BEST GLOBAL BANKS

Top banks with services for companies with shipments of export cargo and import cargo in international trade.

BEST GLOBAL BANKS

December 5th, 2017 Elaine Pofeldt Leave a comment

There’s no doubt that America exporters are feeling optimistic. In its second annual Grow Global survey, American Express recently found that 92 percent of U.S. small and mid-sized (SMEs) enterprises that export see international markets as a significant growth opportunity. The exporters had revenue between $250,000 and $1 billion. A whopping 77 percent remain confident that sales outside the U.S. will increase in the next year.

Of course, to take advantage of such opportunities, exporters need an experienced banking partner. Here are 25 banks of all sizes with a robust array of export services.

AMERICAN EXPRESS americanexpressgrowglobal.com | HQ: New York City | Assets: $148.52 billion

American Express has made a strong commitment to global trade. One example is its Grow Global program, which brings together global trade experts, exporting officials and business leaders to aid U.S. small and middle market companies in expanding globally. At one Grow Global event in Miami this past spring, attendees could participate in “Global Connections,” which included mentorship roundtables on a range of exporting topics, getting advice from agents, distributors, government and industry officials, and business leaders who are successfully exporting their goods and services.

AmEx’s Global Commercial Payments division offers a variety of payment and lending products to help exporters with travel and everyday business spending, cross-border payments, global currency solutions and business financing. Among AmEx’s offerings are its vPayment service, where users get a single-use virtual account number that they can use to pay suppliers electronically; FX International Payments, an American Express online platform that lets businesses send, receive and manage their foreign currency wire payments; and Buyer Initiated Payments, which lets companies pay suppliers electronically and helps them extend their working capital.

BANK OF AMERICA MERRILL LYNCH bofaml.com | HQ: New York City | Assets: USD$ 2,271 trillion

Among the big global banks, Bank of America Merrill Lynch aims to stand apart by applying dedicated resources from its Global Trade Finance team to support mid-sized companies with programs such as supply chain financing. Bank officials note that the mid-size market has tremendous growth potential, experiencing 6.7 percent revenue growth over the past 12 months, according to the National Center for The Middle Market, 2Q-2017. However, they point out, there is a greater need for better financing alternatives for mid-size companies down the supply chain than large corporates. There is also a greater need to assist mid-size companies in international markets, such as China and India, they note, and point out that mid-sized companies are hardest hit by the trade finance gap (per the International Chamber of Commerce [ICC] 2016 Global Trade and Finance Survey).

To meet the demand, Bank of America Merrill Lynch has doubled the number of programs in the middle market over the past two years, with buyers and suppliers transacting in over 50 countries. This has not gone unnoticed: Middle market clients recognized the bank for three years in a row (2014, 2015 and 2016) as a Best Brand in Trade Finance in the independent Greenwich Best Brand Poll.

BARCLAYS bbt.com | HQ: London | Assets: $1.5 trillion

Operating in 40 countries, this London-based bank offers a full array of services to those who hope to branch out from U.S. markets. The bank offers trade solutions such as financing, letters of credit, a letters of credit discounting service that speeds payments from customers, trade collections, trade finance—including export credit agency financing—and trade loans. The bank also offers bonds and guarantees. A global trade portal enables customers to manage their trading activities online. Barclays has a location in New York City that serves the U.S. export market.

BB&T bbt.com | HQ: Winston-Salem, North Carolina | Assets: $221.2 billion (2016)

With extensive experience in working with the Export Import Bank of the U.S. and the U.S. Small Business Administration, BB&T offers a range of programs to help exporters finance export sales, get protection against non-paying clients and use foreign receivables as collateral. The bank offers three kinds of export credit insurance: single-buyers export credit insurance, small business export credit insurance and multi-buyer credit insurance. Documentary services include export letters of credit and international standby letters of credit.

BNP PARIBAS (Bank of the West and First Hawaiian Bank) bankofthewest.com | BNP Paribas HQ: Paris | Assets (for BNP Paribas): $2.5 trillion

Giant global bank BNP Paribas–owner of BancWest Corp., a holding corporation for Bank of the West and First Hawaiian Bank–has a network of 100 trade centers in 60 countries, where exporters can work with International Service specialists who offer access to a full spectrum of international import and export services in many languages and currencies. One unique offering: A Trade Finance App that lets exporters manage international standby letters of credit and keep up with trade finance transactions. Through BNP Factoring, BNP offers factoring services, and the bank is a member of factoring networks Factors Chain International and International Factors Group, which offer factoring in a buyer’s country for exporters.

BNY MELLON bnymellon.com | HQ: New York City | Assets: $1.8 trillion

BNY Mellon offers a suite of trade finance and processing services to importers and exporters through more than 1,600 correspondent banks. It has a business presence on six continents, and correspondent bank relationships in 35 countries and more than 100 markets. It provides a wide range of trade finance mitigation services through nine trade processing centers around the world. Bank officials says they are committed to providing superior, personalized global trade services at competitive rates to exporters and importers worldwide.

BNY Mellon was established in 1784 and has provided trade support to corporations and financial institutions since the 1800s. It bills itself as the first bank to implement a full letter of credit relationship service and first to offer Internet-based client facing trade systems to initiate trade transactions and access reports, including document images. Bank officials say BNY Mellon offered the first web-enabled trade front office with multi-language capacity, the first web-based letter of credit and purchase order reporting, and the first web-based imaging. Today it remains a technology leader helping banks optimize and create efficiencies within trade finance to help lower cost and manage capital requirements via APIs and platform approaches, as well as applying emerging technologies such as blockchain and AI to trade finance.

CITIGROUP Citigroup.com | HQ: New York City | Assets: $1.9 trillion

Through Citi Treasury and Trade Solutions, exports can tap into a comprehensive suite of trade services and finance products to facilitate commercial flows and finance supply chains. The global bank’s expertise includes trade finance, trade services, export and agency finance, trade working capital finance and commodity finance. The bank has deep knowledge of structuring complex and unique transactions and a vast global network of operating countries, with more than 600 dedicated trade professionals worldwide, in all major markets. Its syndication franchise has the ability to structure global and market leading trade finance transactions.

COMERICA BANK comerica.com | HQ: Dallas | Assets: $72 billion

Although Comerica is smaller than many of the banks on this year’s list, it is one of the top providers of letters of credit in the U.S. and a major lender for the Export-Import Bank of the United States Working Capital Guarantee Program. The bank provides working capital loans, foreign receivable financing, foreign receivable discounting and foreign buyer financing to exporters. The Comerica GlobalTRADE Web platform lets customers manage processes such as export letters of credit, standby letters of credit and documentary collections in real time.

COMMONWEALTH BANK OF AUSTRALIA commbank.com.au | USA HQ: New York City | Assets: $745 trillion USD

If you are looking to export to Australia or New Zealand, Commonwealth Bank of Australia could be a good bet. The bank works with U.S. clients who are hoping to expand their businesses to the region and offers foreign currency accounts, international money transfer, international trade finance for exporters and supply chain finance. Export services include export documentary collection, export documentary letter of credit and export finance without recourse, among other services. Commonwealth Bank has offices in both Houston and New York City.

DEUTSCHE BANK TRUST CO. AMERICAS gtb.db.com | HQ: Frankfurt | Assets: $1.8 trillion

With a fully integrated global Trade Finance network in more than 40 countries, Deutsche Bank offers a variety of services to help clients finance export activities and manage the risks of global trade. Its offerings include financial supply chain management, with products for pre- and post-shipment finance, confirmed payables, distributor finance and receivables finance. The bank also offers custom-made and performance-risk finance solutions for structured export and commodity trade finance; and guarantees. Among its documentary offerings are documentary or standby letters of credit and documentary collection.

It has strong bases in major emerging markets such as the Asia Pacific, Central and Eastern Europe and Latin America. Services include advisory and distribution services, documentary collection, documentary remittances, financial supply chain solutions, letters of credit, standard remittances, structured commodity trade finance, syndicated trade loans and trade receivables finance.

EAST WEST BANK eastwestbank.com | HQ: Pasadena, California | Assets: More than $35 billion (East West Bancorp)

If you are looking to export to China, working with East West Bank is an option worth investigating. The bank, which has more than 130 locations worldwide, focuses on the U.S. and Greater China markets. It has a presence in California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West runs full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. Solutions for exporters include pre-export financing, export letters of credit and export acceptance financing. The bank works with the Export-Import Bank of the U.S., the Export-Import Bank of China and a network of foreign credit insurance agencies.

