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The challenges of SMEs in international trade: a closer look

HedgeFlows has been invited to take the prestigious Close Up stage at Money20/20. Our Co-Founder, Neh Thaker, used his time on stage to delve into the reasons behind the untapped potential of SMEs in global trade and how HedgeFlows aims to bridge the gap, and empower these businesses to thrive.
 
In this blog article, we summarise the key points from his pitch at Money20/20 in Amsterdam on June 6, 2023.
 

THE potential vs reality

Did you know that a massive 70% of UK SMEs see immense potential in going global, yet only 10% of them seize the opportunity? This staggering statistic highlights the existing gap between ambition and action. Two months ago, we conducted a survey among SMEs, focusing on their experiences and challenges when it comes to trading internationally. The resounding message was clear: SMEs face significant hurdles that hinder their entry into the global market.
 

The challenges faced

The reasons behind SMEs hesitating to venture into international trade can be broadly categorised into two groups.

  • Firstly, the costs and financial complexity associated with international trade pose a high threshold for these businesses to start.
  • Secondly, they often lack the necessary technological infrastructure and expertise to navigate the added complexities that come with global trade.
 

HIDDEN COSTS AND FINANCIAL RISKS

Moving from purely domestic to international business introduces countless new challenges for non-enterprise-sized companies. Hidden costs, currency swings, and other financial risks emerge, exposing them to greater losses and a higher risk of fraud. Additionally, many manual processes become overwhelming. As smaller companies grow, the need to buy or sell internationally naturally arises. However, they often lack access to the right tools or support, unlike their larger counterparts.

The sad reality is that smaller companies cannot always afford to build a bigger finance team or invest in enterprise-level financial software until they have experienced significant growth. As a result, many SMEs never reach the stage where they can afford the right tools, leaving them vulnerable and preventing their growth potential. This imbalance creates a fundamental unfairness between large and small companies.

 

THE IMPORTANCE OF SMES IN INTERNATIOANL TRADE

It is crucial to acknowledge the significance of SMEs in every economy. Accessing international markets for supply chains and customers brings immense benefits. However, without proper support, these businesses are unable to fully capitalise on these opportunities. 

 

Addressing the root of the problem

While significant investments have been made in financial infrastructure by banks and fintechs, the challenges faced by SMEs in international trade remain unsolved. The focus has primarily been on optimising payment rails and facilitating ease of payments. However, making the payment only constitutes the last 10% of the commercial journey. The true size of the problem lies beneath the surface, like an iceberg.

Most people tent to fixate on the visible costs of making foreign payments, such as currency conversions and payment fees. However, this represents only a fraction of the challenges faced by SMEs. The hidden part of the iceberg encompasses a multitude of financial pitfalls that can lead to significant losses. Many of these risks remain hidden from view until it is too late to take preventive measures. At HedgeFlows, we refer to this hidden complexity as the financial iceberg.

 

Streamlining processes for growth

HedgeFlows delivers several benefits for SMEs. It enables more stable profits and cash flows, reduces errors and saves time, and fosters safer international growth. For banks and FX brokers, HedgeFlows provides an opportunity to engage with SMEs on risk management, access a high-growth segment of digital-savvy businesses, tap into hidden risk management fees, and establish a longer-lasting revenue stream.

Unlocking safe international growth for SMEs is a mission that HedgeFlows is passionately dedicated to. We believe that all businesses, regardless of their size, should have access to the tools and support they need to navigate the complexities of global trade. By empowering SMEs which accessible and comprehensive financial solutions, HedgeFlows aims to bridge the gap and create a fair playing field for businesses of all sizes.

If you would like to learn more about what we do or discuss how to join us on our mission to unlock safe international growth for SMEs and foster a more inclusive and prosperous global business landscape, get in touch!
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