Finding Money Abroad
Think global, bank local?
AMONG THE MANY TOP-PRIORITY ISSUES you face as you consider taking your business into a market abroad is how to handle your finances there. Most entrepreneurs ultimately decide it is best, or even necessary, to work with a bank in the target market and perhaps secure some form(s) of capital resources locally. They find that this allows the segment of their business that is operating in the target market to work more smoothly and move more quickly toward a state of sustainability, rather than being completely bound to the laws, structures and relationships of the home country. Their local banking needs can be handled in real time by people who will come to know your business, and that can give the local company flexibility and responsiveness which is important for long-term success.
Financial support and your plans
The physical location where you plan to start or expand and the type of industry in which your business operates will greatly influence the array of opportunities that may exist for government subsidies, private investors, institutional investors and your ability to borrow and have access to credit. If you are at the very start of your research into where to expand internationally, try to discover what countries or regions and cities within them might be especially welcoming and encouraging to your type of operation. It might not have occurred to you that Country X could be a good prospect, but if you put Country X through all the other evaluations you are giving to countries that first come to mind, you might find some interesting opportunities.
The nature of banks in your target market
Let’s say you have firmly decided on your target country. In my opinion, the first step in pursuing international capital resources is to identify the structure and the stability of conventional banking in that country. This is important because you will most likely have accounts with them, and some of your business’s operating budget will be placed into accounts with them, so it would be a great first step just to check everything out. Some banks are more business-friendly than others. Also, try to assess the relative safety a candidate bank can offer you. You probably wouldn’t want to have your money in banks in a war zone.
Once you’ve determined that using a local bank and its services makes sense as part of your expansion, ask if there are any international banks in the area that have offices and additional locations anywhere near your headquarters. When Scott and I worked with a trading company in China, it was helpful that the bank that we worked with had branches in China, Hong Kong and also in Chicago (close to our home base). This made it extremely easy to move capital around and electronically manage certain expenses of our projects remotely. Most important, we were in control of the cash flow and we could manage our own budgets without having to hire, train and trust someone on the other end. Now, that being said, as time went on we did eventually work with a few human capital resources in China and in Hong Kong that we allowed limited access to money and certain accounts in an effort to help the business run smoothly and more efficiently.
One practical tip: consider opening two accounts in your target market bank. Use one to wire in operating cash, but authorize the person who pays local expenses like salaries only to draw from a second account. Weekly (or at whatever frequency works), your local manager can submit a list of expenses for you to approve for payment. You transfer that amount (or more) to the account that your manager can access, and ensure the local business can run smoothly without risking unapproved expenditures.
Private investors and immigration incentive plans
Another interesting strategy for finding funding abroad is to identify private investors who may have an interest in your business or industry, or who simply want to benefit from one of the many immigration programs that support and incentivize foreign investors to participate in business and the economic growth of a country.
For example, the United States offers a program through the US Citizenship and Immigration Services called “Green Card Through Investment”. It allows entrepreneurs, their spouses and any unmarried children under 21 years of age, who invest in a commercial enterprise in the United States that plans to either create or preserve ten full-time jobs for qualified United States workers, to apply for a green card (which permits permanent residence in the US). The required investment amounts range from $500,000 to over $1,000,000, depending on the nature of the investment.
Economic growth incentives
Certain countries offer incentives that are unrelated to immigration. They simply want to stimulate economic activity and growth. Therefore you and your business may be eligible for grants, loans or other forms of aid that will help you seamlessly move your operation, start a business abroad or expand into new markets. Often this type of help can come in other ways that reach far beyond money, such as fast-track approvals, certifications and licensing requirements. This help can be very important, because depending on your business, it can be the regulatory side, not the capital side of the initiative, that can ruin an opportunity.
Caution, creative searching and win-win deals
Either way, when searching for money abroad, the most important things to remember are to really vet the financial resources you plan to use, and to feel confident about their stability within the local economy. Also, make sure that you are effectively investigating all of the resources that may be available to you for expanding into certain countries and market areas. Most importantly, try to find local private investors who would find it advantageous to invest or partner with you and your organization in some way. Mutually beneficial, win-win business deals tend to work out the best for all parties involved, and these types of businesses tend to grow more smoothly and much faster than those that attempt to do everything themselves.
M.O.