FIFTH THIRD BANK 53.com | HQ: Cincinnati | Assets: $141 billion

For exporters based in Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina, Fifth Third Bank is a convenient source of pre- and post-export financing, including purchase of insured receivables. It also offers internal expertise in agency finance. Fifth Third Bank works with the Export-Import Bank of the U.S., Export Development (Canada), the International Finance Corp., the Inter-American Development Bank and European Bank for Reconstruction and Development.

HSBC BANK USA us.hsbc.com | HQ: London | Assets: $197.9 billion

Through HSBC’s offices in markets around the world, exporters can access export collections and export letters of credit solutions, export finance solutions and foreign exchange service. The bank was recognized as Best Export Finance Bank for borrowers in the Trade Finance Magazine Awards 2017. HSBC offers international business guarantees to make transactions safer, among them advance payment guarantees, which are used when you require a sum of money at an early stage of the contract. They enable your customer to recover some or all of the money that is advanced if you fail to meet your contractual obligations. With HSBC’s Import Export Smartforms, both exporters and importers can expedite trades by downloading and completing forms for common transactions, such as a request for a letter of credit, from HSBC’s site.

HUNTINGTON BANCSHARES huntington.com | HQ: Columbus, Ohio | Assets: $102 billion

Midwestern exporters looking for a local partner may find Huntington—a past recipient of the President’s “E” Award for export service excellence—worth considering. Huntington’s team of trade service professionals offer exporters expertise on EXIM Bank Working Capital guaranteed finance and foreign buyer finance, international cash letters and check collection, credit insurance, letters of credit and documentary collection. The bank has a presence in Ohio, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, West Virginia and Wisconsin.

ING ingwb.com | HQ: Amsterdam | Assets: $1 trillion

Global Finance magazine chose ING as Best Bank in the World for 2017. With offices in Atlanta, Dallas, Houston, Los Angeles and New York, ING’s Financial Services Division includes a specialized lending arm that offers structured finance products to clients in industries such as utilities, natural resources, telecom and media. Its offerings include structured export finance. One key area of expertise is structuring export finance in countries where long-term borrowing may be difficult or costly with risk mitigation and those in which projects involve exports and/or investments from more than one country.

J.P. MORGAN CHASE AND CO. jpmorgan.com | HQ: New York City | Assets: $2.6 trillion

Through its Global Trade program, JPMorgan Chase & Co. offers a variety of solutions to exporters. For those seeking traditional products and services, the bank offers letters of credit, provides guarantees, facilitates trade document collection and can help automate manual processes through local bankers. Supply chain finance programs are designed to help exporters strengthen supplier relationships and secure supplies of key materials while improving working capital performance, optimize financing costs, strategically manage increasing sales volumes, and gain greater visibility into transactions via its proprietary platform. Other export finance options include export credit agency and multilateral-backed financing; medium- and long-term finance structures; syndicated, medium- and long-term trade-related loans and access to the Working Capital Guarantee Program/Export-Import Bank financing.

KEYBANK key.com | HQ: Cleveland | Assets: $135 billion

With a team of international financing specialists on staff, Keybank offers a robust array of services to exporters. The bank has “Delegated Lending Authority” status from EXIM Bank, expediting the lending process for those seeking working capital. Exporters can connect their clients with a customized financing package for the buyer with export credit insurance from EXIM Bank. The bank also offers international collections, a training and consulting program to help exporters spot and take advantage of market opportunities, letters of credit, multi-currency accounts and structured trade finance.

PNC BANK pnc.com | HQ: Pittsburgh, Pennsylvania | Assets: $369 billion (2016)

PNC Bank has deep experience in working with the Export-Import Bank of the U.S., assembling financing packages for exporters that include needed insurance. PNC’s Trade Services team helps clients optimize working capital, improve cash flow access and liquidity, mitigate risk, grow international sales and choose the right currency for trading. Its offerings include export letters of credit, export documentary collections service and foreign exchange. PNC customers have access to its Global Trade Excellence service to initiate transactions and automate reporting for letters of credit, documentary collections and acceptance transactions—a time-saver when it comes to record keeping.

SANTANDER BANK santanderbank.com | HQ: Boston | Assets: $78 billion

With a strong presence as a retail and commercial bank in 10 core markets across Western Europe, Latin America and the U.S., Santander Bank offers both on-the-ground expertise and global services to exporters. Santander also offers a suite of market research and business networking solutions to support companies’ international expansion. The Santander Trade Portal provides corporations with access to trending market insights and business opportunities. The Trade Club allows users to connect with each other based on listed business interests, while the Trade Network provides companies with a platform to search for and connect with local market entry experts in a particular country of interest. The bank regularly provides live webinars to users who may be interested in hearing from its economist in Mexico, for instance. SantanderTrade.com offers free trials offering access to its Trade Portal, Trade Network and webinars.

STANDARD CHARTERED sc.com | HQ: London | Assets: ‎£657.6 million

Standard Chartered Americas, through its corporate and institutional banking business, provides financial products and services to multi-national corporations, financial institutions and development organizations. Bank officials say they take pride in their ability to bridge the physical distance between Americas-based clients looking to expand into and across the markets where it has a presence and vice versa. Its fully licensed presence in Brazil, for example, offers Latin American expertise for clients seeking access into the region and across Asia, Africa and the Middle East.

Standard Chartered provides a range of transaction banking, lending, financial markets and corporate finance products and solutions. Owing to synergies between product groups, the bank can help clients operate and trade globally by serving multiple markets, officials say. Clients work with a dedicated relationship manager who helps them tap into the bank’s deep industry expertise as well as its “one-bank” model, through which the bank hopes to serve all of their banking needs.

SUNTRUST suntrust.com | HQ: Atlanta | Assets: $208 billion

Looking for a bank that knows how to put SBA loan programs to work for exporters? SunTrust–a preferred lender in the SBA’s Export Working Capital Program–is worth considering. For three consecutive years, the U.S. Small Business Administration chose SunTrust Export Lender of the Year for providing working capital loans to U.S. exporters. As a preferred lender, SunTrust makes Export Express loans to exporters who have been in operation for at least one year and meet other SBA eligibility rules. Other offerings include export letters of credit, standby letters of credit and documentary collections.

TD Bank, N.A. | HQ: Cherry Hill, N.J. | Assets: $964.72 billion (for Toronto-Dominion Bank)

TD Bank is a subsidiary of the Toronto-Dominion Bank of Toronto, Canada. It offers a variety of global trade finance products and services for businesses, government agencies and institutions. Among its offerings are import letters of credit, export letters of credit, documentary collections, standby letters of credit, structured trade finance, and bankers’ acceptance. The bank works with export credit agencies, such as Export Import Bank of the U.S., to reduce risk. Exporters can arrange short- and medium-term facilities in conjunction with the bank’s syndications/trading desks to provide clients with a favorable structure, tailored to market conditions.

U.S. BANCORP usbank.com | HQ: Minneapolis | Assets: $464 billion

As the fifth largest bank in the country, U.S. Bank is a leading provider of international trade and foreign exchange services to corporations and financial institutions across the country. The bank has a full array of comprehensive financing and depository options, treasury management tools, investment banking capabilities and corporate trust services. In addition to traditional trade finance tools, U.S. Bank also provides supply chain financing capabilities that are designed to manage liquidity, increase cash conversion cycles, maximize payment processing and optimize working capital efficiencies. U.S. Bank is a leader in financial services innovation and is actively involved in initiatives to drive digitization of trade and develop new client solutions based on distributed ledger technology.

WELLS FARGO wellsfargo.com | HQ: San Francisco | Assets: $1.9 trillion

Founded in 1852, Wells Fargo now has a presence in 42 countries. The bank’s international trade specialists provide access to letters of credit, documentary collections and open account programs that offer an alternative to letters of credit. The bank’s CEO Trade online trade platform helps clients to reduce costs and increase efficiencies on letters of credit and documentary collections.

The bank continues to rack up awards for its service to those involved in global trade. It was selected Best Trade Finance Bank in North America (2016) by Global Finance magazine, Distinguished Provider for USD Global Transaction Services for five years (2013–2017) by FImetrix Global Stats and No. 1 in Overall Institutional Satisfaction among Global Financial Institutions (2016) by FImetrix Global Stats. Middle-market firms may find it helpful to note the bank was recently ranked tops in total middle market banking share in the U.S. by Barlow Research Middle Market, based on rolling data.

WESTERN ALLIANCE BANCORPORATION westernalliancebancorporation.com | HQ: Phoenix | Assets: $19 billion

Among the fastest-growing bank holding companies in the U.S., Western Alliance Bancorporation, through main subsidiary Western Alliance Bank, operates several full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank. One strength is its manufacturing and distribution expertise, available through its geographically managed manufacturing and distribution lending groups.

