Presenters:Gary K. LuxonComerica BankTroy W. BrownriggBrownrigg Companies LTD Private Export Finance SolutionsBruce BroganFifth Third BankMartha I. GabrielseJPMorgan ChaseBill Richeson November 18, 2011PNC Bank 1:30 p.m.
Trade Cycle FinancingExport Finance Timeline Exporter Import Shipment Importer Sale Invoice Payment Bill of Lading Pre-Shipment Period Post-Shipment Period Foreign Buyer Financing Working Capital Financing/PO Finance Letters of Credit and Bankers Acceptance Bid & Performance Standby L/Cs Financing (to 180 days) Export Letters of Credit Non-LC Solutions Non-LC Solutions Documentary Collections and TA Financing Ex-Im Bank Working Capital Program A/R Credit Insurance Discounting BAs and Foreign A/Rs Ex-Im Bank: Direct Buyer Financing 3
Ex-Im Bank Working Capital GuaranteeCredit facility established by a commercial bank that is backed by an Ex-ImBank guarantee at 90% of principal and interest used to support anexporter’s working capital needs: Collateralized by export-related inventory and foreign accounts receivable Inventory, including raw materials and WIP, advance up to 75% Foreign accounts receivable advance up to 90% Supports establishment of standby letters of credit and indirect exports Generally one year but can be up to three years Covers exporter performance risk Note: Provides no protection to exporter against foreign buyer non-payment. 4
Ex-Im Bank Working Capital GuaranteeLines of Credit Transaction Specific Transaction Specific Revolving Revolving Multiple transactions or specifically identified ones May be committed for up to three years with annual reviews 5
Trade Transaction Timeline Goods Goods Re-sold/Used Produced Extended Terms Open Account Cash in Advance Good Loan to Seller Receivable Loan to Buyer6
Payment Methods: 4 Methods BestLowest Cash Risk Buyer (Importer) Perspective Seller (Exporter) Perspective Flow • Open Account • Cash In Advance • Documentary Collections • Letter of Credit • Letter of Credit • Documentary CollectionHighest • Cash In Advance • Open Account Worst Risk Cash Flow Buyer and Seller have Reversed Priorities!
Trade Credit InsuranceWho Buys Trade Credit Insurance? Any company that sells goods on credit terms (Net 30/60/90 days) and is exposed to the risk of non-payment.Questions to Consider. Has your company considered growing its export sales in light of the historical low level of the US Dollar verses other currencies? Has one of your key customers ever defaulted on a payment or filed for bankruptcy? Can your company benefit from purchase order financing? How well do you really know your buyers?Types of Policies. Multi-Buyer and Single-Buyer. Credit risk is underwritten based on total sales or approved limits per buyer.
Trade Credit Insurance Mitigating Risk: Insure foreign account receivables and services against non-payment of foreign and domestic buyers. Coverage protects against commercial(insolvency, bankruptcy, default) and political(war, political violence, transfer) risks. Marketing: Know you have the security and competitive edge to take our product global. Increase your sales by expanding into foreign markets. Financing: Access additional credit by using insured accounts receivables to increase your borrowing capacity.Costs: Net 60 - Multi-Buyer - $10,000,000 Sales Basis - $40,000 Min. Premium – 12 month - 90% Coinsurance - Foreign and Domestic.Services: Due Diligence on your Top 20 Buyers, Discretionary Credit Limits, and Loss Payee / Enhanced Assignment Endorsements.Our Strategic Partners and Carriers include: Zurich, Coface, Chubb, Chartis(AIG), Great American, EXIM Bank.
Documentary Letter of Credit: Use it to provide short term finance to your Buyer! Buyer has requested extended payment terms of 90 days from date of shipment Seller has countered that they will not offer such terms on Open Account basis, but would consider if Buyer provides acceptable LC and agrees to absorb the associated additional costs of financing Seller talks with their bank, to obtain indicative pricing for 3 key credit/finance driven fees associated with this arrangement: Confirmation fee Acceptance commission Discount charges Buyer’s bank issues the LC Seller’s bank is the Advising and Confirming Bank LC is payable via a Time Draft to be drawn at 90 days from date of Ocean Bill ofLETTER OF CREDIT Lading
Documentary Letter of Credit: Use it to provide short term finance to your Buyer! Seller ships and presents documents to their bank, requesting that the Accepted Draft be discounted. Documents are examined and found to be in compliance with the LC Time Draft is Accepted under the LC, creating a Bankers Acceptance Seller’s bank discounts the Bankers Acceptance, depositing funds to the account of the Seller Seller’s bank collects the full amount due under the Bankers Acceptance from the Issuing Bank at maturity Illustrative Fees: $300,000 sale to Saudi Arabia at 90 days date of shipment Confirmation fee 1.5% per annum. LC expires 90 days from date of issuance: $1125 Acceptance commission 2% per annum. Documents presented and Bankers Acceptance is created10 days after shipment, leaving 80 days left until the payment due date: $1333 Discount charges 90 day LIBOR + 2%. Bankers Acceptance is discounted with 80 days left to maturity: $1833LETTER OF CREDIT Total “financing” costs: $4291. 1.43% of the face value of the sale, or 5.72% if you multiply the 90 day cost by 4, to express it as an annualized or 360 day cost
Eximbank Medium Term Buyer Finance• General overview• What goods can be financed• Maximum term• Fees and charges• Information required for pre-qualification• Credit Issues• Processing Time• Examples
Global Accessfor SmallBusinessPrivate ExportFinanceSolutions
Gary K. Luxon, Director – International Trade FinanceComerica Bankgkluxon@comerica.comOffice: 313-222-4903Troy W. Brownrigg, Licensed Agent – International ProductsBrownrigg Companies LTDtroy.firstname.lastname@example.orgOffice: 248-373-5580Bruce Brogan, VP - Global Trade SolutionsFifth Third Bankbruce.email@example.comOffice: 248-603-0412Martha I. Gabrielse, VP - Global TradeJPMorgan Chasemartha.firstname.lastname@example.orgBill Richeson, SVP - Global TradePNC Bankwilliam.email@example.com