SOURCES OF FUNDING FOR INTERNATIONALISATION

Accelerate your business with these expert tips on "Sources of finance for internationalisation". Take a look and discover this TIP!

There are many sources of funding to support the internationalisation of a company. Each country provides support for its companies to conquer other markets. Companies that have a permanent establishment in Spain and already have an established market can tap into many sources of finance.  

Companies participating in mentorDay's softlanding programme benefit from a permanent address at its business centre. Dyrecto. There are non-refundable subsidies for those who are starting to export to cover part of the costs of studies, consultancies and even part of the salary of the person involved (Chambers of Commerce, regional organisations such as PROEXCA, ICEX). And there are subsidies, loans or capital contributions for when the company has to invest in fixed assets in other countries (ICEX, COFIDES).

How to obtain funding? 

To finance exports:

• Advance payment of the amount of invoices and preliminary production costs. ICO export line up to 12.5 million.
• Medium and long-term financing.
• Commercial risks.
• Financing through non-bank channels.
• Reciprocal Interest Adjustment Agreement (CARI).
• Fund for the Internationalisation of Enterprise (FIEM).
• Mutual guarantees.
• Financing technological innovation.

To finance investments:

• Investments outside the national territory.
• Participatory lending.
• Financing between 75,000 and 10 million euros.
• Foreign investment insurance.
• Optimisation of the investment process.
• Liquidity.

To obtain medium and long-term financing:

The ICO International Tranche II Exporters Medium and Long Term Facility offers financing aimed at the granting of Supplier Credit (intended for Spanish companies for the sale of goods or services to foreign companies).

And, buyer credit, (intended for foreign firms, for the acquisition of goods or services exported by Spanish companies), as well as complementary financing to the foreign company acquiring the Spanish goods or services, which has not been covered in its entirety by a buyer credit.

Formalisations through credit institutions:

The ICO International Channel Medium and Long-Term Export Tranche Line provides financing to companies with registered offices outside Spain that acquire, with deferred payment, goods or services both to companies with registered offices in Spain and to companies outside Spain that have a Spanish interest.

Likewise, companies with registered offices in Spain or outside Spain with a Spanish interest that sell goods or services, with deferred payment, to companies with registered offices outside Spain may also apply for financing. 

To insure commercial risks 

CESCE provides a wide range of solutions for comprehensive risk management through its two lines of activity: 

• On own account: protection against non-payment, commercial customer information, market research and assistance in obtaining financing, improving customer liquidity and collection management. 
• On behalf of the State: The EU's external relations policy ensures commercial risks beyond two years, political and extraordinary risks, among them: 
• Commercial risks: insolvency or protracted default of a debtor. 
• Political risks: situations caused by a country's authorities that prevent the importer from making payments abroad, such as transfer risk or the insolvency of a public debtor. 
• Extraordinary risks: e.g. wars, earthquakes, floods, etcetera. 

To access finance through a non-bank channel:

The Business Support Fund CESCE MASTER ORO offers an alternative for obtaining liquidity by discounting commercial invoices. 

• It is a non-bank financing channel, which does not appear in CIRBE. 
• For large and small companies, regardless of size. 
• The Fund acquires without recourse the credit for the amount covered by CESCE and within a maximum period of 6 days from the request, the transfer of funds is carried out.
• You must be a CESCE MASTER ORO customer and have the Títulos de Liquidez service.
• The Reciprocal Interest Adjustment Convention (CARI) is a support scheme for Spanish exports that encourages financial institutions to provide long-term export credits (two years or more) at fixed interest rates.
• The Fund for the Internationalisation of Enterprise (EMFF) is an official support programme for feasibility studies, technical assistance, export and foreign investment operations, supply and turnkey projects, managed through the State Secretariat for Trade.
• ICEX and Compañía Española de Reafianzamiento S.A. (CERSA) facilitate SMEs' access to finance through the Spanish mutual guarantee system.
• The ICEX-CESCE 1 Million Policy facilitates access to credit insurance for SMEs with a maximum sales volume of one million euros, with bonuses in the 

To finance the internationalisation of technological innovation:

CDTI offers different project funding programmes and cooperation initiatives in the field of internationalisation of R&D&I, among them:

• International Technology Cooperation Projects: transnational R&D&I projects close to the market.
• Global Innovation Line: financing of innovative investments in Spain or abroad to improve the growth and internationalisation of companies.
• Involves: encourages the participation of Spanish companies in international technological cooperation programmes.
• H2020: is the main Community initiative to promote R&D in the EU.
• CDTI-Eurostars: encourages the participation of Spanish companies in international R&D cooperation programmes.

