Comerica Bank – An Overview§ Headquartered in Dallas, Texas.Locations in Arizona, California,Florida and Michigan, with selectbusinesses operating in several otherstates, as well as in Canada andMexico.§ $59.3 billion in total assets as ofDecember 31, 2009§ #559 among Fortune’s largestcompanies§ #12 among banking companies withthe most commercial and industrialloans (American Banker)§ Among the top 10 Ex-Im Bank workingcapital lenders§ #30 among DiversityInc “Top 50Companies for Diversity” in 2009Comerica Bank – An Overview
§ Leading Letter of Credit Provider within U.S. Comerica ranks #9among the top U.S. commercial banks, in letter of credit outstandings.1§ Leading Lender for Ex-Im Bank Working Capital Guarantee Program.Comerica ranks #7 among the top 10 lenders.2 We hold the “Super”Delegated Authority and “Fast Track” lender designations.§ Foreign Correspondent Bank Network. Comerica has coveragethroughout Asia, Europe, Latin America, the Middle East and Africa.§ Strong Credit Ratings. Comerica has strong credit ratings -- required forthe acceptance of a Standby Letter of Credit. Present Ratings -- “A1” byMoody’s, and “A” by Standard & Poor’s and Fitch Ratings.1 Source: Documentary Credit World (FDIC Statistics on Banking), 1st Quarter 20092 Source: Ex-Im Bank, FY 2009Key FactsComerica Bank – An Overview
§ Global Trends§ Primary Goals• To optimize working capital• To mitigate key risks• To reduce costs• To simplify the trade processTrends/Goals in TradeCompany
U.S. Exports and ImportsOver the last decade, there has been steady growth inglobal trade---U.S. exports grew 35% and U.S. importsgrew 28%.U.S. Exports and Imports2000-2009Value in thous ands ($ US D )0200,000,000400,000,000600,000,000800,000,0001,000,000,0001,200,000,0001,400,000,0001,600,000,0001,800,000,0002,000,000,0002,200,000,0002,400,000,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009Exports ImportsSource: International Trade Administration Note: Import data is not available by state Source: International Trade Administration, TradeStats ExpressU.S. StatsComerica’s Footprint -- 40% of Total ExportsIn 2009, Comerica’s footprint represented 40% of totalU.S. exports. TX is the #1 export market, followed byCA, #2 (11% of total exports), FL, #5; IL, #6; MI, #9;and AZ, #24.#2#24#1#9#5#6020,000,0 0040,000,0 0060,000,0 0080,000,0 00100,000 ,000120,000 ,000140,000 ,000160,000 ,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009California Exports2000-2009Value in thousands ($USD)ExportsTrend/Goals in Trade
California StatsCalifornia Depends on World MarketsCalifornia’s export shipments of merchandise in 2009totaled $120 billion, ranking California second only toTexas ($163 billion) among the states in terms of totalexports in 2009.California Exports1999-2007V alue in thousands ($US D)020,000,00040,000,00060,000,00080,000,000100,000,000120,000,000140,000,000160,000,0001999 2000 2001 2002 2003 2004 2005 2006 2007ExportsExports – Top Trading PartnersThe state’s top 10 trading partners are:(figures in thousands, $USD)§ Mexico 17,484, 818§ Canada 14,280,022§ Japan 10,905,099§ China 9,742,859§ South Korea 5,944,788§ Hong Kong 5,803,780§ Germany 4,442,225§ Taiwan 4,120,871§ United Kingdom 3,916,277§ Netherlands 3,567,219Source: International Trade Administration, TradeStats ExpressNote: Import data is not available by stateSource: International Trade Administration, TradeStats ExpressNote: Import data is not available by stateCalifornia Exports2000-2009Value in thous ands ($ US D )020,000,00040,000,00060,000,00080,000,000100,000,000120,000,000140,000,000160,000,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009ExportsTrend/Goals in Trade
“Global Supply Chain”“Supply Chain Management”“Trade Cycle Financing”“Supply Chain”“Physical and Financial Supply Chain”“Global Trade Cycle”Buying and selling process between companies.Overview - The Global Trade Cycle
Effective management of the global trade cycle provides numerous benefits:IMPORTER (BUYER) BENEFITS EXPORTER (SUPPLIER) BENEFITS§ Optimize working capital§ Improve cash flow forecasts§ Take advantage of supplier discount terms§ Improve supplier relations§ Increase Days Payables Outstanding (DPO)§ Optimize use of credit capacity§ Reduce costs§ Interest rate and capital arbitrage§ Reduce working capital needs by using betterinventory control and cash flow management§ Improve sales forecasts§ Lower financing rates on required working capital§ Reduce Days Sales Outstanding (DSO)§ Manage buyer credit risk more effectively§ Reduce costs§ Interest rate and capital arbitrageBenefitsOverview – The Global Trade Cycle
