Small- to medium-sized exporters are increasingly reliant on financing solutions as freight rates skyrocket amid port congestion, ship delays, and a container shortage. These companies are grappling with escalating shipping costs, which have exceeded production costs for some of them. The cost to ship goods from North Asia to North America’s East Coast has climbed 165% over the past 12 months to $8,600 per FEU on July 27.
An Indian exporter said many exporters could not get an empty container to deliver their goods. This has delayed sales and prompted them to plan their export schedule further in advance. Shipping delays are expected to get worse in August on a surge of cargoes coming from China. The queue of ships near the Los Angeles-Long Beach has increased from 22 on July 16 to 25 on July 27.
A Palo Alto-based financier, Drip Capital, said there is an uptake in trade financing in the past year as freight rates soar. Small and medium companies are typically conservative and want to minimize risk, Drip Capital’s CEO Pushkar Mukewar said. Drip Capital offers to buy cargoes then focus on finding a buyer that can pay it back. As a result, exporters do not have to wait for 60 or 90 days to get paid.