To finance investments 

To finance investments outside the national territory 

The Line ICO International 2019 Tranche I Investment and Liquidity 12.5 million or its equivalent in USD per client, in one or several operations, for liquidity operations and investments outside the national territory in new or second-hand productive fixed assets, passenger cars, business acquisitions. 

The Line ICO International Channel Investment and Liquidity Tranche aimed at the self-employed, companies and public and private entities with a Spanish interest, both those domiciled in Spain and those domiciled abroad that have at least 30% of Spanish company capital or other companies with a "Spanish interest". 

To obtain equity loans 

• The FOND-ICOpyme Fund offers financing for the internationalisation processes of Spanish companies that, having passed the first stages of implementation, make investments to boost their growth.

Processing is carried out by Axis, the fund manager. 

• • Amount: 750,000 to 1,500,000 euros in innovative companies, and from 1.5 to 15 million euros in growth companies.

• The Line ENISA Competitiveness finances projects based on viable, profitable and proven business models, focused on the competitive improvement of production systems and/or change of production model or expansion through expansion of production capacity, technological advances, increase in the range of products/services and diversification of markets, among others. 

• • Amount: 1.5 million, depending on the level of equity and the financial structure of the company. 

ENISA has lines for companies in other stages of development. To obtain funding of between 75,000 and 10 million euros

The Fund for Small and Medium-Sized Enterprises' Overseas Investment Operations (FONPYME), together with COFIDES' own resources, provide financing of between 75,000 and 10 million euros.

There is no study commission and it is possible to finance both the establishment (commercial and productive) of the SME abroad as well as the extension of existing facilities or company acquisitions. 

If you need to secure the investment:

CESCE provides solutions for integrated risk management and manages on behalf of the State the Overseas Investment Insurance PolicyThe "political risk insurance" covers political risks and losses arising from, among other factors, expropriation or confiscation of the company abroad, failure to transfer dividends, terrorism, revolution or war, and breach of agreements or commitments by the authorities of the host country of the investment.

Optimises the implementation process:

The programme SMEs Invest of ICEX and COFIDES provides comprehensive support for Spanish SMEs to invest abroad: 

FOR PRODUCTIVE INVESTMENTS

75,000 to 10 million euros (up to 80% of the project's medium and long-term financing needs) and preferential access to ICEX's Customised Services programme. 

FOR COMMERCIAL DEPLOYMENTS

75,000 to one million euros (up to 80% of the financing needs of the expenses associated with the commercial implementation of the company) and preferential access to the ICEX Personalised Services programme. 

For liquidity and/or productive investments outside the national territory

The Line ICO Guarantee SGR/SAECA 2019 provides financing to the self-employed and Spanish companies or mixed companies with majority Spanish capital that have the guarantee of an SGR or SAECA. The amount financed per customer is a maximum of EUR 2 million in one or more operations.

ICEX Next co-finances 50% of the expenses incurred by the company, up to a maximum of 9,800 euros 18 months: 

• Strategic advice to design an internationalisation plan and develop a business plan by market. 
• Destination and specific advice to improve your company's international competitiveness. 
• Support in the costs of prospecting, promotion abroad and recruitment of staff for the International Department.

The PROEXCA's Canarias Aporta Programme provides specialised technical advice and financing to develop, promote or consolidate the internationalisation process of Canary Islands companies and their commercial expansion abroad. 

• Flexible programme, which adapts to business needs according to the business opportunities identified by the companies. In this way, a company that bids for the programme can subsequently undertake an implementation process, or vice versa. 
• Aimed at SMEs, applying individually or in groups, with priority being given to business groupings. 
• The maximum amount of support is €40,000 for a period of 3 years, if the stipulated results are achieved. 

Due to the remoteness and insularity of the Canary Islands, the rest of Spain is included as a market within the Programme, as it is a highly demanded geographical area, and with clear commercial opportunities for companies that are starting out abroad. 