Methods of PaymentThere are four primary methods of payment for global transactions, with thelevel of risk varying for each.Tools & Methods of Payment
The evaluation of risk in global commerce plays a major role in determiningthe method of payment to be used for settlement between buyer andsupplier.RISK EXAMPLESCountry / Political Risk § Economic instability, government restrictions on payment, war, embargoCommercial Risk § Insolvency, unscrupulous buyers, fraudCurrency Risk § Convertibility of currency, exchange controlsTransportation Risk § Timeliness of delivery, piracy, pilferage, unions, loss of productDocumentary Risk § Wrong documents, improperly prepared documents, incomplete documentsForeign Bank Risk § Insolvency, creditworthinessProduct Risk § Quality, quantityTypes of RiskOverview - Global Trade Cycle
§ Letters of Credit:§ Commercial Letters of Credit§ Standby Letters of Credit§ Documentary Collections§ Financing:§ Direct Bank Financing§ Bankers’ Acceptances (BA)§ Trade Acceptances§ Ex-Im Bank Working Capital Guarantee Program (WCGP)§ Private Insurance§ Private Export Funding Corporation (PEFCO)§ Online Solutions:§ Comerica GlobalTRADE Web§ Comerica TM Connect Web§ Comerica eFXGlobal Trade Cycle SolutionsTools & Methods of Payment
SOLUTION DESCRIPTION§ Commercial Letters of Credit • Irrevocable undertaking by a bank on behalf of its customer in favor of adesignated beneficiary, under which payment is effected only if the beneficiarypresents documents in accordance with the letter of credit terms and conditions.• Often referred to as Import Letters of Credit and Export Letters of Credit or TradeLetters of Credit.• Confirmed Export Letters of Credit provide additional protection to exporters.(Note: Bank deals only with documents, not goods.)§ Standby Letters of Credit • Performance Standby Letter of Credit: Irrevocable undertaking by a bank to makepayment to a designated beneficiary in the event that its customer fails to performa non-financial contractual obligation (e.g., cover performance of contractors/suppliers, in lieu of a bid or performance bond).• Financial Standby Letter of Credit: Irrevocable undertaking by a bank to makepayment to a designated beneficiary in the event that its customer fails to fulfill afinancial contractual obligation (e.g., support advance payment/paymentguarantee, in lieu of cash or security deposit, support IRB/EDC).Letters of CreditTools & Methods of Payment
SOLUTION DESCRIPTION§ Documentary Collections • Buyer: Bank receives documents conveying title to goods from foreign bank anddelivers documents to its customer in exchange for payment or promise to pay ata future date.• Supplier: Bank delivers documents conveying title to goods to foreign buyer’sbank for delivery to its customer in exchange for payment or promise to pay at afuture date.Documentary CollectionsTools & Methods of Payment
SOLUTION DESCRIPTION§ Ex-Im Bank WorkingCapital GuaranteeProgram (WCGP)• Working capital loans backed by Ex-Im Bank guarantee (90% of loan amount, includingprincipal and interest). Enables U.S. exporters -- large and small -- to facilitate the exportof goods and services.• Comerica holds:• “Super” Delegated Authority lender designation (allowing us to commit credit facilitiesup to $10 million per borrower, without pre-approval from Ex-Im Bank); and• “Fast Track” designation (allowing us to commit credit facilities greater than $10 millionand up to $25 million per borrower, with expedited Ex-Im Bank approval).§ SBA Export WorkingCapital Program (EWCP)• Working capital loans for small businesses backed by SBA guarantee (guaranteesrepayment of up to $1.5 million or 90% of loan amount, whichever is less). Similar to theEx-Im Bank WCGP, however, no U.S. content or military/defense product and servicerestrictions.FinancingTools & Methods of Payment
Questions and AnswersCaroline BrownFirst Vice PresidentTrade Finance OfficerLong Beach, CA562-590-2525CVBrown@Comerica.com
Risk Migaon in Export Finance Nous Sommes Tous comme le ble dans les champs. Chacun unique, Chacune la meme.
