Many small businesses underestimate the true cost of sending money abroad, and hidden fees can quietly eat into your margins. Whether you’re paying overseas suppliers and contractors or expanding into new markets, international transfers can make up a significant portion of your cash flow.
Traditional banking methods often fail small businesses when it comes to international transactions due to their high costs, slow processing times, and lack of transparency. However, there are practical steps small businesses can take to avoid overpaying and keep more money in their business.
Why international transfers cost more than you think
On the surface, sending money abroad seems straightforward: enter the amount, pay a flat fee, and the transfer goes through. But in reality, several layers of costs are built into the process. These can include:
- Bank fees and transaction charges: Domestic banks typically charge a fee per transaction, often ranging from $20 to $50. For smaller transfers, this can represent a large percentage of the payment itself.
- Intermediary or correspondent bank fees: If the transfer passes through one or more partner banks, extra charges may apply.
- Foreign exchange (FX) markups: Perhaps the most overlooked cost, the FX spread is the difference between the market rate and the rate you’re offered. It can range anywhere from 0.5% to 5% of the transaction, which can add up quickly.
- Processing delays: Beyond monetary fees, slow processing times can disrupt supply chains and business relationships, especially when suppliers rely on timely payments.
Many small businesses focus only on the visible “transaction fee,” not realizing that the FX margin, alone, is often the largest cost driver of cross-border payments.
The impact of hidden fees on small businesses
For global enterprises, extra costs may simply be another line item, but for small businesses, they can directly affect growth, competitiveness, and profitability.
Here’s how these extra fees can impact different industries:
- Boutique manufacturers sourcing parts from overseas suppliers may find that transfer costs add up to thousands per year, money that they could reinvest in marketing, staff, or product development.
- Consulting firms paying international contractors may face fluctuating FX rates, which erode the predictability of their budgets.
- E-commerce sellers often make or break their performance based on small percentage differences in FX margins. A slight shift in the wrong direction could determine whether international expansion is profitable.
Unchecked, these “invisible” costs put a small business at a disadvantage when competing with larger players who negotiate better terms or use specialized FX partners.
How small businesses can effortlessly navigate the cross-border payment ecosystem
Small businesses often face daunting challenges when operating internationally, but expanding across borders is far from impossible, even with limited resources and simple accounts payable processes.
By understanding the hidden costs, shopping for better FX spreads, and using specialized solutions like those from Convera, small businesses can minimize overpayments and channel savings back into growth.
Here are key practical strategies for saving money on international transfers:
- Compare providers and rates regularly: Just as you would shop around for insurance or office space, a small business should regularly compare transfer rates and fees. Even a 1% difference in FX margin can translate into significant savings over time.
- Understand the mid-market rate: The mid-market rate (the midpoint between buy and sell rates on the global currency markets) is the benchmark to measure against. If the rate you’re offered is far from this, you’re likely overpaying.
- Look beyond the transfer fee: A low or even “zero” transfer fee doesn’t guarantee the cheapest option. Often, providers offset this with wider FX spreads. Always calculate the total landed cost of the transfer, not just the upfront fee.
- Use forward contracts to manage FX risk: Forward contracts let you lock in today’s exchange rate for a payment you’ll make in the future. For a small business with predictable overseas payments — like monthly supplier invoices — a forward contract can remove uncertainty and help with budgeting.
- Choose a specialist partner: Some providers offer payment solutions specifically designed for small businesses, including access to competitive FX rates, transparency in pricing, and tools to streamline cross-border transactions. These solutions help businesses grow and improve efficiency.
For example, small e-commerce sellers who source products overseas benefit from transparent FX pricing and faster settlement times. Professional services firms working with global contractors can avoid payment delays that affect cash flow. Manufacturers can pay suppliers on time.
For small businesses ready to grow internationally, controlling transfer costs is key to unlocking sustainable, long-term success in global markets.
Check out Convera’s small business solutions to start saving on international transfers today.
