Insights by Cathay

International companies operating in foreign markets can power the growth and performance of their businesses by exploring emerging markets, taking advantage of untapped business opportunities and benefiting from pro-business regulatory environments.

However, there are also several possible pitfalls associated with international business, creating a certain degree of risk that could lead to serious consequences if not managed properly. Foreign exchange rates can fluctuate, making it difficult to deal in foreign currency, and navigating capital markets might pose problems for foreign investors.

Fortunately for international businesses, there are cross-border financing solutions and services that can help overcome those challenges and mitigate risks associated with doing business across borders.

Why International Businesses Need Cross-border Financing

Financial institutions offer cross-border financing arrangements to help businesses participate in international trade — or establish foreign subsidiaries — by providing a source of funding that enables them to compete globally and conduct business beyond their domestic borders.

It is useful for multinational firms to conduct international trade without needing to hold a large reserve of working capital. Cross-border financing has risen in popularity over the years with the help of globalization and the rise of emerging economies.

The Advantages of Cross-border Financial Services

• More business opportunities: Cross-border financing gives businesses access to broader markets that may be more receptive to their product offerings and/or less competition, generating higher growth and performance.
• Better regulatory environment: Regulations can differ depending on the country and state administration. Cross-border financial services enable global firms to conduct their operations in markets with more favorable regulation and less red tape, allowing them to reduce operational costs and allow their business to be more efficient and profitable.
• Optimize cash-flow management: Companies with operations in multiple countries might find it difficult to balance their debt obligations with receivables inflows. Cross-border financing provides businesses with another source of working capital they can use to repay debts while receivables are pending.
• Less risk exposure: When businesses operate across different markets and countries, they reduce their exposure to volatility in a single market. For example, a recession or political upheaval in the United Kingdom may have a negative impact on the business, but if operations also exist in North America, the negative impact may be lessened.

Cross-border Financing Options

At Cathay Bank, we offer cross-border financing solutions so you can take advantage of opportunities in foreign markets.

We offer:

• International business financing: We have extensive experience across numerous financial offerings, including import and export letters of credit, inventory financing and asset-based financing to help global firms get access to the funding loans they need.
• Lending limit: We offer a variety of lending options, including direct and participation loans tailored to your unique international trading needs.
• Stronger buyer/seller relationships: Our team at Cathay Bank helps businesses make payments to suppliers across international lines. This enables businesses to strengthen vendor relationships and enhance their credibility, powering success for both parties while minimizing foreign exchange risk.
• Letter of credit & documentary collections: Letter of credit and documentary collections help ensure international settlement of payments to suppliers, despite differing tax and regulatory structures.
• Strengthening cash flow: International firms can work with financial analysts to identify new opportunities in emerging markets, find the best financing terms and rates, and optimize cash flows and take advantage of market opportunities.

Reach out to the team at Cathay Bank to speak to a financial analyst and learn more about our cross-border financing options.

Related Links:

• Overcoming the challenges that can occur with trade financing

• Why a Supportive Community Bank Is Essential to Business Success