Can smaller manufacturers afford to export to new markets?

After months of pursuing international clients, negotiating pricing and showcasing capability, your business has won a large order from a reputable international retailer. However, your firm does not have the funds to manufacture the order. While you would expect to raise funding because of the secured order from a reputable buyer, for many Indian MSMEs, this can be a genuine issue. While tariffs are causing changes in international trade, MSMEs now need to diversify their exports. However, can smaller manufacturers afford it?

Cost issues

If a manufacturer, exports goods valued at Rs 1 crore monthly and currently gets paid within 30 days, extending the payment period to 90 days will increase their receivables by Rs 2 crore. This means they experience a longer gap between getting paid and needing to buy materials, pay employees, and fulfil other orders. The required finance will vary based on production costs, supplier credit, and customer deposits. However, longer payment periods can cause issues with cash flow. The timing of payment receipt, whether 90 days after dispatch or 90 days after acceptance, can impact the business. Inspection and approval requirements can complicate this further, leading the business to acquire larger clients and enter new markets but hold less cash on hand.


This is not unique to India. In 2025, ADB estimated a global trade finance gap of $2.5 trillion. As businesses diversify their supply chain and trade, there is increased demand for finance.

Challenges with securing finance

A four-year-old packaging company in Delhi recently got a big order from major retailers in the USA. But they struggled to find finance. They were not making a profit and had very little collateral to offer. The buyers also wanted to extend 120 days of credit. However, after going to a few lenders, they managed to find a US-based financier who had a better understanding of the market and felt comfortable about approving finance. Without proper financing they would not have been able to move forwards. When looking at exporting, it is understandable that lenders will be wary. Even if you know your buyer well, there could be issues with production, quality and payment.

It is also equally important to think about the type of financing you are looking for. A manufacturer may need a facility to purchase materials and create stock. The lender may not offer invoice discounting or factoring until the goods are shipped and receivables arise. This cannot help with the immediate financial needs of purchasing raw materials. If you are expecting payment from the buyer in several months’ time, then a short-term loan may not be suitable. You should consider when the money will become available, the amount you can borrow, and whether the repayment dates align with the transaction's cashflow. Consider the total cost of the financing. Not just the interest rate but also any extra charges, percentage of invoice not funded and whether you will still owe money if the buyer does not pay. This can have a major impact on whether your export order is viable.

Competition with finance

In March 2026, a textile manufacturer had the same problem. The company had a good profit margin and dealt with reputable European/UK buyers but could not secure finance for long-term (150-180 days) orders due to them not being able to get a binding guarantee from their customers. With a Turkish competitor able to offer the longer terms, this put them at a disadvantage. A UK-based financier was willing to offer financing up to 180 days. As the customers could not provide a binding guarantee, they were willing to look at confirming the details of the transaction through accessing the supplier portal directly with the buyer's treasury department.

This example highlights how much of an advantage having access to finance can provide within exports. Although price, quality, capacity and lead times can be very important factors, having access to finance can make all the difference. A manufacturer in India may have a competitive product but still be unable to win an order internationally as they cannot offer the longer payment terms expected by the overseas customer.

Timing of finance

Access to finance only proves useful when the lender provides it at the right time. A manufacturer may need finance to purchase materials and pay staff before dispatch. If your lender cannot provide finance until after dispatch, then you may struggle. You will also need to consider the cost of the finance. Consider the administration charges and the portion of the invoice that the lender can finance. What happens if the buyer doesn't pay? Credit insurance can help to reduce some of the risk, but you need to understand the premium and exclusions. You also want to consider how much currency risk you are taking on by delaying payment from overseas. You may have an attractive order, but after paying for finance, insurance, freight and currency, you may not make much profit. For smaller manufacturers, you will want to consider this.

Why this matters

In FY2024-25, 48.55% of merchandise exports from India were from MSME-related products. This shows that having access to export finance is important for India to be competitive. The Export Promotion Mission is worth Rs 25,060 crore. The Niryat Protsahan element provides support on interest costs, export factoring, and collateral guarantees and credit enhancement. However, if you are an exporter, you want to know if you are eligible, how much you can get and what it will cost. Will you get approval in time? If you don't get approval until after the production date, then it may not be commercially viable. You should weigh applications more heavily based on secured orders, strong credit profiles, and thorough documentation (especially when assets are lacking). As seen in the Tirupur example, having digital checks using the buyers' systems can help to secure finance. This will not always be possible but shows why it is important to consider how international trade works when assessing applications.

Risks of scaling up

Diversifying will reduce the risk of being dependent on one market. However, having more clients may not reduce risk. They could be part of the same corporate group or be reliant on the same distributor. Having several large orders can cause duplication of costs for production. Having a large order book can look great, but you may not have the ability to pay your immediate costs. The quality of the order is important. Can you afford to produce? Will you have enough margin after paying all your costs? Can you meet your commitments whilst waiting for payment? Sometimes, you want to negotiate a smaller initial dispatch, deposit or shorter payment terms. Sometimes, you may want to decline the order. If you cannot fund your next production cycle, then you are not gaining much from exporting.

Opportunities with diversification

Having a broader range of export markets can reduce reliance on current trading partners and provide opportunities for Indian manufacturers. However, just because you have signed a contract doesn't mean you can purchase materials, pay staff, produce and dispatch. Often, this will happen before you receive payment from the customer. As shown in the Delhi and Tirupur examples, just because you have won a contract from a reputed international buyer doesn't mean you won't have issues with finance. You need to consider export finance early. If India wants MSMEs to be competitive in more markets, then they need to ensure they have access to buyers with competitive manufacturing and timely finance.

The writer is Founder & CEO of Globizera.