Small businesses have been encouraged to secure finance to fund the stock-up and production of goods ahead of closures over the Chinese New Year period.
SME lender Scottish Pacific has urged small businesses trading with counterparts in China to prepare for closures over Chinese New Year.
According to the lender, over a quarter of all Australian trade and a significant amount of New Zealand trade take place with China, exposing such businesses to the lull in business activity over the week-long celebration, which runs from 24 January to 30 January.
Craig Michie, Scottish Pacific’s import finance spokesman, observed that the business impact of the celebrations can endure for a month.
Mr Michie added that such difficulties could extend to other countries with large Chinese populations, including Malaysia, Singapore, Indonesia, Thailand and the Philippines.
“It can be a challenging time for importers and exporters, but with preparation, you can minimise disruptions,” Mr Michie said.
As a result, Mr Michie advised Australian SMEs to be aware of the implications on their business and consider obtaining additional working capital.
Mr Michie said that by securing finance, Australian importers could fund the build-up of stock ahead of the celebration, while exporters can ensure they have adequate cash flow for production in order to meet the demands of business partners once the holiday has passed.
“One of the most effective ways to ensure you have enough working capital is to use trade finance,” Mr Michie said.
The Scottish Pacific representative said that trade finance would help “reduce friction during transactions”.
“For instance, a lender might offer extended credit to the importer to fulfil an order and provide an advanced payment to the exporter that matches the agreement terms,” he said.
He concluded: “Not only does trade finance help reduce the payment risk and supply risk and improve cash flow, it makes things easier across the board for both parties during the busy Chinese New Year period.”
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