Overview • Start with due diligence • Negoate appropriate terms of sale • Use insurance to reduce risk
Know Your Customer • Who and Where – Special issues related to internaonal relaonships • Tax ID Number • Internaonal Credit Reports • Tradional Methods – Trade references – Site visits • Financial Statements
Negoate Terms of Sale • Not one size ﬁts all – Cash in advance – LeNers of credit – Documentary collecons – Hybrid terms – Credit Cards – Open account
Credit Insurance • What is Credit Insurance? – How does credit insurance work? – Basic Insurance assumpons • Applied to credit insurance – Risk protecons oﬀered • Insolvency • Protracted default • Polical risks
Why Credit Insurance • Flexible tool – Risk protecon – Financial leverage • Buyer advantages – Least cost ﬁnancing • Seller advantages – Enhanced collateral posion with lender » Foreign receivables » Concentraons of risk – Backup or replacement of internal credit process – Lower administrave burden than documentary collecons
Who Oﬀers Credit Insurance • ExIm Bank (U.S. Government program) • The Private Market
How To Choose – Cost/Rate • How are premiums calculated and paid? – Minimum Premiums – Deducble – Available cover • Key buyers • Single buyer • Polical risks • Country availability • Content restricons – Diﬀerences in Underwring Support
Using Credit Insurance • Terms and Condions: – Know your policy. • Stop Shipment • Reporng • Claim ﬁling requirements • Exclusions • Policy Administraon – Updates • New Customers and Increased Limits • Longer Terms • New products • New Countries
Claims • Claim Triggers – Waing periods – Insolvency • Claim ﬁling deadline • Documentary Requirements – The big three WRITTEN Purchase Orders Invoice Bill of Lading Things Need to Match.
More on Credit Limits • Named buyer limits-‐the simple soluon • Discreonary Credit Limits – Rules based – Compliance with condions is key to successful claims – Some examples • Ledger history • Third party informaon • Internal procedures become part of the policy
Assignment of Proceeds • Entles lender to claim payments • Does not enable lender to ﬁle a claim • May entle lender to policy onformaon • The ExIm enhanced assignment
Specialty Brokers • Familiar with specialized policy requirements • Infrastructured to assist clients • Knowledgable about the market • Able to provide opons for cover – Best-‐ﬁt – Lowest cost
www.tarnensurance.com 805-‐375-‐2373 CA LIC 0C75675
E X P O R T T R A D E S E M I N A RCREATING AN INTERNATIONALCREDIT POLICY
A/R IS AN IMPORTANT PERCENTAGE OFA TYPICAL COMPANY’S ASSETSWHR GE CAT NWL DBD HON AVERAGEA/R 2,038 287,489 18,673 1,112 488 7,429TOTAL ASSETS 15,396 685,328 88,743 6,222 2,593 41,853% AR / TOTALASSETS 13% 42% 21% 18% 19% 18% 22%FY 2012 – US MillionA/RTotal Assets
SALES & COLLECTION• Making sales is important,but collecting on thosesales is critical• Without sales a companycannot continue tooperate, but a sale is nottruly a sale until collected
WHAT IS A CREDIT POLICY?A Credit Policy canbe defined as ageneral course ofaction used to guidefrequentlyencounteredsituations designed toachieve strategicobjectivesCredit Management: Principles & Practices, 4th Edition
WHY SOME COMPANIES DON’T HAVE ACREDIT POLICY?• Sales departmentexercise control overthe credit process• Management teamsnot convinced of thevalue of credit policy(concerned it maystifle sales)• Senior managementlack knowledge ordirection on how towrite and implement apolicy• Managementunwillingness to devotethe needed resourcesto write and implementa policy document.
PROBLEMS BECAUSE LACK OFCREDIT POLICY• Subjective and inconsistent decisions• Poor communication (internal and external)• No quantification of analysis• Limited control• Inadequate visibility and aggregation• Unaware of how to profitably managereceivables• Reactive mode environment rather thanProactive mode
REASONS TO HAVE A CREDIT POLICY• Improve decision making• Clear guidelines for dealing with customers incredit terms• Provide corporate strategy for creditoperations• Operational guide for credit staff• Elimination of unauthorized special credit deals• Simplifies the work of auditors and compliancewith government issuesSource: FCIB International Credit Policy webinar.
