the World Trade Organization (WTO) estimates that international world trade has expanded by between 80% and 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? Find out how you can incorporate trade finance into your business development strategy.

Incorporate domestic trade financing into market penetration and 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 provinces, it may involve financing domestic trade. As you may have to renegotiate local and provincial trade agreements.

For example, let’s say you sell jewelry. A business in a neighboring town may buy your jewelry and sell it to their customers.

You have a long history with this client. And know that your product is selling fast in your customers’ store. In which case, you could propose to sell the customer more jewelry for a wholesale price.

After negotiating, the client accepts. However, despite the long and positive history he has had with the client, the client may not feel comfortable paying him before exporting the jewelry.

This is where a banking or commercial financial institution comes in, providing a letter of credit promising to export the jewelry once payment is made.

Consider the Internet and physical stores

If you’re already selling more of your product or service to customers, maybe it’s time to branch out into another channel like the internet?

If you have a successful eCommerce store, maybe it’s time to start a physical store too?

That way, your customers have more options where to buy your products.

Especially when it comes to physical stores, trade financing can help you secure new import and export trade deals, especially when multiple currencies are involved.

Creating a new product or service for regular and new customers

With repeat customers, you are doubling the amount of products that the repeat customer is importing.

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 regular customers before jumping into new customers as it involves more risk.

Once again, trade finance can help cultivate more confidence during this period of growth. Since commercial financiers or banking institutions can create letters of credit, the terms that must be followed by the importer and exporter are established.

Final Thoughts on Your Business Development Strategy

Know that growth doesn’t happen in a day; it is more difficult for companies to move from market penetration to supplying new products to new customers.

That is why we recommend that you approach growth slowly. However, knowing that trade financing can help increase the number of customers you trade with, no matter where they are.

What is your opinion on trade finance? How has it helped your business? Share your thoughts, comments and answers with us.

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