In addition, PROEXCA provides global and personalised coverage of internationalisation support services:

• Business dynamisation through an export manager. 
• Advice, support and monitoring of each business initiative by PROEXCA technical staff. 
• Support in the search for public/private funding for business projects. 
• Facilitation of other services provided by collaborating organisations. 

Support for internationalisation. Key organisations in Spain.

EL FORFAITING

The forfaiting allows immediate payment of credits and deferred payment transactions, in the medium and long term. This consists of the purchase without recourse to the holder of bank guaranteed bills of exchange or promissory notes, documentary credits and bank guarantees on payment commitments representing commercial transactions..

The advantages of forfaiting include the following:

• AVOIDING RISKS

The risks of non-payment by the debtor, interest rate fluctuations and exchange rate risks are eliminated.

• LIQUIDITY

As the funds are immediately available, the company unlocks its existing trade discount lines and improves its current asset ratios by transforming the customer item into cash.

• SIMPLICITY

The documentation required is minimal. Forfaiting eliminates administrative costs and collection problems.

• FINANCIAL ADVANTAGES

The interest rate applied is very competitive. The non-recourse purchase finances the entire operation. 

EL FACTORING

This is an agreement whereby a company assigns to a factoring the rights to collect all or part of its short-term invoicing.

The company's factoring becomes the holder of the debt vis-à-vis the buyer and is responsible for collection management. The assignor may also insure against the risk of the debtor's insolvency.

The main advantages of factoring include the following:

• Eliminates the risk of non-payment and delays in collection due to debtor insolvency (in the non-recourse mode).
• It simplifies accounting, as the company has only one client: the factoring company.
• It allows for the reorganisation of the client portfolio.
• It eliminates the costs of litigation and refunds for non-payment.
• It lowers administrative costs and communication expenses, as it is the factor that manages the collection and claims for non-payments.
• In the non-recourse mode, the company can reduce the customer item on the balance sheet, thereby improving its liquidity, solvency and cash ratios.

Official export credit 

Official export credit is a form of medium- and long-term export financing with official support on favourable financial terms. The official export credit system is an instrument of undoubted value for financing sales abroad.

Operations eligible for financing must be exports of machinery and capital goods, industrial plants, technology, power plants, hydroelectric plants, ships, aircraft, projects and/or technical services of Spanish origin.

There are two basic modalities:

• BUYER CREDIT

In this case, the exporter collects the full amount financed in cash. 

• SUPPLIER CREDIT

It allows us to offer financing to the supplier on preferential terms and, in addition, on certain occasions, we discount without recourse the bills of exchange representing the deferred payment.

TO TAKE INTO ACCOUNT

• INTEREST RATE

Financing can be granted at both variable and fixed interest rates and always in accordance with the regulations of the OECD Consensus and the ICO (Instituto de Crédito Oficial). 

• CREDIT INSURANCE

As these are medium or long-term financing operations, the financing bank will probably require credit insurance cover granted by CESCE under satisfactory conditions.

One form of self-financing is international cash pooling (see Tip), which allows you to manage the financing needs of one country with excess liquidity in other countries.

Tax havens

Deciding to go international using tax havens can be very expensive in the long run, as there are many penalties that you should be aware of. In Europe there is a list of countries considered tax havens to avoid.  

The Canary Islands is the only region authorised by Europe to benefit from many tax advantages, without the disadvantages of being considered tax haven (+). Therefore, tax havens are those countries where it would be undesirable to establish for tax and exchange control reasons.

In Spain, the concept of tax haven was introduced by the General State Budget Law for 1991. Royal Decree 1080/1991 of 5 July 1991 determined which countries or territories are considered tax havens under Spanish law. There is no evidence to the contrary. Any country or territory included in the list is subject to the penalising tax treatment provided for in the various Spanish tax rules.

The countries and territories considered by Spanish law as tax havens are the following:

• Europe: Liechtenstein and Monaco.
• America: Montserrat, Turks and Caicos Islands, British Virgin Islands, US Virgin Islands, St Vincent and the Grenadines, St Lucia.
• Africa: Liberia, Mauritius and Seychelles.
• Asia: Jordan, Lebanon and Macao.
• Oceania: Mariana Islands, Nauru, Solomon Islands, Vanuatu.