There may come a time when you wish to expand your eCommerce business options internationally. In doing so, there are several factors to consider, including how to leverage your current working capital solutions and where to find additional funding. Here are some of the top ways you can fund international expansion, as well as some other things to keep in mind when growing your business.
When taking your business overseas—or expanding in general—it’s important to remember the cost. Business expansion is not cheap, but there are several avenues through which you can secure adequate funding to help carry you forward. These are some of the ways you can finance your expansion.
Traditional Bank Loans
If you’re looking to expand your business in any way, the first option you might consider is getting a loan, most likely through your bank. Banks and other financial institutions can offer loans to help fund business growth. Working capital loans provided by traditional banks and credit unions can help your business pay for day-to-day expenses. This capital can enable you to focus on your expansion efforts without having to worry about how you’re going to hold up in the short term.
While bank loans can benefit small business owners, they are also difficult to obtain. To qualify for these loans, you often need to demonstrate established business credit, which small businesses may lack. Bank loans can be particularly tough for eCommerce sellers to secure, as banks tend to consider eCommerce platforms too risky.
Another standard solution for financing international expansion is credit cards. Opening a line of credit is a great way to temporarily grow your working capital and get in a position where you can move away from debt-based solutions. Small businesses still in the early stages of growth can benefit from credit cards. Some of the best cards for small businesses in 2022 include the Ink Business Preferred Credit Card, the Business Platinum Card from American Express, and the Payability Seller Card.
You can use credit cards to increase inventory for international growth, increase working hours, and more. Using a credit card is a great way to finance your business endeavors, especially if you want to expand overseas. Shop around, see what’s out there, and try to find the best card for your specific business operations.
While debt financing options like bank loans and credit cards can temporarily increase your working capital, you will eventually have to pay that money back. That’s why it can be better to seek equity financing solutions like angel investors, if possible. Angel investors are wealthy individuals that help fund startups, often in exchange for a share of the business.
When it comes to working capital finance options, angel investors are one of the best ways to go if you can get them. Finding an investor typically involves some networking, so you may need to reach out to various investing groups and ensure that your company fits the profile for what these investors are looking for.
Another way to fund your international expansion operations is through venture capital. Essentially, venture capital refers to the money invested in high-potential startups, typically by venture capital firms or individuals that expect to receive some sort of equity stake in the business in return. Partnering with venture capitalists can help you grow your business in many ways, and it can provide the funding necessary to get your business global.
Venture capital can be an excellent option for businesses that need a little extra boost. While this type of funding is not meant to exist long-term, it can help get businesses on their feet, which is extremely important when rolling out international expansion. Your company’s cash flow can increase, presenting you with greater opportunities in the global market. What’s more, you can achieve working capital improvements by acquiring venture capital funds at the start of your expansion.
Equity crowdfunding ties into angel investment and venture capital in that it involves sourcing capital from other investors. Most people who carry out crowdfunding efforts do so online, and private companies can legally raise up to $5 million in over the course of a year with this strategy. It can effectively increase your net working capital and overall effective working capital management.
The primary difference between equity crowdfunding and other types of funding used to support small businesses is that it doesn’t involve debt. Instead of paying for a business loan, you share parts of your company with those investing in it. Equity crowdfunding is another good way to raise money for international expansion, particularly for online business, as equity crowdfunding gathers investors in the digital space.
Strategizing For International Expansion
Securing working capital for your international expansion efforts is only half the battle—you also need to figure out how you’re going to use and manage that money effectively. It’s also important to remember that, when selling internationally, there are laws and regulations with which you need to be compliant. Here are some tips for leveraging your working capital to the greatest extent possible to meet your expansion goals.
Get Your Accounts Payable Process in Order
When working internationally, you will likely be working with additional suppliers. For this reason, it’s a good idea to manage your accounts payables and get your payment process organized for quick and easy payments. This is the time to request and understand payment terms to ensure you can get suppliers paid as efficiently as possible.
It’s also important to get your accounts receivables in order. Use your acquired working capital to implement new policies and procedures so that you can get up and running without issue.
Optimize Your Cash Flow
A critical aspect of international expansion is identifying and fixing any cash flow problems and looking for ways to manage your operating cycle better. Additionally, you should determine your cash conversion cycle or the amount of time it will take you to convert your business investments in inventory into cash. This can give you a better idea of what you should and shouldn’t risk in terms of liquidity when expanding internationally.
Along with optimizing your cash flow, you should manage your inventory appropriately. Pay attention to your day's inventory outstanding (DIO) ratio, as this can tell you how long you hold your merchandise on average before converting it to sales. Likewise, the days payable outstanding (DPO) ratio can help you measure the number of days it takes your business to pay its bills. This is a great way to stay on top of your accounts payables and determine how much inventory you’re holding at any given time.
Fund Your International Expansion Efforts With Payability
Learning how to leverage your working capital to fund international expansion can be tricky, but with Payability, you can access solutions to help improve your cash flow so that you can grow your business. Unlike other funding options, there are no credit checks with Payability—you can qualify based on your sales history and performance.
Get started with Payability today to see how you can fund your international business growth operations!