Local bankers offer a full complement of deposit, lending, treasury management, international banking and online banking products and services. Other services include documentary collections, EXIM Bank Guaranteed Working Capital Lines of Credit, foreign currency wires, foreign exchange hedging, standby and commercial letters of credit, pre-export financing and revolving lines of credit.

Financing options for supply chains of shipments of export cargo and import cargo in international trade.

Archives, Features, Global Logistics, International Banking

Global Logistics Planning Guide: SUPPLY CHAIN AND DEMAND

December 1st, 2017 Elaine Pofeldt Leave a comment

Andrew Legge has found a unique niche as founder and managing partner of Havelock Wool, a three-year-old, seven-employee business that processes its insulation in Reno, Nevada, and distributes it out of Brooklyn, New York.

Legge, who sells his insulation domestically and exports it to Canada, dreams of the day when he can persuade the buyers of the sheep’s wool home insulation he sells to pay him in 30 days and his wool suppliers, based in New Zealand, to give him 90 days to pay them.

“That’s an important goal in terms of being a manufacturer—actively managing, in the most advantageous way possible, what is going on with your cash,” says Legge, who formerly worked in the private equity industry.

Like many exporters who understand the value of cash flow, Legge is looking into supply-chain financing.

In supply chain financing, sellers of goods, such as Legge’s insulation, can—via their bank—optimize working capital for both themselves and their suppliers. With the financing in place, sellers can lengthen their payment terms to its own suppliers, while giving its suppliers the option to get paid early.

In one common type of scenario, a bank may provide you with working capital to buy the supplies you need for a product you plan to export and, if you need accelerated payment terms, set up a structure where you get paid within five days of delivery, explains CPA Anthony Tomaro, a partner at Grassi & Co., a New York City area accounting firm and head of the firm’s subgroup on Manufacturing & Distribution of Foods.

Many exporters find it is an ideal solution to the cash-flow challenges that emerge in transactions that stretch out for months from the point where a distant client places and order. “We’ve seen higher volumes this year,” says Richard Rowe, director of Supply Chain Finance for SunTrust Robinson Humphrey. “The rumblings are that the current administration is very supportive of manufacturers and that may be leading to increased requests.”

Supply-chain financing can seem complicated if you’ve never used it before, so it’s important to understand the process fully. Here are some tips on how to make the most of it.

Understand when it makes sense. Supply-chain financing lets a supplier sell its invoices to the bank at a discount, once the buyer approves them. Generally, supply-chain financing works best when your customer’s credit is better than your own. “If you think about the risk back to the bank, it’s based off of our corporate client’s credit risk ratings,” notes Rowe. “The discount rate, which is based on the credit rating of the buyer, would be superior to where the supplier would be able to raise funds on their own.”

Find the right banking partner. Although you may love working with your local bank, it may not be the best provider of supply-chain financing for you. “A lot of times you have a great banker who can get anything done in the U.S.,” Tomaro says. “If you go outside the border, you want to make sure they have the bandwidth to help you. If not, you may have to consider going to a bigger bank or a bank that has those services.”

Working with a bank that has many branches overseas can be particularly helpful. If your client is located in a city where a branch is located, bankers in that branch may well know your customer. That can make the due diligence process easier and could help you avert disaster if you are considering doing business with a client that does not pay up. “You need to know they are legit,” says Tomaro.

Banks that do frequent overseas business may also have better technology and infrastructure set up to manage supply chain financing. For instance, when one of Tomaro’s clients was exporting coconut water, he worked with JPMorgan Chase to set up the supply-chain financing.

“They had the capability of knowing who the people on the ground were at the other side of the world,” says Tomaro. “That reduced that risk. At the same time, we were able to track our shipments. We had control of the documents. We knew where the goods were. We knew when they were clearing customs. At the end of the day, it’s making sure you are moving products from Point A to Point B as efficiently as possible.”

Also consider what a bank will charge you—and ask your accountant to walk you through what the bank explains if you still don’t understand what the actual costs will be. “Their cost structure could be a lot different from Bank A to Bank B,” Tomaro says.

Customize it. Supply chain financing may take many forms, so make sure you are clear with your banker about what type of help your business needs. “The market for supply chain finance programs is somewhat diverse and there is no centralized place where you can go to gather data on global supply chain financing programs,” notes Rowe.

At SunTrust, for example, the bank offers clients’ suppliers an opportunity to sell receivables early at a discount. That may sound like factoring, but it is different, Rowe explains, in that the bank obtains irrevocable obligations to pay a certain amount by a certain date from the exporter’s clients. With factoring, it is possible the value of the invoice will be diluted if the client does not pay the full amount of the invoice.

One appealing aspect of selling receivables early at a discount in this way is that while the clients are aware of the supply chain finance program, they do not know if any particular supplier has sold receivables. “This is an arm’s length transaction,” says Rowe.

Plan for the future. Once you do have supply-chain financing in place, make the most of it to take advantage of opportunities in the marketplace. Recently, for instance, Chinese buyers of the wool Legge uses shifted to purchasing it in the U.K. instead of New Zealand. As a result, prices in New Zealand plunged.

“All of a sudden, I’m buying wool at a 40 percent discount,” he says. “We understand supply-side dynamics. We always want to be positioned to take advantage of these things as they occur.”

With supply-chain financing in place, exporters like Legge can position themselves to take advantage of scenarios like this in the future.

Financing shipments of export cargo and import cargo in international trade.

Archives, Banking, Banking on Global Trade, Features, Imports/Exports, International Banking, International Trade

Persistence Pays Off

August 6th, 2017 Elaine Pofeldt Leave a comment

When Aksel Sidem and his two business partners needed financing for their Milwaukee-based company S3 International, LLC, they found that the U.S. Small Business Administration was ready to help—three times.

S3 distributes spare parts to commercial and military customers around the world and repairs aircraft components. It exports to Asia, Europe, North Africa and South America. Jeff Wnuk, the firm’s president, founded the firm in 2005. By 2007, his former colleagues in the industry Sebastien Imbert and Sidem came on board as partners.

That year, the company secured a $300,000 loan from Chase Bank through the SBA Express program. The SBA Express program offers accelerated turnaround of applications for loans from $100,000 to $350,000.

By 2012, S3 was outgrowing its 10,000-square-foot building. The founders obtained two loans totaling $2 million to buy a 25,000-square-foot building and pay for equipment and improvements through the SBA’s 504 program, which provides financing for fixed assets such as real estate. With S3 continuing to grow in 2014, they secured a $5 million line of credit, backed by the SBA. The most recent two rounds of financing came through their current bank BMO Harris. Thanks in part to the three rounds of financing, S3 has grown to 47 employees.

“The SBA as a whole has been one of our best allies,” says Sidem, the firm’s general manager, who worked closely with the SBA Office of International Trade’s U.S. Export Assistance Center in Chicago to secure the financing.

Finding the right financing is essential for exporters, especially those in capital-intensive industries. But in 2017, it may require some persistence. Factors such as President Trump’s new immigration policies and threats to pull out of NAFTA—as well as developments like Brexit—have brought uncertainty to international business and made it harder for some exporters to get financing, say industry players. “Cross-border transactions are in a bit of a holding pattern, in part due to politics,” says Andrew Sherman, a partner at Seyfarth Shaw LLP, who has advised many small and midsize businesses involved in international markets. Here are some strategies you can use to get the financing you need now.

Do your due diligence. Before you finance any significant-sized export order, make sure your customer is legit—and solvent. Kathryn Byrne, partner, manufacturing and distribution leader at Mazars USA, an accounting and advisory firm based in New York City, suggests that exporters travel overseas to meet potential customers at their place of business and to speak with local bankers about them. “Get to know their reputation in the city,” advises Byrne.

Also, invest in obtaining a credit report from a provider such as Experian or Creditsafe on a potential customer, says Edwin Hagan-Emmin, CEO and founder of Aztec Exchange, a global supplier of invoice finance products and services that is headquartered in Dublin, Ireland, and has offices in Delaware, Los Angeles and Miami. This will not only help you weed out companies that are not good credit risks but also allow you to negotiate an export finance deal from an informed perspective. As you might imagine, financing a shipment to a client who is perceived as a high credit risk will cost you more than if a client is seen as low-risk, so any information you can share to mitigate a lender’s concerns could save you money. “You can put yourself in a strong position to talk about pricing,” says Hagan-Emmin.

Negotiate contracts carefully. Even if a client has good credit, agreeing to manufacture and ship an entire order without payment up front is risky. By requiring a 40-50 percent deposit, small and midsize export businesses can reduce the risks of not getting paid and increase a bank’s confidence in lending to them.

“More likely than not, a bank would give them a very short-term loan for 3-6 months,” advises accountant Eddie Wong, partner in charge of the China Practice Group at Friedman LLP in New York City. “For a well-established larger exporter, a bank would usually give them one year.”

