Why capital matters for international expansion and how to get it

By Margaret Nguyen•Published on 7 March 2022•3 minutes

In this article

•
Why capital is essential — even if you don’t “need” it
•
Raising domestic capital vs. applying in a different country
•
How to get capital for international expansion
•
Options for FBA businesses
•
What to do once you’ve secured the funds
•
See how Airwallex can support your international expansion

The potential to plan and grow an international business is greater than ever before, and your business has set its sights on expanding to the UK.

But even if you’re familiar with international business laws and the processes for registering your business, hiring employees, and carrying out international transactions, there’s another essential aspect of expansion to think about: raising capital.

As much as we’d like to start up and expand businesses worldwide at the drop of a hat, these types of business ventures require significant financial backing.

Why capital is essential — even if you don’t “need” it

You need investment in the form of expansion capital in order to see growth at a substantial pace and generate solid turnover. Even if you are financially stable and ready to make the transition, raising extra capital to support your company during the transition can really make your expansion smooth sailing.

For example, you might have goals that you could meet organically using what you have now, but at a slower rate. Expansion capital can help give you the time and resources your company needs to increase your profitability and success at a more efficient pace.

You can use this type of business funding for product development, increasing production capacity, additional payroll, sales and marketing, succession planning, acquisition finance, and more.

Raising domestic capital vs. applying in a different country

So where should you apply for expansion capital — in your home country, or the UK?

Although you may not see the difference at first, applying for capital internationally isn’t optimal.

Global funding is a popular choice for businesses seeking capital.

Take the US for example. According to the US Chamber of Commerce, foreign companies have invested $4.5 trillion into American companies.

However, raising international capital might not be the best choice when compared to raising domestically.

Since the laws differ internationally, your company may not be as protected when it comes to security and product details. For example, partnering with the wrong international investor could put your business at risk of copycatting and misuse of information.

Make sure to protect yourself if you go this route. Always make sure you research legal recourse, use strategic marketing, keep patents and copyrights up-to-date, and only divulge necessary information.

Another downside to raising funds overseas is the plethora of finder’s fees for local investors and extra international costs. Be aware of these. Customs fees and finder’s fees should never exceed 10%, which is the norm in many countries.

How to get capital for international expansion

You should have an idea of how much financial help you’ll need before you apply for funds to support your UK expansion.

One way to do this is to use your balance and revenue sheets from your current location to give yourself a rough outline of what the first few months of international operations will look like financially.

Remember that starting a new location overseas most likely won’t play out perfectly, so make sure to account for hidden costs and pad out some funds for emergency use as well. Once you’ve done this, it will be easier to determine your capital goals and how much you’re looking to raise.

The next step is to establish where this capital is coming from.

Online eCommerce funding platforms

Online funding platforms like Payability can help eCommerce businesses with their funding needs.

Payability uses marketplace sales to determine how much growth funding a company qualifies for. Their platform provides world-class funding solutions that enable businesses to succeed.

“We at Payability have helped thousands of growing and leading Amazon marketplace businesses unlock capital that allowed them to grow beyond their domestic marketplace and into international waters. These are some of the ways our sellers have used our funds: hiring a copywriting freelancer (which allows for products to properly connect with local buyers in addition to your business); investing in tools to help improve upon your operations such as PPC advertising and keyword bidding; as well as investing in a local supplier.”

- Payability

Investors

Another option is to raise expansion capital through investors. Your federal government may have a program set up to encourage investments in small businesses.

For example, in the US, the US Small Business Administration funds Small Business Investment Companies (SBICs) — privately owned, licensed companies that invest in small businesses in the form of debt and equity. SBICs combine the funds they receive from the Small Business Administration with their own funds to invest in small businesses.

Once a business gets capital from an investor, they must pay them back with interest as well as giving a share of the ownership in exchange, depending on the type of investment made.

Working capital loans

A working capital loan provides the cash businesses need for day-to-day expenses. These can be easier for small businesses to obtain than other loans that may require extensive collateral or personal guarantees.

Working capital loans help cover operating expenses through bank credit lines, short-term loans, home equity lines, trade credit, or equipment loans. The amount you qualify for is based on your existing working capital, which is calculated by subtracting your current liabilities from your current assets.

Plus, most working capital loan application processes are simple and easy to complete online.

Options for FBA businesses

You might find it difficult to secure business loans from traditional lenders or investors if you’re an Amazon seller. Don’t worry — you still have options, including the following.

USBA micro loans

In the US, the US Small Business Administration offers micro loans starting at $500 to $50,000 for startups and expansions.

Amazon Lending loans

This invitation-only program by Amazon Capital Services, Inc. helps small and medium-sized businesses grow on Amazon through short-term financing. These loans range anywhere from $1,000 to $750,000.

You must have a seller account in good standing with Amazon at the time of application. Since this option is invitation-only, you need to check your Seller Central account to see if your company is eligible.

Amazon line of credit

Amazon and Goldman Sachs have partnered to offer qualified sellers a business line of credit. This form of business capital allows businesses to request funds on a rolling basis rather than all in one large lump sum.

This is another invite-only program, so check your Seller Central account to see if you qualify.

What to do once you’ve secured the funds

Your business will be ready to take the next steps after acquiring capital for your UK expansion. These steps may entail any of the following:

Ensure you have the proper business licenses and legal forms for UK operation.
Familiarize yourself with UK business laws.
Insure your business.
Set up your international business accounts.
Start hiring.

See how Airwallex can support your international expansion

Airwallex is here to support your international expansion every step of the way. With the right tools like our virtual visa cards, international money transfers, and foreign currency accounts, you can see international success quicker than you’d expect.