Understanding your international funding options

Ensuring your business is financially ready for international growth is imperative for your success. One of the common reasons New Zealand exporters fail when they try to expand into international markets is bad financial planning and a lack of funding. They underestimate the capital required to enter into a new market and sustain themselves once there.

Taking the time to understand the financial implications of exporting and being prepared with a detailed financial plan, will significantly increase your ability to attain capital for sustainable growth. Funding growth from cash flow is not an option for all businesses. Often materials, componentry, shipping and distribution, tariffs, promotion and marketing among the myriad of other operational costs have to be pre-paid here in New Zealand before the goods have been delivered offshore - and paid for by the customer. The debtor cycle for export markets may be double or treble what you experience in New Zealand.

Learn more about key areas of expenditure, how to sustain and fund your export drive through debt or equity funding and who can help you realise your growth ambitions.

Understanding your funding options

This Export Essentials guide takes you through the key considerations for funding for international expansion. You’ll find information on:

  • What costs to account for when developing your export plan and budget
  • What your funding options are
  • The information you’ll need when seeking debt or equity funding
  • What you need to have in your financial plans before raising capital

Download our free guide on this page for understanding funding for international growth.

Watch this four-minute video of Mike Devonshire NZTE Beachhead Advisor and Steve Boyd from luxury accessories label, Deadly Ponies, sharing their perspectives on what cash flow and capital considerations you need to contemplate to ensure you enter into and sustain yourself in a new market.

If you would like to learn more about developing the right approach to exporting for your business, register now for the next Export Essentials workshop. We’ll give you practical tools and techniques to take your business global.

Mike Devonshire: Well, some of the major challenges that business face trying to fund their export growth is around the debtor cycle. So, traditionally at home you might have a 30 to 60-day debtor cycle; that can be doubled and, in fact, tripled offshore if you’re not careful. So, that’s probably the major issue. 

Steve Boyd: Funding international growth is a huge challenge. For our business, we’ve grown quite slowly, and I guess we’ve always tried to manage it within our own means. We make a certain number of handbags and we sell those and we use those profits to make more handbags and so on.

Mike Devonshire: The biggest mistake is undercapitalisation, and that’s not intentional. People don’t fully understand what it requires to enter into a market and sustain themselves in the market often, so understanding the capital requirement is key, and then once you’re in there the cash-flow cycle and the working capital to sustain yourself there is probably the next area and as important but needs to be focused on.

Steve Boyd: I mean it’s always a challenge managing cash-flow but I do think it differs significantly depending on the type of business that you run. I mean we make a product and we sell that product. Provided you’re not over-amplifying  your prospective selling then you can be reasonably sure that you’re going to be able to cover the costs in making that. Because we’ve been doing this for so long we’ve really run a very, very sophisticated cash-flow model where we basically make what we can afford.

Mike Devonshire: There are financial modelling tools available; some of the bank websites provide good insight into that. Most importantly - like any model what’s important is the input, so a thorough understanding of your debtor and creditor cycle, a full appreciation of what stock is required and when, and also a good understanding of the terms of trade are probably the key areas that we need to focus on.

Steve Boyd: When entering new markets we’ve always planned a long way ahead. So, we run - I actually run a 10-year budget and then I break that down into a five-year, and with new markets I plan a three-year budget.

Mike Devonshire: The key thing is to identify or understand what the risks are because most plans fail on the back of the assumptions that they make, so they haven’t verified their key assumptions, generally they haven’t verified them correctly because they just don’t know; they don’t have knowledge. So, they need to go and find knowledge or at least mitigate the risk of not having the right knowledge to populate their assumptions.

Steve Boyd: My main piece of advice is that we’re a very tiny country and it is incredibly expensive to achieve massive things internationally. Picking off achievable targets and actually setting achievable financial goals that you know where the end mark is and you say, “I’m quite happy to put that in.” It’s like you go to an auction and you go in with a price in mind; you don’t go in and say, “I’m going to spend 1.5 million dollars on this house” and then walk out spending 1.8. You know where your mark is. And that’s, I think, exactly the same in entering a new market. 

Exporter guide

Identify gaps in your strategy using the Export Plan template
  • I want to find funding for my export business
    If you’re working out how to fund your export plans, take a look at our useful Export Essentials guide to funding your export growth. This includes information on debt funding and external (investment) funding - the two key options for export companies wanting to expand. 

    The first step in funding your plans is knowing what they’ll cost – so if you’re starting a new business or considering taking your company into overseas markets, make sure you also check out our Export Essentials guide to the cost of exporting.

    Some government grants are available for businesses in New Zealand, but most involve co-funding, meaning you’ll need to at least match the money that you’re given. 

    For information on government funding for your business, visit Business.govt.nz’s useful page on government grants and what you can get help with. 

    The Export Credit Office can also help you with understanding how to access trade finance when you're delivering on export contracts.

    For information about NZTE’s own funding offerings and how they work, visit our page on funding
  • I want to find out about tax requirements for export
    NZTE doesn’t provide tax or legal advice as we are not specialists in this area – the best option is always to get professional advice on this matter. 

    To find tax a lawyer in New Zealand, the New Zealand Law Society provide a useful tool on their website.

    Your local Chamber of Commerce may be also able to recommend tax or legal experts who have knowledge of particular export markets, and have worked with other export companies. You can find your nearest chamber online on the New Zealand Chamber Network web page.

    For some markets, NZTE holds lists of tax lawyers and accountants that our team is aware of – to check if a list of contacts is available for the market you’re looking at, contact our Advisor Team on 0800 555 888 or send us an enquiry
  • How do I protect my business against a buyer defaulting on a payment?
    The Export Credit Office can help you protect your business from cancelled contracts or payment defaults that are due to commercial or political events beyond your control. 

Export Essentials Workshops

Develop your export plan in our practical two-day workshop