Know your borrowing options. As Sidem discovered, there are many lending programs available to exporters. In addition to the programs he used, there are many export-specific programs run by the SBA. Familiarizing yourself with them before you speak with lenders can help you get more out of your discussions with them.

Here are some of the main export lending programs run by the SBA:

The International Trade Loan (ITL). Exporters can apply for term loans up to $5 million with terms of up to 25 years for working capital and the purchase of fixed assets through the ITL program. “We see it being used by exporters who need new machinery and equipment,” says Dennis M. Foldenauer, regional manager, Illinois and Wisconsin, and International Trade Finance Specialist at the U.S. Small Business International Trade, U.S. Export Assistance Center in Chicago, Ill. Loans in this program come with a 90 percent guarantee by the SBA, meaning that the SBA promises to repay the bank 90 percent of the loan if you default. Interest rates for loans less than seven years are 4.25 percent for loans under $25,000; prime plus 3.25 percent for loans from $25,001 to $50,000 and prime plus 2.25 percent for loans over $50,000. For loans seven years or longer, interest is prime plus 4.75 percent for loans under $25,000; prime plus 3.75 percent for loans from $25,001 to $50,000 to prime plus 2.75 percent for loans over $50,000.
The Export Working Capital program. Offering a line of credit up to $5 million for financing export transactions, this program offers credit for international receivables and inventory. The program enables banks to advance the exporter up to 90 percent of the value of international receivables, depending on factors such as the riskiness of the receivables. There is no maximum interest rate but the SBA monitors these loans for “reasonableness.”
The Export Express program. If you’re in a rush, this program offers financing of up to $500,000 through an expedited process designed to take 36 hours or less. Both term loans and revolving lines of credit are available. Interest loans for loans of $50,000 or less are prime plus 6.5 percent. For loans over $50,000, interest is prime plus 4.5 percent.

Find the right partner. To locate banks in your area that participate in export lending programs run by the SBA, go to https://www.sba.gov/managing-business/exporting/export-loans/export-lenders. Some banks are more active in export lending than others—which gives them a huge edge in expertise—so ask how frequently they make export loans.

Also, inquire about the countries where a lender makes loans. Even if you export to only one country now, you may want to branch out—and an export finance partner with experience in a variety of international markets could offer very valuable insight. “Don’t just think about your customer today,” advises Hagan-Emmin. “Think about whom you would like to have as a customer.”

Ultimately, as you evaluate any potential lenders, ask yourself, “Will this export financier effectively help me to scale up?” advises Hagan-Emmin.

Make sure you’re covered. Some lenders may require you to buy trade credit insurance if they lend you money for an export deal. “It gives banks comfort they will get paid,” says Byrne. One easy place to buy it is through the Export-Import Bank of the U.S. (EXIM Bank), though specialized brokers also sell it. Many exporters opt for a policy such as Small Business Multi-Buyer Credit Insurance, which protects an exporter’s accounts receivable by insuring against nonpayment by buyers. Banks sometimes will allow exporters to treat insured receivables as collateral for a loan.

If you are involved in international development projects, you may also want to look into the Overseas Private Investment Corp.’s OPIC Political Risk Insurance. Its policies protect American firms from political risk associated with overseas development projects—such as a country nationalizing a distribution facility you have built there. OPIC offers coverage in more than 160 developing and “post-conflict” countries.

Consider alternative financing. A traditional bank loan is not the only way to finance your export operations. If you are filling a small order, using a business credit card with a high credit limit may be sufficient. Some exporters turn to factoring their invoices, which is also known as accounts receivable financing. In factoring, you sell your invoices to a specialty finance company known as a factor. The factor provides you with most of the value up front and then pays you the balance of the invoice, after subtracting its fees, once it collects.

“The market for export financing has dried up considerably since 2012 or 2013,” says Hagan-Emmin. “A local factoring company, if they have experience in your export market, may well give you a line.” The cost of factoring can vary considerably according to variables like how many invoices you are factoring, but it is usually higher than for bank financing, so make sure you shop around.

Protect yourself. In lieu of getting a loan, some exporters seek a letter of credit from a bank. Issued by the importer’s bank, these are a written commitment to pay the exporter. The letter of credit guarantees payment of a specific amount, as long as the exporter meets certain conditions that are spelled out in the agreement by a certain date.

“With a letter of credit, it is pretty much guaranteed that exporters will get paid when they ship the product,” says Wong. In the end, it doesn’t matter how big an export deal is—unless you actually get paid.

Archives, Insurance

ABROAD MINDED

May 15th, 2017 Elaine Pofeldt Leave a comment

When a U.S. spice company sent its products to Japan, it suffered an unwelcome surprise: A food supplier had irradiated the spice to kill vermin. The irradiation was detected when the spices were screened in Japan.

Tiny amounts of irradiation would not have been a problem in the U.S., but the spice could not make it past border officials in Japan. “Japan cares a great deal about radiation levels in the food it gets,” says attorney Jeremy King, who heads the Olshan Frome Wolosky law firm’s insurance coverage practice in New York City.

With the product unusable, the company filed a successful claim on its foreign property and general liability package insurance policy.

As the spice maker discovered, carrying foreign liability insurance is smart business. An off-the-shelf commercial general liability policy often will not protect a business from situations arising outside of North America without an endorsement expanding the coverage territory, notes King. Typically, say experts, exporters will buy a package policy that is tailored to the situations they may encounter abroad.

Beyond that, in today’s volatile political climate, it is important to be prepared for the unexpected, say brokers.

“You have a new administration that is changing the landscape of geopolitical strategies,” says Jason Turner, CEO of Venbrook Group, a multinational property and casualty insurance firm headquartered in Los Angeles. “There is the potential for a heightened level of risk out there for businesses that do business abroad.”

Nonetheless, purchasing a foreign liability policy can turn into a giant research project. Here is a guide to determining if you need foreign liability insurance, what type you need and how to purchase it.

Do You Need It?

Not every firm needs a global liability policy. To determine if you do, ask yourself four key questions, advises Cathleen Muller, second vice president of Travelers Global Practice in Hartford, Conn.: (1) Does your company plan to have any employees travel outside of the U.S.? (2) Do you sell products or services outside of the U.S.? (3) Do you rely on a foreign supply chain for materials or finished goods? (4) Does your company have its own locations or store products outside of the U.S.?

“If the answer is yes to any, you should think about purchasing a global policy,” says Muller.

It is also mission-critical to look into the insurance requirements in any contracts with export clients. “They must be absolutely sure their insurance matches the contractual obligations within the country where they exporting,” says Simon Cassey, senior vice president of Chesterfield Group, an insurance and reinsurance group in London.

Do You Have the Right Broker?

The broker who sold you your commercial general liability policy may not be the best person for the job. Look for a broker experienced in selling international insurance.

“Your local agent is probably not as well versed in intentional and global exposure as someone that does it all the time,” says Ashley M. Hunter, president of HM Risk Group, an underwriter with offices in Austin, Texas, and London.

One way to find the right broker, says Hunter, is going through your trade organization. “The associations are usually a helpful resource,” says Hunter.

Before you purchase a policy, make sure to interview several brokers, advises Marc Snyderman, an attorney in Cherry Hill, N.J. He advised United Technical Resources (UTRS) Inc., a 250-employee government contractor based in the same town, on purchasing foreign liability insurance as its outsourced general counsel. UTRS, an engineering services firm, assisted in the design of a mortar fire control system for short-range mortars and supports the prototyping and manufacturing of this product by the U.S. Army.

“You want to talk to a couple of different brokers and see who knows the business you are in and has placed that kind of work before,” Snyderman says. “A mom and pop brokerage shop may not have placed an international policy.”

Through his due diligence, Snyderman found his client could get better rates with a larger firm. “In the insurance business, the larger brokers have more access to larger policy pools and they get better rates,” Snyderman says.

If you run a smaller firm, your challenge will be finding a broker that will work with you. “They don’t always take on small companies,” says Snyderman.

Do You Have a Game Plan?

Once you select a broker, give careful thought to the countries where you plan to operate now and plan to trade in the future. Many policies have exclusions for particular countries with which the U.S. has restricted trade. “You need to make sure the countries listed are not the countries you are doing business with,” says Hunter.

Typically, says Hunter, exporters will buy what is known as exporter foreign liability insurance. The two major insurers for whom many brokers write policies are Chubb and XL Catlin. “They specialize in small exporters globally,” Hunter says.

Exporter foreign liability policies may range anywhere from about $7,500 to $100,000 or more, according to Hunter. “It all depends on what the product is and where it is being exported,” she says. “If it’s like a battery going into a Samsung phone, we’re nervous about those things. We’re going to charge you a premium.”