DIFFERENCE BETWEEN CREDITPROCEDURES AND FORMAL CREDIT POLICYCredit Policy outlinescompany’s strategicand operationalrequirements fromcredit salesProcedures are theevery day workingpractices of thecredit department:who does what andhowrSource: FCIB International Credit Policy webinar
WHERE TO START?• Look beyond individual customers in a waythat reflects an understanding of just howcredit fits into overall corporate goals• Policies that guide the credit function aredeveloped and monitored within thecontext of a corporate strategic-planningframework.• Specific credit policies and procedures areformulated to achieve corporate goalsCredit Management: Principles & Practices, 4th Edition
SOLID FOUNDATIONS• Strategic planning is thekey ingredient thatunderlies credit policyand procedures• Strategic planning entailsthe coordination of long-range plans with aparticular focus uponstrategies, controls anddesired results• Link credit policy andprocedures closely tocost controlsCredit Management: Principles & Practices, 4th Edition
CHARACTERISTICS OF A CREDIT POLICYYour policy should keep you competitive whileavoiding unnecessary lossesHow your industry works and how your company fitsinto your industry will have a large affect on yourcredit policy
PRINCIPLES TO FOLLOW WHENESTABLISHING YOUR CREDIT POLICYMarketPositionCustomerTypeMerchandiseTypeMarkupPricingProductAvailabilityLocationFinancialStrengthEconomicTrendsGovernmentRegulations
GLOBALIZATION• Globaliza(on is not just a cliché. It is happening all around us as businesses increasingly look at the world as if it had no na(onal boundaries. • With globaliza(on, compe((on intensiﬁes. Under these circumstances, the only companies that will succeed are those that are capable of providing customers ﬁrst-‐class products and services, along with compe((ve payment terms
BASIC TECHNIQUES AND RULES• Evaluate the stability of the government of the country in which the importer is located and review events that might aﬀect sales to a par(cular foreign country and foreign customers • Some of the most common barriers or complexi(es associated with expor(ng include: diﬀerences in language; credit terms [terms of sale]; shipping terms; and foreign exchange problems • Understand the local meaning as well as the textbook transla(ons of business terms and terminology
BASIC TECHNIQUES (CONTINUED)• Become familiar with methods available to mi(gate the risks associated with export sales transac(ons • Meet with your companys top management to consider proﬁt margins, sales terms, and the amount of risk considered acceptable to the expor(ng company • Understand your own countrys export laws as well as rules and regula(ons and laws in each of the countries you plan to export into • Credit managers have to take some risks, but they must be calculated risks
MINIMIZE THE RISK• Request a signed credit applica(on • Obtain and evaluate credit informa(on • Request the most recent ﬁnancial statements • Request trade references from at least three U.S. trade references -‐ preferably vendors selling in large dollar • Request bank references, checking accounts, and loan informa(on.
MINIMIZE THE RISK (CONTINUED)• Get ra(ngs on all the references and keep them updated • Run a credit report • Establish the terms of sale • Establish the credit limit • Specify in what currency payment will be made • If payment is not in U.S. dollars, include wriSen agreements on the exchange rate
MINIMIZE THE RISK (CONTINUED)• Get the customers agreement to credit terms in wri(ng • Make sure the credit terms are also printed on the invoice • Stay current in world aﬀairs • Monitor media coverage of the customers country • Study the demand for the product shipped • Be aware of how (tle passes
SOURCES OF INFORMATION• Interna(onal Trade Administra(on (ITA) • FCIB / NACM • EXIM Bank • World Bank • Graydon, D&B, Coface, CrediSoday, Atradius • The Economist, Bloomberg-‐Businesweek, Barron’s, Financial Times, WSJ
Presented ByTim Bastian, International Certified CreditExecutive
} Non-Financial Companies have three FX risksto manage.1. Transactional Risk- Contract Import andexport activity as well as borrowing orlending in foreign currencies.2. Operational Risk – Future operational cashflows from non-contract business.3. Translation Risk – From the financialstatement rollups in multi-nationalcompanies to a single currency.
