Small Biz Exporting: How Can You Guarantee Payment?

WSJ International ImageEarlier this year, the Wall Street Journal published a piece exploring The Costs of Expanding Overseas for small businesses. While the centerpiece of this article was highlighting an executive order signed by President Obama to expedite exportation approvals, a couple of interesting stats presented themselves about one quarter of the way through the article:

“Businesses with fewer than 500 employees accounted for 294,589 of 301,238 U.S. exporters in 2012, or about 97%, according to preliminary data released by the U.S. Census Bureau in December.”

Not only are small businesses the ones who often need the greatest assistance when it comes to exploring/expanding exportation, but they also make up nearly ALL  of the currently registered exporters in the United States. That’s a huge announcement. The second stat that caught our attention:

“While paperwork is a headache for some small companies, it’s not their biggest concern, according to a survey of small businesses fielded in 2013 by the National Small Business Association and the Small Business Exporters Association. Asked to identify what they consider to be the largest challenges to selling goods and services to foreign customers, 41% of respondents selected “I worry about getting paid.” That’s up from only 26% of respondents in 2010 who said payment was an issue for them.”

So, small businesses make up the lion’s share of U.S. exporters, and they’re also the ones experiencing increasing concern over payment as they branch into new markets. Through additional interviews with small business owners, the article goes on to explain that these small business owners are seemingly left with only the more traditional payment methods at their disposal – Letters of Credit, open credit, consignment, etc.

While those tried and true payment methods are still effective, small businesses can be hit especially hard with the expenses associated with Letters of Credit or underwriting new business partners who may or may not be eligible for open lines of credit. Here’s where we believe online escrow services like PaySAFE can not only be helpful, but can help to save significant amounts of man power and capital.

First of all, escrow benefits both the importer and exporter – no more contracts heavily weighted toward one party or the other. The exporter knows the buyer is serious as all funds are verified upfront and held with a neutral third party. Importers are protected in knowing that their purchase funds won’t be released until there’s verification that their order has shipped.

Online escrow also requires only a minimum of attention from both parties. With PaySAFE, both parties are notified via email whenever a new milestone is reached in the process, and even advises as to the next step of the agreement. This type of transaction removes significant amounts employee time and fees associated with coordinating Letters of Credit, and the extensive time investment in underwriting for open lines of credit.

Ultimately, as the government is looking to find new ways of expediting the process of getting U.S. good exported, we feel it’s equally as important that small and mid-sized businesses know that there are payment alternatives that can help secure AND expedite the payment process as well – mitigating nearly all of the financial risks in taking on new international business partners.

For more information about how PaySAFE can help secure your international transactions, visit our international trade page or call 877.638.1518 to speak with a customer service rep.

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2 comments

  1. […] Regardless of which payment method you choose, it’s important to know all the costs and potential pitfalls before you commit one way or another. Each payment process can vary widely in its terms, fees and dispute processes. Click for more information about how PaySAFE can help your business with international payments or to read more about how you can guarantee payment as a small business exporter. […]

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