However, the type of foreign liability insurance you purchase must be tailored to your business. For instance, at Venbrook Group, Turner says many clients emphasize political risk coverage and then build on that by adding trade credit insurance and transit coverage.

Snyderman’s client UTRS planned to send staff to Tunisia to train Army personnel, so it purchased an international travel policy that would cover them if, for instance, someone became ill and needed to return home for medical care. The premium cost “a couple of thousand dollars,” based on about five to 10 employees who travel internationally, he says.

Are You Ready to Get Sued?

Make sure you purchase a policy that will give you adequate coverage from legal costs if you get sued, advises Hunter. If the limits on your coverage are, for instance, $1 million, she advises you to ensure your defense costs are outside of those limits. “You don’t want your legal defense costs to come out of the same bucket you have to pay a claim out of,” says Hunter.

Hopefully, you’ll never get sued by your overseas business connections, but you’ll sleep easier at night knowing that if it happens, your company is prepared.

Archives, Banking, Global Trade Daily, In The News, International Banking, News

LOAN RANGERS

February 14th, 2017 Elaine Pofeldt Leave a comment

When Lisa Bitsky, owner and president of Automated Design Corp., needed a loan in 2011, she headed to her local office of SCORE, a nonprofit that advises small business. A SCORE advisor suggested that her company apply for an SBA Export Express loan, which is guaranteed by the U.S. Small Business Administration. The advisor believed Automated Design Corp. was a good fit, given that it had begun exporting its products to Japan in 1992. Automated Design Corp. builds custom automation, including sports-testing equipment for sporting goods used in golf and basketball and for athletic shoes sold domestically and internationally.

Armed with the paperwork the SCORE advisor had advised her to bring, Bitsky completed the forms within about 30 minutes, and the SCORE officer submitted them to several banks for her. Five days later, she had the $100,000 she requested for her seven-person Romeoville, Ill.-based firm in her account thanks to a loan from Borrego Springs Bank (since acquired by Sterling Financial Corp. in Spokane, Wash.) at a little over 7 percent interest.

While that interest rate was substantial, Bitsky counted herself lucky to get a loan at all during a period when banks were recovering from the Great Recession. “In 2011, to get a $100,000 loan was huge,” recalls Bitsky, who used the funds to develop technology that positioned her business well when economic recovery came. One technology it developed, called GenIV, is used by manufacturers to determine the compression of golf balls in R&D and quality control, says Bitsky. It can also be used to test baseball bats.

Automated Design Corp.—which has generated $1.6 million in annual revenue in recent years and now exports to countries including Australia, Canada, China, Mexico, South Korea, Taiwan, Vietnam and the U.K.—has seen a big boost in growth recently thanks to its investment in R&D. “We are going to set a record this year,” says Bitsky of Automated Design Corp.’s expected 10 percent increase in sales for 2016.

Bitsky is now an enthusiastic supporter of the SBA’s export loan programs. “These people know what they are doing,” she says. “They are truly there to make you succeed.”

If you’re looking for export financing, the SBA’s loan programs for exporters may be worth considering in 2017. These programs provided $6.6 billion in financing to small business exporters during President Obama’s administration, says Marianne Markowitz, regional administrator of the SBA’s Midwest Region. Generally, manufacturing and mining businesses with up to 500 employees and non-manufacturing businesses with up to $7.5 million in annual revenue are eligible for SBA programs, but there are exceptions.

“We would love to help small businesses grow their businesses through exporting,” says Markowitz.

While it isn’t yet clear what President Trump plans to do with the SBA’s loan programs, fixing the U.S. trade deficit was a cornerstone of his campaign, so it will be worth keeping an eye on these programs in coming months.

Here is a guide to the SBA’s programs for exporters as they stand now.

Choose the right program

If you’re looking for financing for your export operations, the SBA offers three main programs that may be able to help you. The SBA Export Express program, which Bitsky used, offers financing up to $500,000, primarily to businesses that have been operating for at least 12 full months. Under the streamlined application process, the SBA promises to evaluate loan applications and provides an approval decision in 36 hours or less. To qualify for an Export Express loan, you must demonstrate that it will allow you to enter a new export market or expand in an existing one.

For exporters who need up to $5 million to fund export transactions, the Export Working Capital Program is also an option. It provides advances against firm purchase orders from foreign buyers or to support foreign accounts receivable. The money can be used to finance supplies, inventory, work in process or production of export goods or services. These loans generally have terms of one year or less but may extend to three years.

A third option is the International Trade Loan Program, which offers loans of up to $5 million for fixed assets and working capital for businesses that plan to start exporting, want to continue exporting or have been adversely affected by competition from imports. Intended to provide long-term financing, International Trade Loans have terms up to 25 years.

Not sure which program is right for you? Markowitz recommends contacting advisors who work with the program, starting with the agency’s Export Assistance Centers (www.sba.gov/managing-business/exporting/us-export-assistance-centers). You can also get help at SCORE (score.org), Small Business Development Centers (americassbdc.org) and Women’s Business Development Centers (wbdc.org). The SBA also runs Export Assistance Centers (www.sba.gov/managing-business/exporting/us-export-assistance-centers), where you can get help.

“I always ask them to go to our counselors first,” says Markowitz. “We can help them understand the requirements of the program and if it’s a good fit.”

To increase your odds of success, potential borrowers can submit their profile through LINC, an online matchmaking system between borrowers and lenders, when you apply. “This profile is put out to all of the lenders in the space,” says Markowitz. “We’ve had a ton of success with that.”

You can also go straight to participating banks for advice. The SBA publishes a list (www.sba.gov/managing-business/exporting/export-loans/export-lenders/export-express-program-lenders), where you may be able to find a local lender eligible for the SBA’s loan guarantees.

Understand what a loan will cost you

When you take out an SBA loan, you will pay both interest and fees. These vary with the program you enter. Given that the Federal Reserve recently raised interest rates, it is important to understand what your costs will be.

For Export Express loans, the interest rate is currently prime plus 6.5 percent for loans up to $50,000. For loans over $50,000, it is prime plus 4.5 percent.

For International Trade Loans, the maximum interest rate for loans with terms of less than seven years ranges from prime plus 2.25 percent for loans over $50,000 to 4.25 percent for loans up to $25,000. For loans with terms of seven years or longer, rates range from prime plus 2.75 percent for loans above $50,000 to prime plus 4.75 percent for loans up to $25,000.

For the Export Working Capital Program, there is no maximum interest rate, but the SBA monitors lenders’ interest rates for “reasonableness.”

To encourage banks to make export loans, the SBA provides loan guarantees. The fees the SBA charges for processing loans are tied to these guarantees.

For Export Express loans, there is a 90 percent guarantee of loans of $350,000 or less and a 75 percent loan for loans greater than $350,000. For both the International Trade Loans and the Export Working Capital Program and International Trade Loans, the guarantee is 90 percent for loans up to $4.5 million. However, there is a maximum guarantee of $4 million for International Trade Loans, compared to $4.5 million for the Export Working Capital Program.

On all three export loans, there are no SBA fees on loans of $150,000 or less. However, for loans above $150,000, there are fees charged on the guaranteed portion of the loans. The fee on the guarantee portion is 3 percent for loans from $150,001 to $700,000, 3.5 percent for those from $700,001 to $1 million and 3.75 percent if it is above $1 million. There is also an annual service fee on all loan sizes of .546 percent on the guaranteed portion of the outstanding balance.

All of the SBA’s export loan programs want owners to have some skin in the game, and to get an export loan, you must provide a personal guarantee. That means you are on the hook personally for your loan if your business cannot pay it back and must put up collateral. “If a loan isn’t paid back we go through liquidation,” says Markowitz. “It’s the same standard as any other bank loan. You assign your personal assets as part of that personal guarantee.”

Bitsky, whose firm brings in about $1.6 million in revenue annually, is aiming to pay off the 10-year loan early, by the end of this year, given the recent interest rate hike. “I know interest rates are going to start creeping up a bit,” says Bitsky. “That one follows prime.”

Try going after a grant

Many business owners don’t know that the SBA provides grants to exporters—yes, money you don’t have to pay back.

The State Trade and Export Promotion (STEP) grant program directs money to individual states, which then provide grants directly to small businesses to help them learn how to export, participate in foreign trade missions and trade shows, obtain services to support foreign market entry, develop websites to attract foreign buyers and design international marketing products or campaigns. To find out if your state participates, go to www.sba.gov/managing-business/exporting/step.

Each participating state has a listing that includes a contact and explains what types of export-related activities are eligible for funding. “It is a very flexible grant,” says Markowitz.