Political Risk Country Economic OutlookInflation DeflationTimingMarginsVolume
} As a U.S. retailer, your supplier for swim suitsis in Brazil whom is seeing 13% inflation,while the dollar remains stable. The supplieris under pressure to raise prices. Options:A. If you have a contract in dollars, thesupplier would need to look at offsets to hisincreasing cost. (hedges/swaps)B. If no contract, your price may go up or youmay need a different supplier to maintainyour cost.
} You are selling machined goods to Mexicowith the sale in Dollars and while you haveyour invoice out, the Dollar strengthensagainst the Peso.1. It will cost your customer more money topay you.2. The customer may try to hold funds uphoping for a correction to the exchange ratebetween the Peso and the Dollar.
} Solutions:1. You can discuss simple solutions with yourcustomer. A pre-payment will lock theirPeso cost to Dollar at quoted levels throughdelivery.2. Credit insurance options to protect fromdefaults resulting from currency shifts.
1. Always Hedge to the risk not for profit.2. When getting FX quotes from your bankermake sure you ask for the buy/sell ratestogether to get the best price on order.Example: Buy/Sell Dollar to Yen, 1 Million.This way you learn the spread betweencurrencies and do not over pay in eitherdirection.
} FCIB Membership – Courses and a web basedKnowledge Center with solutions madeavailable to you.} Your Accountant that has internationalexperience.} Your Attorney with international tradeexperience.} Your Banker who has an InternationalCurrency trading desk and internationalbanking experience.
} U.S. Department of Commerce – CommercialImport/Export Department.} Your Insurance Broker (some major insurerscan provide solutions for international FXrisks.)
} Foreign FX strategies to determine risk andwhat the best method to offset those risks isa complicated subject that can not be learnedfrom a short seminar, use your team ofinternational professionals and otherresources to best determine what will workfor your situation.
Thank you to all of the sponsors of the event.
SAVE THE DATEFor FCIB’s 24th Annual GlobalConference!September 15-17, 2013 at theHyatt Regency Philadelphia, Pennsylvania
Financial Support forExportsExport-Import Bank of the United States
Who We Are▪ Mission – To create and sustain jobs by increasing U.S.export sales▪ Oﬃcial Export Credit Agency (ECA) of the U.S.Government since 1934▪ 85% of all transactions are to small businesses▪ Target 20% of all authorizations to small businesses▪ Self-sustaining
Ex-Im Supports a Variety of Industries▪ Manufacturing▪ Construction▪ Medical▪ Mining▪ Power-generation▪ Aircraft and Avionics▪ Services▪ Renewable Energy▪ Agribusiness▪ Wholesale/Retail▪ Oil and Gas
Open in Over 155 Countries 1. Brazil 2. Colombia 3. India 4. Indonesia 5. Mexico 6. Nigeria 7. South Africa 8.Turkey 9.Vietnam
Working Capital Guaranteeon Exporter LoansMedium and Long TermInsurance & Guarantees onBuyer LoansPre-Export Post-ExportExporter Finance ChainExport Credit Insurance onBuyer Credit
Working Capital Guarantee—Basic Parameters90% guarantee on principal and interestfor export-related inventory and A/R– Guarantee also covers certainliquidation costsGenerally one year or lessMust be fully collateralizedCovers exporter performance riskNote: Provides no protection to exporteragainst foreign buyer non-payment
Benefits to Exporter/Borrower• Finance foreign a/r to generate additional working capital• Finance costs of new, foreign POs▪ Generate additional Gross Profit Margin by increasingforeign sales▪ Incentivize your Banker to issue Standby L/Cs coveringyour Advance Payment Guarantee, Bid/Tender Bond, orPerformance Bond for only 25% (10% by specialcircumstance) cash collateral.
Working Capital Guarantee for ExporterTO QUALIFY:• Three years in business• One year exporting• Positive net worth, profitable prior year• Minimum Financial Requirements:– Current Ratio– Net Sales / Total Assets– Debt to Worth– (Net Profit + Depreciation, Depletion, & AmortizationExpense) / Current Portion of Long Term Debt– EBIT / Interest– Cost of Sales / Inventory; and– Sales / Accounts Receivable
Global Credit Express – Term SheetBorrower: A U.S. company exporting U.S. goods/servicesPurpose: for finance of the business of exportingrather than specific export transactionsAmount: Max. $500,000Type: Line of creditPeriod: six months or one yearInterest Rate: Ex-Im CIRR* + 2.6% p.a. fixedFees: $500 Application; $2500 Referral Fee; 2.5%flat Exposure Fee on amount of Line of Credit; LegalFees est. $150 0 -$3000*CIRR: currently 1.39% fixed; seehttp://www.exim.gov/tools/commercialinterestreferencerates/
Global Credit Express – Term Sheet (2)Collateral: (i) a first or second perfected securityinterests in the general assets of the Borrower.(ii) owner(s) with 20% or more ownership providepersonal guarantee(s)Documentation: (i) Application Package, (ii) Ex-ImCommitment Letter w/Term Sheet, (iii) Loan, Creditand Guarantee Agreement; (iv.) Promissory Note.
