Do you doubt whether internationalization is a good strategy for capital goods companies? In this article we clearly show how this industry has a positive impact on the evolution of Spanish exports in 2022, becoming one of the main sectors in foreign sales.
However, one of its main drawbacks is related to the need to find international financing solutions, since buyers must make high investments. Therefore, also We expose two financial alternatives paving the way for growth.
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What are capital goods?
The capital goods industry is made up of those companies that supply the necessary assets to carry out a productive or manufacturing activity, as well as the corresponding supplies and basic infrastructures.
These types of assets are characterized by being durable and, as a general rule, require a fairly large investment. For this reason, they are also known as “capital goods” or “investment goods”.
Although it is a sector that goes unnoticed, the truth is that constitutes one of the pillars of the Spanish economy and has a strong impact on the growth of exports in Spain, as indicated in the press release on the Foreign Trade Report: January – December 2021 (published by the Ministry of Industry, Commerce and Tourism).
Export situation in Spain 2022
Despite the complex international context, marked by a war in Europe, the evolution of Spanish exports from January to July 2022 increased by 24.4% compared to the same period in 2021.
Although, in 2021, exports in Spain reached a record number (€316,609.2 million), the trade balance remains negative. Mainly, this is due to the high imports of energy products and other goods with a high added value.
In any case, the evolution of exports in Spain is showing a good growth rate in 2022. According to Xiana Méndez, Secretary of State for Trade, “the recovery after the pandemic is a fact”.
Much of this growth is due to foreign sales of capital goods. Without going any further, in July 2022, came to constitute 19.2% of total Spanish exports, becoming the main sector.
In year-on-year terms, this industry has managed to increase its international sales operations by 24.1%.
Fountain: Foreign Trade Monthly Report, July 2022 (Ministry of Industry, Commerce and Tourism)
Thus, due to its situation and growth, we can deduce that foreign operations are a strategic key for the addition of capital goods.
How can capital goods companies export?
Once the evolution of capital goods exports in 2022 has been analyzed, it is worth asking to what problems companies in this sector face and how they can solve them.
A priori, internationalization is a source of business opportunities for the industry. However, correct planning is necessary to carry out any expansive project.
Actually, to address exports, attention must be paid to 5 fields:
- Marketing.
- Transport and logistics.
- Legal area.
- Custom code.
- Financial area and means of collection.
Many of the difficulties can be solved with an experienced customs broker and freight forwarder; They are two key pieces in the mechanics of foreign trade.
On the other hand, beyond marketing and operational issues, international financing usually one of the main drawbacks for capital goods companies.
This is because the nature of its products requires the buyer to make a medium and long-term investment. However, for these purposes there are specific international trade financial instruments.
Financial solutions for the export of capital goods
One of the most classic resources is to use the system of Export Credit with Official Support (for example, a Buyer Credit).
However, this Export Finance solution requires the intervention of an Export Credit Agency (ECA) to cover the risks through credit insurance from a Spanish bank and a bank in the export destination country. .
The participation of so many players means that the costs of the operation are high and that operations of less than 5 million euros are not attractive for the entities involved; it makes it in practice a very impractical solution for small and medium exporters.
So that, when financing via official credit is not accessible, the exporter can resort to a Export Leasing.
In this case, it is an international financing formula based on the sale of the goods to a leasing company. Subsequently, this company makes a financial lease to the importer.
For the exporting company, this operation is no different from a normal foreign sale; with the only difference that the commercial risk is eliminated, since the sale is made in cash, and the buyer has a different legal personality (a leasing company).
Thanks to financial alternatives such as Export Leasing, the capital goods industry continues to gain potential to contribute to the good evolution of exports in Spain.
Do you need help to export your products?
Now that you know the different sources of foreign trade financing. If as a freelancer or company you export your products abroad, take advantage of the potential of international financing tools that can make the difference between the success or failure of your operations abroad.
At AlterFinance we try to help you reduce risk in the development of your export strategies and we can present you with the financial product that best suits your international project. whatWe talk about your project?.
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