That’s good news for U.S. exporters who must adapt to a trade environment that is apt to be changing very quickly as Trump begins to implement his policies in the months to come.

Archives, Features, Global Trade Daily, In The News, News, Top Banks

TOP 25 GLOBAL BANKS

December 6th, 2016 Elaine Pofeldt Leave a comment

It’s a great time to be an exporter. The recent American Express Grow Global Survey found that 80 percent of U.S. businesses with $250,000 to $1 million in revenue, and who sell outside the U.S., report higher revenue than one year ago—and 26 percent of their revenue growth is, on average, linked to international sales.

But financing is critical to take advantage of export opportunities. To support exporters in identifying the best banks to help, we have named 25 that have strong export services and, in many cases, have some of the highest assets under management.

AMERICAN EXPRESS
americanexpressgrowglobal.com | HQ: New York City | Assets: $161 billion
AmEx’s Global Commercial Payments division offers a range of payment and lending products that assist exporters with travel and everyday business spending, cross-border payments, global currency solutions and business financing. Through its vPayment service, American Express also provides companies with single-use virtual account numbers that they can use to pay suppliers electronically. In addition, FX International Payments, an American Express online platform, lets businesses send, receive and manage their foreign currency wire payments. The company’s Buyer Initiated Payments let companies pay suppliers electronically, giving them more control over their payments, extending their days payable outstanding and adding to their working capital flexibility.

BANK OF AMERICA MERRILL LYNCH
bofaml.com | HQ: New York City | Assets: $2.195 trillion
Bank of America Merrill Lynch has had a heavy focus in recent years on using technology to better serve exporters. “We are bullish about the future of trade and supply chain finance, particularly in the middle market space where eCommerce has leveled the global playing field for smaller companies,” says Percy Batliwalla, head of Global Trade and Supply Chain Finance at Bank of America Merrill Lynch. Among the bank’s innovations are a patent-pending technology to access document images on CashPro Trade, a platform that helps businesses in more than 50 countries more effectively manage trade flows around the world. With an interactive dashboard and innovative trade calendar, exporters can accelerate payment and reduce risk by tracking maturing invoices and discounting when it makes sense.

BB&T
bbt.com | HQ: Winston-Salem, North Carolina | Assets: $222.6 billion
BB&T, an Ex-Im Bank Delegated Authority Lender and U.S. Small Business Administration Priority Lender, offers products and services that enable clients access to export working capital, better manage overseas commercial and country risk, and render and collect international payments. Through BB&T’s online TradeAssist platform, exporters and importers can receive notice of letters of credit, initiate documentary and/or clean collections, track documents and payment activity, and receive and review international standby letters of credit. BB&T also provides web-based communication services to help importers and exporters execute real-time foreign currency trades.

BNP PARIBAS
(Bank of the West and First Hawaiian Bank)
bankofthewest.com | BNP Paribas HQ: Paris | Assets: 1.087 trillion
Giant global bank BNP Paribas has a network of 100 trade centers in 60 countries and owns BancWest Corp., a holding corporation for Bank of the West and First Hawaiian Bank. Customers can use a Trade Finance App that lets exporters manage international standby letters of credit. It can also be used to keep up with trade finance transactions such as import or export letters of credit, import or export collections, shipping guarantees, financing requests and trade related banker’s guarantees. BNP Paribas is a member of factoring networks Factors Chain International and International Factors Group, which offer factoring in a buyer’s country for exporters. This financing comes from advances against outstanding accounts receivable.

BNY MELLON
bnymellon.com | HQ: New York City | Assets: $1.7 trillion
BNY Mellon has recently been expanding its FX business, as customers seek more assistance in managing their currency exposure. The bank, which has nine sales and trading centers around the world, has a global custodian network to provide local liquidity. Trade Technologies’ Global Trade Management platform offers automated global trade documentation presentation. BNY Mellon says it offered the first web-enabled trade front office with multi-language capacity, the first web-based letter of credit and purchase order reporting, and the first web-based imaging.

BOK FINANCIAL
bokfinancial.com | HQ: Tulsa, Oklahoma | Assets: $33 billion
BOK Financial offers an extensive suite of services for exporters, including Exporter’s Plus, a full-service solution for export letter of credit document preparation, compliance assurance and presentment. Its online FX system, FX Advance, provides real-time rates, with audit and reporting tools to manage currency exposure. BOK Financial has an extensive network of correspondent foreign banks which U.S. exporters can use to their advantage when doing business globally.

CITIGROUP
citibank.com | HQ: New York City | Assets: $1.4 trillion
Citi Treasury and Trade Solutions offers clients a comprehensive suite of trade services and finance products to facilitate commercial flows and finance supply chains. Its expertise includes trade finance, trade services, export and agency finance, trade working capital finance and commodity finance. With hundreds of years of experience in trade finance, the bank has deep knowledge of structuring complex and unique transactions and a large international network of operating countries. The bank’s international network of dedicated trade professionals includes more than 600 worldwide in all major markets. Its syndication franchise has the ability to structure global and market leading trade finance transactions.

COMERICA BANK
comerica.com | HQ: Dallas | Assets: $71 billion
A major lender in the Ex-Im Bank Working Capital Guarantee program, Comerica Bank is also one of the top providers of letters of credit in the U.S. It offers services to exporters through its International Trade Finance Group. The bank’s Global Capital Markets Trading Advisors advise clients on strategies to manage currency risk exposure. Services also include import/export financing, international payment solutions, foreign exchange, foreign receivable financing, foreign receivable discounting, foreign buyer financing, supply chain financing and working capital loans.

DEUTSCHE BANK TRUST CO. AMERICAS
gtb.db.com | HQ: Frankfurt | Assets: $1.5 trillion
Deutsche Bank has positioned itself to serve clients in increasingly global markets, with a presence in more than 70 countries and strong relationships with export credit agencies and private risk insurance companies. It has strong bases in major emerging markets such as the Asia Pacific, Central and Eastern Europe and Latin America. Services include advisory and distribution services, documentary collection, documentary remittances, financial supply chain solutions, letters of credit, standard remittances, structured commodity trade finance, syndicated trade loans and trade receivables finance.

EAST WEST BANK
eastwestbank.com | HQ: Pasadena, California | Assets: More than $30 billion (East West Bancorp)
An active lender in the Ex-Im Bank Working Capital Guarantee program, East West Bank was recognized as the U.S. Small Business Administration’s 2015 Export Lender of the Year. It won the award after providing $16.43 million in export financing to small businesses in 2014. Services include pre-export financing, export bill purchased, export acceptance, export finance through Ex-Im Bank, the Export-Import Bank of China, and the bank’s network of foreign credit insurance agencies, letters of credit, and RMB-denominated export trade settlement for exporters.

FIFTH THIRD BANK
53.com | HQ: Cincinnati | Assets: $142 billion
Fifth Third Bank provides access to government programs through which exporters can get loans against export-related inventory and work-in process, as well as direct loans to foreign customers of its exporting clients. It works with Ex-Im Bank, Export Development (Canada), the International Finance Corp., Inter-American Development Bank and European Bank for Reconstruction and Development. Services include bankers’ acceptances, credit insurance, documentary collections, export financing, foreign exchange, Global Trade Direct secure internet portal for managing export activity, letters of credit and pre- and post-export financing.

HUNTINGTON BANCSHARES
huntington.com | HQ: Columbus, Ohio | Assets: $101 billion
Huntington is a very active lender with Ex-Im Bank and provides direct financing alternatives to foreign purchasers of U.S. made goods, up to 85 percent of the contract value. It offers credit facilities starting at $350,000. Huntington received the President’s “E Star” Award for Export Service in 2013. That was for its development of creative financing solutions for exporters and work with regional business and trade promotion groups. The bank is also known for its customer satisfaction. It just ranked highest in the J.D. Power U.S. Small Business Banking Satisfaction Survey.

HSBC BANK USA
us.hsbc.com | HQ: London | Assets: $198.8 billion
HSBC is a big champion of overseas trading and an active Ex-Im bank lender. The bank has kept a keen eye on the opportunities globalization presents and offers exporters reports such as “Trade Winds: shaping the future of international business.” The bank has developed a Trade Forecast Tool that provides both a short and long-term view on trade for 20 markets which can be used from tablets and smartphones. Its services include currency exchange, documentary collections, Ex-Im Bank Working Capital Guarantee Program, export collections, FX trading, letters of credit, trade credit insurance, information management, wire transfers and working capital loans.