Global Credit Express – Eligible Borrowers• is a small business by SBA definition• min. three years of revenue producing operations• one year of exporting experience• no tax liens or judgments• exports goods made in USA or services performedby U.S. citizens• possesss a business FICO score of 180 or higher
Export Credit InsuranceExporter Benefits:• RISK PROTECTION: Protects the exporteragainst non-payment by their foreign buyers• MARKETING TOOL: Enables the exporter toextend open account credit terms to new andexisting foreign buyers• FINANCING AID: Allows lenders to addinsured, foreign receivables into the borrowingbase
Single-Buyer, Single CountrySmall Business Multi-buyerSmall Business Multi-buyer – Express InsuranceStandard Multi-buyer___________A small business is defined by the Small BusinessAdministration at this site:http://www.sba.gov/size-standards-tool?ms=nid4060In addition, Ex-Im provides its Small Business policies only tothose Small Businesses who had average $7.5 mm or less exportsales on credit terms over the past three years.Short-Term Policy Types
Exporter Qualifications to apply for Small Business orStandard Multi-buyer Policy:1. In same line of business for at least three years.2. Have at least one year of exporting experience.3. Had an operating profit in their most recent fiscalyear.4. Dun & Bradstreet Paydex of 50 or higher and noderogatory information.5. Signed financial statements for the last fiscal yearthat show positive net worth. Net Worth at the mostrecent fiscal year-end is at least 10% of requestedpolicy limit.6. No material adverse issues.
Export Credit InsuranceCost for a Policy Quote: $ - 0-Cost for a one-year Policy: $ -0-Cost to insure a Buyer: about $.65 per US$100.00Information Needed on the Buyer:$100,000 – a credit report$250,000 – credit report and two tradereferences$300,000 – financial statements on BuyerCoverage Amount: 90%/95%Claim Window: 90 – 240 days from invoice due date
Medium & Long Term Buyer Loan Insurance/GuaranteesFor international buyers purchasing U.S. capitalequipment and services:▪ 85% ﬁnanced, 15% cash down payment▪ Medium-term– Repayment typically up to 5 years andamounts up to $10 million▪ Long-term– Greater than 5 years and over $10 million
M/T Insured Foreign Buyer Loan – the structure• U.S. Exporter, a manufacturer of capital equipmentwhose• Foreign Buyer, who wants to finance the purchasewith “Customer Finance”.• Commercial bank, or “lender”, providing a loan tothe Foreign Buyer, and cash to the U.S. Exporter,which loan’s principal and interest payments are:• Insured (or guaranteed) by Ex-Im Bank of the U.S.
