The Case of China: How Incomlend Helps Chinese suppliers

Challenges for Chinese exporters 

China trails only the United States with the second-most number of unicorns in the world, which are tech companies valued at US$1 billion or more. China’s success owes in large part to its very large domestic market. Though the country was recently surpassed by India, China still has  1.4 billion people. Any business that launches in the country has a significant addressable market, even if their product is specialized. 

The sheer scale of China is a double-edged sword: Because the country has such a great amount of potential customers, some businesses do not look beyond the nation’s borders. From the portion of Chinese businesses that do operate cross-border, beyond the famed Great Firewall, most encounter several crucial challenges.

Because China is the world’s greatest exporter, businesses in the supply chain face stiff competition not only for customers abroad, but financing back home. When exporters apply for bank financing, they are competing with other exporters who may have more favorable credit histories, better credit references, or even stronger collateral from the business. In this kind of environment, it’s tough to obtain the working capital they need to not only begin operating overseas, but grow this cross-border commerce.

The challenge of obtaining working capital through bank financing is further compounded by the fact that the Chinese government has traditionally devalued the local currency, the yuan. While this is beneficial for the economy as a whole - since more businesses and importers come to China in search of goods - it is not so favorable for individual businesses. Exporters have to often compete on price, which is a race to the bottom. Lowering prices by a few cents can mean the difference between winning a contract and being left in the dust. As a result, Chinese exporters may face a working capital crunch that further incentivizes them to cut corners.

There are several advantages in China’s favor. While exporting from the country was largely a manual affair before, with business leaders having to meet face-to-face in the country to strike deals, there are now platforms that aid Chinese exporters in finding customers overseas. This greatly accelerates their product acquisition, so they can focus on fielding and offering the best possible products to foreign buyers.

Unfortunately, while there are now tech marketplaces that help Chinese exporters find customers overseas, this is still not an option for some, who lack the working capital to fulfil these orders even if they came in. In this case, another technological solution can also help invoice financing.

Innovating for Chinese exporters 

Incomlend was recently recognized in a case study competition for its work in the Chinese market. Through a partnership with a major retailer, any supplier affiliated with this business is eligible for receivable financing.

Through this partnership, Incomlend is helping Chinese exporters in several different ways.

Incomlend is providing access to invoice financing.

Prior to the launch of the partnership between Incomlend and the Chinese retailer, there were few invoice platforms available in China. With Incomlend’s entrance into the Chinese market, it remains one of the few available invoice factoring companies available in the country. 

By offering this service through Chinese suppliers, Incomlend is making finance more accessible, providing a route out of the previous two options. Now exporters do not have to choose between struggling with their working capital, or trying their luck at applying for a bank loan, like millions of other exporters in the country. They gain access to a new form of financing that represents a financial innovation - and a fair one - for local exporters. This accessibility is rooted in the fact that many leaders from Incomlend deeply understand the needs of exporters. 

Incomlend provides a great user experience.

A major problem associated with bank financing is lost time. When a Chinese exporter is considering bank financing, the business owner is asked for many financial documents. It will take time to gather these, or if he doesn’t have them, to prepare them as needed. After getting these affairs in order, the business leader can then finally apply. But it may take up to several months for a decision to be rendered on their application. 

Bank financing thus represents a significant opportunity cost for a Chinese supplier. In the time it took to apply for a bank loan, they could have searched for other forms of financing, or even focused on growing their business. Bank financing, in short, is not pro-entrepreneur: It slows them down at a time they need working capital the most, and in the event they are denied, completely wastes their time.

Invoice financing, in sharp contrast, is decidedly pro-entrepreneur. To apply, suppliers affiliated with the retailer simply need to register online by providing the information about their business and their corresponding trade partner. They will also need to provide transaction records about the trade history between the two partners. Since this portal is synchronized with the actual invoice financing platform, the application can be quickly acted upon. Exporters that meet eligibility requirements will be invited for a remote video interview conducted by a risk control team. Should they pass this stage, they will be offered a financing amount based on a credit limit determined by the insurer and evaluation. In this way, Incomlend helps businesses get access to the working capital they need on a much quicker basis. 

Invoice financing helps them grow their business.

Upon receiving their working capital from invoice financing, Chinese suppliers have the discretion on how to use the funds. Enterprises that are still new to cross-border commerce may seek more overseas partners through sales, marketing, and other business development activities. 

Exporters that are more mature, on the other hand, may want to invest in economies of scale. They may buy more product or raw material, hire more staff in the various markets that they operate in, or expand to new markets. No matter what they choose, they will no longer be constrained by their lack of working capital - they can implement diverse business strategies on account of having wisely chosen invoice financing. 

By investing more in exporting, Chinese businesses gain a blue ocean opportunity: Their business has nowhere to grow but up. The benefits of invoice financing are of course not limited to Chinese exporters. Importers and exporters in the markets that Incomlend operates in would also be well positioned to explore invoice financing. Those that do will gain a similar competitive advantage as suppliers in China: The world will open to them.