J.P. MORGAN CHASE AND CO.
jpmorgan.com | HQ: New York City | Assets: $2.4 trillion
J.P. Morgan Chase has facilitated trade payments for clients for 200 years. The bank connects clients with trade, supply chain and export finance solutions. Supported by a global, multilingual and multicurrency platform, the bank’s supply chain finance solutions connects buyers to more than 12,000 suppliers. Services include bank-to-bank reimbursements, bank payment obligation, documentary collections, document preparation, escrow services, Ex-Im Bank Working Capital Guarantee program, export credit-agency-backed finance, letters of credit, open account processing, project-related finance structures, private sector insurance, purchase order management, structured receivables finance, supply chain finance and various trade-related loans.

KEYBANK
key.com | HQ: Cleveland | Assets: $135 billion
With offices nationwide and global banking relationships, KeyBank’s international trade services team is focused on helping clients manage and mitigate their international trade risk. The bank actively participates in Ex-Im Bank’s Export Working Capital Guarantee and Medium Term Foreign Buyer Finance programs. It was also selected as a partner bank in the pilot program of the U.S. Global Business Solutions Initiative in 2013, an interagency effort to add 50,000 small businesses to the nation’s base of exporters by 2017.

M&T BANK
mtb.com | HQ: Buffalo, New York | Assets: $124 billion
M&T Bank—awarded the Presidential “E” Award for excellence in international trade—is known for its creative solutions to exporters’ challenges. When a packaging machinery manufacturer in western New York suffered a cash flow shortage, it turned to M&T Bank, which offered a working capital loan guaranteed by Ex-Im Bank that came with expanded advance rates against export-related inventory and foreign accounts receivable. Services include export credit insurance, documentary collections, foreign deposited checks, letters of credit, revolving lines of credit and working capital financing.

PNC BANK
pnc.com | HQ: Pittsburgh, Pennsylvania | Assets: $361 billion
PNC has worked for more than 30 years with Ex-Im Bank to help foreign purchasers finance machinery, equipment or services from U.S. suppliers as well as working capital loans for export-related inventory and accounts receivable. The bank is a founding stockholder in the Private Export Funding Corp., which helps finance the sale of U.S. exports. PNC offers robust digital services through the Global Trade Excellence program, a secure web-based transaction service and reporting system, where exporters can automate their reporting capabilities for their letters of credit, documentary collections and bankers’ acceptance transactions.

REGIONS
regions.com | HQ: Birmingham, Alabama | Assets: $125 billion
One of the top issuers of letters of credit in the U.S., Regions is part of the Export Working Capital Loan—Preferred Lenders Program run by the U.S. Small Business Administration. The bank’s Express Trade LC provides secure web access to letters of credit and collections applications from anywhere in the world. Other services include collections, foreign exchange, post-export financing, treasury management and global payments, and working capital financing.

SANTANDER BANK
santanderbank.com | HQ: Boston | Assets: $85 billion
With market presence in Argentina, Brazil, Chile, Colombia, Germany, Mexico, Peru, Portugal, Poland, Spain, the United Kingdom and Uruguay, Santander Bank offers both on-the-ground expertise and global services to exporters. It also offers a suite of market research and social networking solutions to support companies’ international expansion. The Santander Trade Portal provides corporates with access to trending market insights and business opportunities, while the Trade Club & Trade Network allow businesses to connect with users and local experts in a given country of interest.

SILICON VALLEY BANK
svb.com | HQ: Santa Clara, California | Assets: $42 billion
When the largest sale in a California-based software company’s history was made to a British customer, the pound was losing value against the dollar. Working with Silicon Valley Bank, the software firm locked in an earlier, more favorable exchange rate and did not lose money on the contract. Calling itself the “bank of the innovation economy,” Silicon Valley Bank provides export related services such as currency hedging to the specific industries it serves. It has a network of banking partners to deliver global solutions in 60 countries in Europe, Asia and North America.

STANDARD CHARTERED
sc.com | HQ: London | Assets: $660 million
Focused on Asia, Africa and the Middle East, Standard Chartered Bank offers a range of project finance solutions, among them financial advisory, structuring and underwriting. It brings clients relationships with more than 25 international export credit and multilateral agencies, such as Ex-Im Bank in the U.S. and The Compagnie Française d’Assurance pour le Commerce Extérieur (COFACE) in France.

SUNTRUST
suntrust.com | HQ: Atlanta | Assets: $205 billion
A preferred lender in the SBA Export Working Capital program, SunTrust offers services such as pre-export working capital, insured foreign receivables financing and buyer financing. For three consecutive years—2010-2012—the bank won the SBA’s Export Lender of the Year Award. SunTrust is a working capital delegated authority lender for Ex-Im Bank. Other services include currency exchange, documentary collections, global treasury management, international letters of credit and wire transfers.

U.S. BANCORP
usbank.com | HQ: Minneapolis | Assets: $429 billion
A robust array of trade finance services can be automated through U.S. Bank Global Trade, an online service that allows users to view a detailed transaction and communication history for each trade instrument, with email notifications in real time. U.S. Bancorp services also include approved payables financing, bank-assisted open account, banker’s acceptances, currency risk management, documentary collections, insured loans, letters of credit, pre-export finance solutions and receivables purchase facilities.

WELLS FARGO
wellsfargo.com | HQ: San Francisco | Assets: $1.9 trillion
Wells Fargo has racked up numerous accolades for its services—winning Global Finance magazine’s “Best Trade Finance Bank in the U.S.” award for 2014, 2015 and 2016, as well as The Asian Banker’s “Best International Trade Finance Bank in Asia Pacific” for 2015-16. The bank’s services for exporters are increasingly digital. For instance, CEO Trade, an online trade service, allows users to manage letters of credit and documentary collections. The bank was named Lender of the Year by Ex-Im Bank in 2012. It is consistently among the top five most active users of Ex-Im’s Working Capital Guarantee Program.

WESTERN ALLIANCE BANCORPORATION
westernalliancebancorporation.com | HQ: Phoenix | Assets: $17 billion
Western Alliance Bancorporation is one of the fastest-growing bank holding companies in the U.S. Its primary subsidiary, Western Alliance Bank, operates several full-service banking divisions: Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank. Its local bankers offer a full spectrum of deposit, lending, treasury management, international banking and online banking products and services. Other services include documentary collections, Ex-Im Bank Guaranteed Working Capital Lines of Credit, foreign currency wires, foreign exchange hedging, standby and commercial letters of credit, pre-export financing and revolving lines of credit.

Archives, Banking, Global Trade Daily, International Banking, News

6 TIPS WHEN SETTLING IN FOREIGN CURRENCIES

October 10th, 2016 Elaine Pofeldt Leave a comment

Rohit Arora, CEO of Biz2Credit in New York City, had to take currency fluctuations into account when striking a deal with an Australian firm to license the rights to bring his online matchmaking platform for borrowers and lenders to its own country. Arora had negotiated an agreement to invoice the company, Australian Finance Group (AFG), in Australian dollars for the licensing fees.

Arora, who works closely with banks through his platform, checked out the fees changed for helping hedge against currency fluctuations. They told him it would not be cost effective for the Australian transaction, which is in the $5 million to $7 million range, as the fees would range from 3 percent to 8 percent of the total invoice amount.

“For smaller transactions, it doesn’t make sense to hedge,” says Arora. “The hedging process is too expensive.”

Arora and his financially savvy team opted to take a DIY approach. They did an analysis of currency fluctuations for the Australian dollar over the previous two years, looking at the daily moving average, and negotiated an amount they would invoice AFG in Australian dollars that was somewhere in the middle of the highs and lows.

“We came up with a number we think is pretty comfortable,” says Arora, though he acknowledges he could lose money if there is an unforeseen event during the ongoing arrangement.

As many exporters find, settling a transaction in a foreign currency can be complicated. Given the nature of Arora’s business, he is more financially sophisticated than most and was able to come up with his own approach, but many exporters need to seek expert help from a banker or other advisor.

“There is no easy solution,” says Robert Bolle, key accounts currency trader for AFEX, a global payments and risk management solutions specialist in the Greater Los Angeles area that assists businesses with Forex (FX) currency market and risk management needs. “The currency markets are always moving.”

Nonetheless, it is very possible to shield your company from currency risks when settling transactions in a foreign currency. Here are some tips from experts on how to decide if it makes sense to settle a transaction in a foreign currency and to determine how best to protect from currency risks.

EVALUATE THE IMPORTANCE OF THE CUSTOMER

It is always easiest to invoice in U.S. dollars but that may not be convenient for some clients. Offering to invoice in your foreign partner’s currency, if that is what they prefer, may strengthen your relationship.

“Most U.S. companies invoice their international clients in U.S. dollars,” says Bolle. “U.S. companies really ought to be open to invoicing their clients in their local currencies.”

Currently, products from the U.S. have become very costly for importers in the UK because the pound dropped dramatically after Brexit, Bolle notes.

