Your export business is thriving. To keep it growing and increase your profits, you want to take control of your supply chain or be closer to your end customers. It’s time to expand your business operations overseas—perhaps with a factory, warehouse or sales and support office.
One of your main concerns will be how to fund the overseas investment. A further challenge is how to manage the ongoing finances of the overseas operation once it’s up and running. And if it’s located in a country with an uncertain political environment, it’s important to consider safeguarding your investment against potential political risks, such as civil war or political violence.
The key financial issues are:
How can I finance overseas expansion?
What can I do to manage finances for my overseas operations?
How do I protect my overseas assets?
To find government grants and tax concessions available to you at this stage of the export journey, use the search tool on the right.
How can I finance overseas expansion?
Obtaining finance is a challenge for any major overseas investment. It may be difficult to obtain a bank loan for your overseas investment, as Australian banks are sometimes reluctant to accept overseas assets as security for additional borrowings. Your Australian business and personal assets may already be tied up as security for existing loans.
Other sources of finance for overseas expansion include:
- friends and family
- a joint venture arrangement with a trusted local partner in the target country
- equity investment by a venture capital firm—a firm which manages the pooled funds of individuals and institutional investors. The Australian Private Equity and Venture Capital Association website provides information about its members
- equity investment by an ‘angel investor’—a sophisticated individual investor. Industry networks or contacts at professional services firms, such as accounting firms, may have access to angel investors.
In Australia, the venture capital market and the number of angel investors are relatively small.
What can I do to manage finances for my overseas operations?
Once you’ve established operations in an overseas country, you may be receiving payment for your exports in a foreign currency and incurring operating expenses in the same currency. A foreign currency account or foreign currency loan allows you to use foreign currency payments from your exports to pay expenses in that currency without converting to and from Australian dollars.
How do I protect my overseas assets?
If your overseas assets or investments are located in a developing country, or one with an uncertain political environment, consider the possible impact of adverse political events. For example, if your assets or investments were damaged in a civil war or political violence, or taken over by the government of the host country, you could suffer substantial financial loss. Political risk insurance can help to protect you from financial loss due to certain political events, giving you the confidence to invest overseas.
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