Start off with basic business
Almost a third (30%) of exporters in Switzerland have a growing need for financing when initiating and expanding international activities. For this reason, too, it makes sense in many cases to build up a certain degree of entrepreneurial stature and a certain base business with stable cashflow in the home market first. An economic emergency in the domestic market is an unfavorable starting point for an entry into internationalization.
Exporting is not a short-term project
Many companies budget for international market entry on a project basis, i.e. a certain budget for market development is initially planned for the first year. Sometimes it is expected that from the second year onwards further costs can be neutralized with market earnings in the same year. Such a calculation does not work in every case. Depending on the market entry model, it can be assumed that the development of a new market will take three or more years to break even, and correspondingly longer for the payback.
Financing options inside and outside the company
In addition to internal financing sources, a large number of external financing arrangements are available. The Swiss Confederation also offers various insurance and guarantee products via the Swiss Export Risk Insurance (SERV), especially for the promotion of SMEs. These provide exporters with, among other things, easier access to pre-financing for goods and services. At cantonal level, the brokerage of favourable building land or tax relief can help in the start-up phase or with a planned expansion of operations. Some cantons provide direct support for internationalisation projects under certain conditions.
Initial recommendations for action
- If necessary, talk to your banking and insurance partners about your project and discuss financing and insurance options as well as the hedging of liquidity risks that are suitable for your company.
In parallel, further risks in connection with internationalization must be identified and precautions taken. These include the use of credit information, letters of credit, guarantees or export insurance (SERV), country risk analyses and debtor and default insurance.
- Derivative financial instruments such as futures and options contracts may also be considered to hedge currency and interest rate risks.
Business activities abroad always involve certain risks. What can you do to minimize these risks or avoid them entirely? The answers are in the following article: How to manage export risks
Our handbook, “Export Compact – Getting Started with Internationalization,” provides good support for first-time exporters. Download it and take advantage of important insights and useful tips. “Export Compact” handbook