On October we finance businesses for every important moment in their growth. Moments that provide a boost to their business. Such moments are called “Moments of Life”.
We like to tell our lenders more about what these important moments are and what a lender should pay attention to. In the second blog of the Moments of Life series we talk about ‘International expansion’.
Go international
Globalisation is reducing the differences between countries. The creation of the European Union ensured free trade between EU Member States and technological developments make it easier to trade products and services. As geographical distances play an increasingly smaller role, it is not a bad idea for some companies to expand internationally. Examples of projects are:
- Opening new outlets in other countries.
- Setting up a new production line in another country.
Just like an investment in the digitalisation of a company, the company is in the right place at October. It is not always possible for a bank to finance an international expansion. Because, for example, it is not always a material investment or it is too complex or risky. As an alternative financier, we see financing requests like these regularly and have more possibilities to take on these requests. For example Gymage, who borrowed €800.000 on October to open a new branch in Miami.
Fun fact: October is also expanding internationally. October was founded in France, after which it expanded to Spain, Italy, the Netherlands and recently also Germany.
Opportunities of going international
“By expanding internationally, companies are entering new markets and increasing their turnover. As a result they can also profit from economies of scale in production. In addition, a company builds a diversified customer portfolio and becomes less dependent on the trends in a particular country. Moreover, manufacturers can reduce production costs when they relocate their production to a country where wages are lower. A successful international expansion thus contributes to the ability to repay a loan, which is beneficial to us as a lender.
There are also risks involved in investing in an international expansion, which a lender has to take into account. These often have to do with differences in legislation, language and culture. Despite the fact that many international laws and regulations are applied, there are also local laws and regulations that a company has to comply with. In addition, it is always a question of whether a product that sells well in one country also sells well in another. Changes in exchange rates can also have an impact on the success of international expansion.
During the application for financing, October analyzes the creditworthiness of the company. Different parts of the analysis are looked at. Does the company have a good strategy? Have the different markets been explored and is the target group determined? Are the revenues still sufficient if the internationalisation does not go according to plan? For us it is important that a company has clearly mapped this, before the investment is made. In a worst-case scenario the company should have sufficient resources to repay the loan.”
– Bob from the credit team in Amsterdam