If you want to travel abroad, there are several steps to getting prepared. You have to book tickets, find a hotel or other place to stay, get vaccinations, and make sure your passport and any necessary visas are in order.
Similarly, when you want your business to go global, there are lots of preparations to take care of. You need to localize marketing, find international distributors and other overseas partners, take care of local government regulation requirements, and work with a solid freight forwarder. One of the most critical steps, that many forget, is making sure that your business credit score is in great shape.
There are serious benefits to having a strong business credit score and business credit report. The most important within the “go global framework” are access to global growth funding, credibility with international distributors and other overseas partners, and leverage in negotiations.
Access to global growth funding
There are many ways to achieve lean global growth when your business goes global, so that you can achieve better results on a frugal budget. You can use government resources. You can work in partnership with international distribution partners. Maybe you can even “charm people’s socks off” using your foreign language skills, crossing your fingers that they will help you reach their marketplace.
However, even when using the right cost-cutting strategies, going global can be expensive. Your costs can include international travel, additional working capital needed to fulfill new international orders on terms, translation and localization costs, shipping costs, samples cost, and other resources needed to successfully attract overseas business and fulfill international orders. At some point in taking your business global, you may decide that getting funding will be necessary in order to achieve your international growth objectives.
For many businesses, that will mean working with a local bank or government program. These options necessitate a strong business credit score and credit report.
Even having no credit background will be detrimental, so in order to get funding, the sooner you work on your business credit score and business credit report, the better.
Having a strong business credit score and credit report means that you will be able to get the necessary funding to invest in increased working capital and the other resources you need. It also means that you can get this funding at a lower interest rate, thus increasing the profitability of the overseas venture to your business.
Credibility with international distributors and other overseas partners
In the international business area, your reputation is even more important than at home. Doing business across different international legal jurisdictions makes depending on the legal enforcement of contracts tricky. So more than perhaps in any other circumstance, potential international distributors and other overseas partners will want to know who you are before doing business with you.
However, as a small business, you may not have much of a domestic reputation in the marketplace yet, let alone in the international marketplace! So how will these potential partners evaluate you? Well, besides meeting you and trying to assess your character on a personal basis, they could also check your business credit report as a proxy for your reputation.
They could even do this without letting you know.
Unlike with personal credit, no one needs to ask your permission before running a business credit check. So making sure that your business credit is in the best shape possible is critical.
Is there anything in your business credit report that might raise a red flag with an international distributor? Consider bringing it up proactively, so that you can explain it. This openness will increase their ability to trust you and your business.
Leverage in negotiations
When negotiating an international distribution agreement, or other partnership, there are many key terms of the arrangement that you will want to negotiate. Some of these terms include: payment terms, how the distribution responsibilities and expenses are divided between the two parties, and long term ownership to the various assets created as a function of the partnership.
You will have more leverage in negotiating all of these valuable terms if you are perceived as being a larger, more important, and more successful business. This can be conveyed with a strong business credit report and business credit score. You can even proactively offer a copy of your business credit report as part of your offer package presentation.
Follow best business credit practices
When discussing business credit reports in the context of going global, keep in mind that there is no such thing as a universal credit system. Each country has its own system with its own way of calculating scores and sharing information. In all countries, however, making payments on time is a cornerstone to great business credit. Here are some tips on how to improve your business credit report and business credit score.
Taking good care of your business credit report and business credit score is a very important part of your business’s go global journey. Here’s to being very successful (and profitable) in all aspects of that journey!
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