Ask an expert

Q Is it a bad time for SMEs to enter foreign markets?

A Even in challenging economic times, Canadian businesses understand that their future lies not in retreating into our home market but in looking beyond our borders for growth opportunities. Entering new offshore markets under current economic conditions may entail additional risks, so businesses should follow these steps:

Do your homework. Understanding the country, currency and payment risk is more important than ever. The recent economic challenges have forced some foreign buyers and suppliers to change the levels of required guarantees of credit now needed to ensure transactions get completed.

Choose your bank carefully. Many banks do not have a presence in the countries where you may want to operate and this can complicate financial transactions or mean missed opportunities.

Stay up to date. Prepare for the financial risks of small business exports in advance and under-stand the changing economic and political dynamics in the countries in which you plan to operate.

Review import contracts. Importing to Canada also represents risks to small business. A bank can assist with import letters of credit, import documentary collections, shipping guarantees or airway bill releases and import financing. Set up these facilities well in advance; even your traditional foreign business suppliers may soon be asking for new types of financial guarantees based on changes to their own banking requirements.

Don’t ignore your existing business. Establishing relationships with buyers and sellers in foreign markets takes time, effort and money — which can distract you from running your day-to-day business.Stay focused on your international business goals without jeopardizing your existing business.

Jon Hountalas is executive VP of commercial banking at HSBC Bank Canada (www.hsbc.ca)