The current exchange rates for the GBP are, as we all know, very low, the pound is weak compared to other currencies such as the US dollar and the Euro. While this can mean good business for those who manufacture and sell from within the UK, for those who import or sell products abroad, it can mean lower profits.
Using lines of credit can help companies who are facing these challenges – so what are lines of credit and how do they work?
A line of credit (LOC) is a bit like having an overdraft, a company establishes a maximum credit figure that they can access and then are able to draw from that amount as and when they need to. LOC’s are flexible which is one of their main advantages. Those who take out a LOC only pay interest on the money they take out and can pay back the money in one go or as smaller instalments.
Lines of credit agreements can be made with reputable companies like Ebury where they are often used as a risk management tool for companies who trade overseas. This is because part of the service entails exchanging foreign currency at a time that is beneficial to the client, this is known as stop loss orders, or agreeing fixed exchange rates in the interests of their clients and so the exchange rate is not subject to volatility.
Taking out lines of credit can benefit a whole range of companies and particularly those who do lots of business overseas. They give companies security and stability, particularly in times such as these when there is much uncertainty surrounding the foreign exchange markets.
Lines of credit act a little like time machines for businesses. Time either stands still, i.e. the exchange rate is fixed for a specified amount of time or the rate companies pay is one set when the time was right.
Companies who use these type of services are companies who are politically savvy and who are determined to make the most of trading globally. These days it is not just about having a business acumen for trading overseas, it’s about seeing the bigger picture and acting upon it when the timer is right.
The question, in this instance, is whether you have the acumen and foresight to make the most of a weak pound or whether you will just weather the storm and risk drowning.