Depending on the type of product you are importing, you may find that large sums of cash are tied up for a long time. This coupled with a fluctuating exchange rate can make for unpredictable and difficult cash flow.
If you are ordering products from a manufacturer, you will in all likelihood have to pay a deposit (around 20% to 30% of the cost) upfront. This is a cost you will need to carry for the period during which your product is being manufactured. Usually the outstanding balance is due before the goods are shipped.
If you are sea freighting, which is by far the cheaper option, you will need to wait around six weeks before your products are delivered. Only when they arrive will you be able to sell them and get paid which can take another 60 days, depending on who your customer is and how you invoice.
Effectively, huge sums of money can be tied up for months at a time. For this reason, importing can be an incredibly costly and time consuming process that requires a large amount of capital to be available.
Work out how long the process will take from the time you place the overseas order or purchase the overseas product, to the time that you receive payment from your end-customer, and factor this into your cash flow.
Many exporters also factor their invoices. This is an expensive solution but depending on your operation and the type of product, it may be a necessary one.
A financial institution that specialises in importing will pay a percentage of your invoice and then pay the remainder when the client pays them. They charge interest, administrative fees on the value of the invoice and some have a minimum monthly charge whether you are factoring invoices that month or not. It pays to shop around for the best invoice factoring deals.