M/T Insured Foreign Buyer Loan – EligibleBorrowers/Buyers• Minimum operating history of 3 years• Current financial statements with Notes:• Loans under $1 million: signed, unaudited• Loans over $1 million: CPA audited,international accounting standards• Borrowers w/annual sales <US$50 millionequivalent may require owner(s) Guarantees• Financial condition, evidenced by financialstatements, yield financial ratios per “MediumTerm Credit Standards”, see:http://www.exim.gov/tools/upload/ebd-m-39-1.pdf
M/T Insured Foreign Buyer Loan – EligibleBorrowers/Buyers (2) i.e., “loan package”• Credit agency report – favorable• Commercial banking reference• Positive operating profit and net income, past twoyears• Positive cash flow, past one year• Total Liabilities no more than 1.75x tangible networth• Amount of credit is no more than 40% of tangiblenet worth• Interim statements disclose no deterioration
20Call Ex-Im Bank Regional Export Finance Centernearest your location:Irvine, CA: 949-660-1341David Josephson, Western Regional Director(949) 660-0726 DirectDavid.firstname.lastname@example.orgMore Information
U.S. Small BusinessAdministrationInternational Trade Finance ProgramsTrade Connect Export WorkshopLos Angeles Area Chamber f CommerceMay 8, 2013
Martin SelanderInternational Trade SpecialistU. S. Small Business AdministrationU. S. Export Assistance Center2303 Martin Court #315Irvine CA 92612(949) 660-8935Serving exporters of Southern California,Nevada, and Hawaii
SBA Los Angeles District Office330 North Brand Blvd #1200Glendale CA 91203(818) 552-3210SBA Santa Ana District Office200 West Santa Ana Blvd #700Santa Ana CA 92701(714) 550-7420
Additional information availableon linewww.sba.gov/oitIncluding copies of all requiredapplication forms, program infoand national staff directory
Export Working Capital Program SBA Export Express International Trade LoanSBA Export FinanceAssistance Programs:
Pre-Shipment GuaranteeLoan proceeds to acquire/producegoods or services for export Post-Shipment GuaranteeDiscounting accounts receivableExport Working Capital Program
Short Term +Transaction BasedLoan repayment from assignment ofpayment proceeds from foreign buyer:-Letter of Credit-Open AccountUnlike more traditional financing, loanrepayment not based upon borrowercash flow or profitabilityExport Working Capital Program
Single Transactionor Revolving Credit Line.Disbursements must be linked to specificexport transaction, contract, PO, LC,invoice, etc. Maximum gross loan limit $5,000,000.(no minimum). Maximum 90% SBAguaranty to the lenderExport Working Capital ProgramFeatures
Negotiable between applicant and lenderSBA fee is one quarter of 1.00% of the SBA guaranteedportion for 12 months or lessExample$100,000 loanx 90% SBA guaranty=$90,000 SBA guaranteed portionx0.25%=$225.00 fee due from borrowerExport Working Capital ProgramInterest Rates & Fees
A) UCC lien on raw materials-inventorypurchased with SBA funds B) Assignment of contract proceeds C) Personal guaranty D) Additional collateral may berequired on a case-by-case basis.Export Working Capital ProgramCollateral
Exporter must demonstrate ability to perform / i.e. inbusiness 12 months (Note other “non-export” SBA loansare available from SBA District Office) Minimal collateral Service & Trading companies are eligible Country limitation schedule Credit Insurance Applications processed at SBA USEACExport Working Capital ProgramEligibility & Features
Provides financing to smallbusinesses whose borrowingneeds are too small to beprofitably met by traditional SBAprograms “Small” = maximum loan$500,000 (no minimum) Flexible use of proceedsSBA Export Express
No SBA application forms No SBA underwriting or creditreview (eligibility review only) “Application” faxed or emailed bybank to SBA national processingcenter in Sacramento SBA turnaround 24-48 hoursSBA Export ExpressIncentives/Advantages
Lender to obtain a brief narrative fromapplicant to clarify how loan proceeds willbe utilized. Applicant in business for at least 12months. Proceeds are to be used to develop orexpand applicant’s export markets.SBA Export ExpressEligibility
n Finance Export Development activities supported by U.S.Department of Commerce Commercial Service: Gold Key, ICP, etcn Other marketing costs such as participation in a foreign tradeshow or translation of product literature for use in foreign markets.n Real Estate acquisition or construction to support production ofgoods for export.n Acquisition of machinery or equipment (i.e. computers, forklifts,etc) to be used in the production of goods for export.n Permanent long term working capital infusionSBA Export ExpressUse of Proceeds
