In today’s global marketplace, U.S. companies in many shapes and sizes are selling products and services in Europe from their U.S. headquarters. As sales increase, such companies often reach a pivotal decision point: Is it time to take the leap and establish operations in Europe? For companies facing this scenario, there are some fundamental questions to ask, from how and where to establish operations and systems, to how to set up bank accounts and cash management, to how to fund operations. While each situation is unique, we’ve outlined a few of the initial questions our clients have faced, along with the decisions they have made along the way.
How and where to establish operations?
Once a company has determined that having a physical presence in Europe will support its long-term growth, next they must decide which operations to establish and how and where to establish them. How a company addresses these initial questions can have a long-term impact on their access to funding as some countries are more appealing from a lender’s perspective, which in turn impacts how a company may leverage operations in those countries to support their borrowing needs.
Companies exporting products into Europe will need to consider whether they open a warehouse in Europe, or deliver products directly to customers. This will depend on how many customers they have, their mix of goods, and whether they can deliver products directly from port. For example, one of our clients established one central warehouse in the Netherlands, which provided tax advantages, a skilled workforce, and a simplified distribution throughout Europe.
Companies also need to determine how to structure client management. Some companies may consider placing personnel in key markets, while others may find it more efficient to establish one central operation with a multilingual team. When faced with this scenario, one of our clients decided to centralize its accounts receivable operations in Switzerland, and benefited from operating this function from a multilingual market skilled in dealing with multicurrency debt collection and treasury management.
To help a company navigate the varying laws, practices, and cultures within Europe, it is key to bring in local expertise. Such experts can advise on topics ranging from operations and distribution, to sales tax implications, to understanding retention of title. For example, to maximize funding availability, such experts can help a company understand the nuances surrounding the retention of title clause, in which European suppliers retain ownership of their products until payment is received from the buyer. Additionally, determining which staff you should hire locally or bring over from the U.S. is important, as is establishing how the local team will provide regular and detailed performance information back to the parent company.
How to set up bank accounts and funding*?
We’ve helped many businesses understand their options when it comes to managing debt, collections, and loans in multiple currencies. For example, we’ve seen some clients who collect debt in foreign currencies each day, and then convert those collections to U.S. dollars on a daily basis. For a company collecting receipts in multiple currencies, it may be more efficient from a hedging perspective to have loans in multiple currencies, which will make management of cash and cash collections somewhat easier, while minimizing currency fluctuation risks. Again, each situation is unique, so working with an experienced international bank is critical.
Taking the leap
For many companies, establishing a physical presence in Europe can be a strategic necessity to support growth. The more such companies understand the implications of those first decisions they make, the better equipped they will be to access funding and achieve the long-term growth they are seeking.
Our cross-border lending capabilities
Wells Fargo Capital Finance can help companies leverage their foreign operations to access the financing they need to grow. We work with U.S., UK, and Canadian-based companies with one or more subsidiaries located in select countries throughout Europe and Asia, as well as Australia.
- A flexible and tailored financing structure that supports growth and expansion
- A simplified lending solution with one global credit facility and credit agreement
- Improved liquidity by leveraging foreign operations
- Multicurrency funding capabilities
Our team brings more than 20 years of cross-border lending experience, with offices throughout the U.S., Canada, and the UK.
* Deposit products are offered by Wells Fargo Bank, N.A. Member FDIC.