FX International Payments
By Karen Lynch
“Facilitating access to finance for internationally active SMEs has become a central objective of many policies and programs,” according to Financing SMEs and Entrepreneurs 2017, a report by the Organisation for Economic Co-operation and Development (OECD).1
In a separate announcement that correlates with the OECD report, U.K. Export Finance said the number of exporters it supports rose 23 percent in 2016 to a 25-year record, and 77 percent of them were SMEs.2 The agency said it issued £1.8 billion in export support, and estimated that 7,000 companies in exporter supply chains also indirectly benefited. The news came one year into the government’s “Exporting is GREAT” drive to empower 100,000 new companies to sell overseas by 2020.
Globally, the OECD report cited the example of Finland, where a state-owned financing company called Finnvera introduced a debt-based mezzanine financing product in 2016 for growth and internationalisation investments in SMEs and midcap companies over three years old. In tandem, Finnvera’s authorisation to provide export credits was nearly doubled, to 13 billion euros (£11.2 billion), while availability of credit guarantees increased slightly, to 19 billion euros (£16.4 billion).
Belgium’s 2016 launch of FINMIX International, an extension of a domestic program in which panels of experts advise entrepreneurs on their plans to start up a foreign office, launch a project abroad, or seek export financing, was also cited in the OECD report. The panels are drawn from public and private banks and other financial services companies, business organisations, and consultants on import-export trade and finance.
Surveying the landscape elsewhere, Australia’s Export Market Development Grants encourage SMEs to increase spending on international marketing and promotion, as well as to embed themselves in global supply chains. Included are a 50 percent reimbursement of eligible expenses (except the first AUD 5,000, or about £2,875) and grants up to AUD 150,000 (about £86,200). In 2016, over 3,000 enterprises were given grants worth AUD 131.5 million (almost £76 million), up about 10 percent from the previous year.3
In digital trade, “the internet is enabling micro, small and medium-sized businesses to access global markets unlike ever before,” a focus group of businesses recently told the World Trade Organisation.4 “But internet-led changes in the composition, nature and speed of global trade are raising increasing policy frictions.” The group called for the WTO to launch a package of improvements in customs processes, trade rules, and assistance to facilitate e-commerce for SMEs and microenterprises.
More broadly, a U.S. survey explored what keeps American SMEs from selling otherwise exportable goods and services. The top five culprits include a lack of knowledge about import-export trade, regulatory complexity, a lack of understanding of how to use free trade agreements, and the inability to get financing to offer to foreign customers. Also, almost a quarter of them worry about getting paid, according to the 2016 Small Business Exporting Survey.5 U.S. SMEs’ internationalisation challenges are not insignificant, with a third of them saying they spent more than 5 percent of their annual operating revenue to begin exporting, and nearly half saying they invested anywhere between a few months and a full year in preparing to export.
Notably, while there are U.S. tax incentives available for SMEs, “many qualifying taxpayers don’t know about them,” according to a recent report in the Journal of Accountancy.6 As seen the world over, more than half of the survey respondents also conceded they have never taken advantage of government services supporting import-export trade.
In light of that awareness issue, countries such as Sweden have made efforts recently to increase outreach to SMEs to promote their services, similar to the work of U.K. Export Finance. That effort yielded results for the Swedish National Export Credits Guarantee Board, a provider of export credit insurance. The OECD cited a rise in the volume of guarantees and a 30 percent increase in associated transactions.7
Governments around the world are expanding their menus of policies and programs aimed at improving SMEs’ opportunities in import-export trade and global supply chains. As the initiatives are growing, so are agencies’ efforts to increase SME understanding of the support already available to them. In Britain, U.K. Export Finance leads the charge.
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1.Financing SMEs and Entrepreneurs 2017, Organisation for Economic Co-operation and Development; http://www.keepeek.com/Digital-Asset-Management/oecd/industry-and-services/financing-smes-and-entrepreneurs-2017_fin_sme_ent-2017-en#page1
2.“UK Government Announces Financial Support for Record Number of Exporters in 2015-16,” U.K. Export Finance; https://www.gov.uk/government/news/uk-government-announces-financial-support-for-record-number-of-exporters-in-2015-16
3.Futureproofing Australia: 2017-2018 Pre-budget Submission, Australian Chamber of Commerce and Industry; https://www.treasury.gov.au/~/media/Treasury/Consultations and Reviews/Consultations/2016/2017 PreBudget submissions/Submissions/PDF/Australian Chamber of Commerce and Industry - Submission 1.ashx
4.WTO Business Focus Group 1 – MSMEs and E-commerce, World Trade Organisation; https://iccwbo.org/publication/wto-business-focus-group-1-msmes-and-e-commerce/
5.2016 Small Business Exporting Survey, National Small Business Association and Small Business Exporters Association; http://www.sbea.org/?p=1295 6.“U.S. Exporters Leaving Tax Dollars on the Table,”Journal of Accountancy; http://www.journalofaccountancy.com/issues/2016/nov/interest-charge-domestic-international-sales-corporations.html
7.Financing SMEs and Entrepreneurs 2017, Organisation for Economic Co-operation and Development; http://www.keepeek.com/Digital-Asset-Management/oecd/industry-and-services/financing-smes-and-entrepreneurs-2017_fin_sme_ent-2017-en#page1