Maximum loan amount $5,000,000 Applicant must establish that the loan proceeds will expand an existingexport market or develop new ones Provides long term financing for small business engaged or preparing toengage in exporting Examples: purchase fixed assets, such as land and building, expand orrenovate existing facilities, purchase machinery and equipment,permanent working capital, debt refinance in limited cases Application package must be submitted from lender to SBA (does notallow for streamlined faxing of application as in the Express program)The International Trade Loan
Martin SelanderInternational Trade SpecialistU. S. Small Business AdministrationU. S. Export Assistance Center2303 Martin Court #315Irvine CA 92612(949) 660-8935Serving exporters of Southern California,Nevada, and Hawaii
FOREIGN AGRICULTURAL SERVICEUnited States Department of AgricultureEXPORT CREDITGUARANTEEPROGRAMGSM-102FACILITATINGTRADEFINANCE
WHAT ISGSM-102?GSM-102• It’s not a loan…• It’s not a grant…• It’s a guaranteeBacked by the full faith and creditof the United States Government
PURPOSE OF THEPROGRAMPromotes the export of U.S. agricultural products by facilitating thefinancing component via a credit guarantee.USDA guarantees the letter of credit to emerging markets wheresales may not occur without the financing and guarantee.GSM-102
PROGRAMDESCRIPTIONObjective• Protects U.S. exporters or U.S. banks against the non-payment of theimporter’s foreign bank under a Letter of Credit (L/C)Terms• Guarantees up to 98% of the loan principal• Covers a portion of the interest• Fees are based on country risk and length of financing• Fees dependent on frequency of principal repaymentsCoverage• Coverage up to 2 years• Over 190 agricultural products• Freight costs are usually covered• Over 140 banks covered in almost 80 countriesGSM-102
PROGRAMPARTICIPATION• Approved Countries/Regions• Approved Foreign Banks• Qualified U.S. Exporters• Approved U.S. Banks• Importers do not need to be approvedGSM-102
• Not just for bulk commodities• High-value processed products are also covered• Not just for large corporations• Approximately 47% of participants are SME’s• Not just for large dollar transactions• Transaction sizes have no minimum. Many are under$1 million USDGSM-102 is…MISCONCEPTIONSGSM-102
Consumer-ready - Intermediate - BulkELIGIBLECOMMODITESü 100% produced in USAü High-Value products (90% U.S. Content)GSM-102
HOW MUCH ISTHIS GOING TOCOST?Guarantee fee(fully transparent)Cost of L/CFinancing costsGSM-102
COMPARISONGSM-102WITHOUTGSM-102WITHGSM-102U.S. exporter reluctant toship without being paidin advanceBank in region may beunwilling to providecredit to importerAny financing to importermay have very short repaymentterms & higher interest ratesU.S. exporter more likely to shipsince USDA carries 98% of the riskand payment is received uponpresentation of documentsPresence of loan term extended bythe U.S. bank to the foreign bankmay encourage extension of creditby the foreign bank to the importerImporter now in better position tonegotiate favorable loan terms withGSM-approved bank in the region
BENEFITS TO ANEXPORTER§ Open new markets and expand sales where risk may be greater§ Minimal cost – fees average about 1 percent§ Reduce importer and foreign bank risk§ Get paid quickly by assigning guarantee to U.S. bank anddelivering shipping documents that conform with L/C§ Ability to lower all-in-costs to the buyerGSM-102
Foreign BankLess risk – USDA assumes almost all risk inthe event of nonpaymentAbility to leverage country & foreign bank limitsReduce capital requirements due to USDAguaranteeAbility to lend at reduced rates because ofUSDA guaranteeAbility to lend up to 2 yearsBENEFITS TO U.S.BANKSEstablish or improve correspondent bankingrelationshipsService U.S. exporter clients & expandrelationshipsGSM-102
12HOW TO GETSTARTED?ExporterGet a DUNS numberSubmit qualificationapplicationNegotiate sales contract withbuyerSubmit request for guarantee/pay guarantee feeContact U.S. bank(if assigning guarantee)GSM-102
13HOW TO GETSTARTED?Provide most recent auditedfinancial statementsDocumentation from federal orstate agency regulatorIdentify shareholderownership & managementContact information ofprincipal and U.S. regulatorU.S. BankGSM-102
Africa & Middle EastCentral AmericaCaribbeanCentral AsiaMexicoChinaRussiaSouth AmericaSouth KoreaSoutheast AsiaVietnamTurkeyMARKETSGSM-102
FY 2013PROGRAMMINGCountry/Region ($5.5 Billion per Farm Bill)Africa/Middle East Region $ 400 MillionCaribbean Region $ 300 MillionCentral America Region $ 550 MillionCentral Asia Region $ 50 MillionChina Region $ 200 MillionKorea, South $1,000 MillionMexico $ 400 MillionRussia $ 250 MillionSouth America Region $ 600 MillionSoutheast Asia Region $ 450 MillionTurkey $ 700 MillionVietnam $ 100 MillionReserve $ 500 MillionTOTAL: $5.5 BillionGSM-102
FOREIGN AGRICULTURAL SERVICEUnited States Department of AgricultureADDITIONALINFORMATIONTeri Ryan202.email@example.com/excredits/ecgp.aspSee how your business can benefit from GSM-102Contact Us