“Now is a great time for a U.S. company to offer a UK client the opportunity to pay in pounds,” says Bolle. “It would give them a competitive advantage and make them more attractive to the UK customer.” However, he adds, this would require some planning and re-adjusting of prices. “If the U.S. company were to do this, then they should seriously consider hedging their exposure.”

LOOK AT THE COSTS

Generally speaking, if a foreign currency is rising against the dollar, you should profit by invoicing in that currency, says Magda Szabo, a tax partner in the New York City office of the accounting firm Grassi & Co.

If a foreign country’s currency is falling against the dollar and you are a U.S. business with an investment there, you are going to be losing by doing the transaction that way, Szabo says. “At the end of the day, you are going to be impacted by which way the currency is swinging.”

However, the costs of opening a currency account and hedging a transaction can be substantial, so you need to weigh those factors when figuring out if a deal will work for you financially. Both banks and currency brokers offer currency accounts, and shopping around to find an arrangement that brings down the cost of the transaction is often worthwhile. “You have to weigh the cost and anticipated results,” says Szabo.

To achieve cost efficiencies, it is best to develop a strategy with your advisors for settling foreign transactions, rather than dealing with transactions on a one-by-one basis, says Bolle. “I’d never recommend that clients receive currency on a contract-by-contract basis,” he says. “With the levels of volatility we’ve seen recently, clients would leave themselves extremely exposed to adverse market moves without hedging at least part of their exposure.”

If you trade in multiple countries, it may make sense to offer settlements in foreign currencies only in the major markets where you do business. When you arrange contracts to lock in rates for a set period of time, you have to have individual contracts for each country, says Bolle. For instance, if you trade in both Singapore and the UK, you’d have to have separate contracts for each.

BUILD A HEDGE

When you invoice in a foreign currency, says Szabo, “the largest hazard is currency fluctuation and the risk of the currency moving up or down against the dollar.” Currently, the picture for U.S. companies exporting to Canada is fairly healthy, according to Bolle, but he notes that Europe is seeing some uncertainty related to Brexit. “The markets are extremely volatile right now,” he says.

Your bank or currency broker can advise you on whether it makes sense to hedge against a potential currency fluctuation and what type of transaction is best. “There are transactions you can engage in to offset and mitigate your risk,” Szabo says. Some transactions will protect you from a potential upswing or downswing in the currency you are using. “If you are worried about it going up or down and want to protect yourself in both directions, there is a different kind of hedging transaction,” she says.

Typically, the contracts exporters use to hedge are called currency forwards or FX forwards. If you sign a 90-day forward to buy the euro, for instance, it will lock in the euro at today’s exchange rates, says Bolle.

No matter what hedge you use, it can’t protect you from every potential risk, so make sure you have the cash reserves to insulate your firm if something goes wrong. “Any time you are dealing with variability in pricing, there is an element of gambling—an element of Lady Luck,” says Peter Bible, chief risk officer at New York City accounting firm EisnerAmper and former chief accounting officer of General Motors. The best solutions will narrow the effect of that variability in pricing, he says.

CONSIDER YOUR EXPOSURE

One rule of thumb when you are exporting manufactured goods is that the longer the period from initial contract and manufacture to shipment and delivery, the more exposure you have to fluctuations between the two currencies, says Bible. For instance, he explains, if you are making a vessel in Florida that is being sold to a shipping company in Greece, the time period between the start of the project and payment would be fairly long, bringing a lot of exposure. “The longer it is, the less likely that either the importer or exporter is willing to absorb that risk,” says Bible. “That’s when you need to bring in a third-party professional like a banker to provide a financial solution to lock in a price for both parties.”

However, if you’re shipping an order of shirts for which you know the client always pays in 30 days, the solution may be simpler, he says. Both parties may be willing to agree up front on an exchange rate that will apply when the delivery occurs, he says.

Be realistic about the potential for delays on your end of the transaction or in the shipping process, Bible advises. “What I’ve seen is companies not hedging their entire exposure,” he says. “They didn’t increase their position in the local currency, and the currency moved away from the dollar more quickly than anyone anticipated.” This scenario often comes up when companies are building a specialized piece of machinery that takes substantial time to build, ship and install, he says. Making sure your financial team stays on top of the project’s timeline and adjusts your hedging arrangements accordingly can help you avoid those risks, he says.

KNOW YOUR MARKET

Generally speaking, the highest risks of currency fluctuations are in developing countries with economies that are volatile. “If their currency is not pegged to the dollar, it can change dramatically overnight,” says Bible. If you do business in these markets, you may want to use a more comprehensive hedging strategy.

Some companies ultimately find that manufacturing locally is the best way to prevent currency risks in a particular market. “To have an operation in the country you are exporting to, you remove currency fluctuation from the equation,” says Bible. Of course, he adds, “For middle market companies, that’s not always feasible. That’s where financial instruments come into play.”

CONSIDER THE TAX IMPLICATIONS

If you play your cards right in hedging transactions, you may collect a capital gain—one on which you have to pay taxes. Ask your accountant to review the tax implications of any potential transaction with you before you move ahead with it. “Depending on the specifics of the transaction, it will impact you,” says Szabo.

If you can predict that impact ahead of time, you can plan ahead with your tax advisor. After taking the time to set up a hedging strategy that works, you’ll want to reap the rewards of the profits you earned—not pay a hefty tax bill.

Archives, Global Trade Daily, Insurance

WHAT YOU NEED TO KNOW ABOUT TRADE CREDIT INSURANCE

August 1st, 2016 Elaine Pofeldt 1 Comment

Many exporters get so excited about winning new business overseas that they forget about the potential risks. The hazards they overlook may include business perils like not getting paid by distant scammers and political risks such as the installation of a new government that seizes shipments or won’t let money out the country easily.

“They never step back, take a look at the big picture and recognize that all of their risk is concentrated in one or two vendors, one or two types of goods, or one or two countries,” says Steven J. Boyne, co-chair of the Insurance Practice Group at the Gunster law firm in Jacksonville, Florida.

Risks may be accelerating. Euler Hermes, a global provider of trade credit insurance, found in a May report that business bankruptcies in the U.S. are expected to rise by 3 percent in both 2016 and 2017, after six years of steady declines. The Asia-Pacific region will see a 13 percent increase, according to the report’s projections, while Latin America will witness an uptick of 17 percent. The report cites causes such as weak long-term growth, increased turmoil in sectors like commodities and the domino effect of major bankruptcies.

Fortunately, there are well-tested ways to reduce the risks that you won’t get paid by your export customers. For exporters who do business overseas frequently, getting a trade credit insurance policy can bring more security. “What credit insurance does is protect you against the nonpayment of your receivables,” says James Daly, CEO and head of Euler Hermes Americas. Trade credit insurance will also bring your insurer’s help in collecting very overdue receivables or with recovering what is owed to you after a client becomes insolvent.

Boyne says some of his clients have collected 65 cents on the dollar on their late receivables through their trade credit insurance policy. “Frankly, getting 65 cents on the dollar from a country like Venezuela is pretty good,” he says.

Useful as trade credit insurance may be, perusing plans to find the right one is generally as much fun as reading the legal notices in a newspaper. “These policies range from 20-page to 600-page documents,” says Michael Senderovich, founder and president of Zeyger Insurance Services LLC in Woodland Hills, California, who works with small and midsize exporters in manufacturing and other fields.

Here’s a handy crib sheet to help you figure out if you need trade credit insurance, what type of policy to buy and how to keep your costs in line with your budget.

FIND AN EXPERT BROKER

Trade credit insurance is so complicated that most people outside of the insurance field find the policies hard to understand. Senderovich recommends asking trusted brokers of your other insurance policies to recommend a broker who has expertise in this niche, so you can tap your broker as a guide.

“You’re not going to go to an attorney who does real estate to get a divorce,” says Senderovich. “If the broker doesn’t know what they are reading, they are putting their client in a bind.”

CREATE THE RIGHT RISK-MANAGEMENT STRATEGY

If you run a small company or export to just a handful of overseas clients, you’ll probably only need an occasional solution to your export credit insurance needs.

One non-insurance option that many businesses use is a letter of credit from a bank. This is a letter that one bank issues to another to guarantee that payment for an order will be made. Letters of credit can be a relatively easy solution, but the fees—often between 1 percent and 3 percent of a deal—can add up if you find yourself trading more frequently than you expected.

Another option is single-buyer trade credit, which is available through brokers and the Export-Import Bank of the U.S. Ex-Im’s policies offer protection against political and commercial risks such as a bankruptcy that disrupts a transaction with a single export client.

For businesses that do a high volume of overseas transactions, buying a policy that covers all of their overseas buyers is often worth it—and is often required by the bank that issued their line of credit. However, given the complexity and costs of many policies, it may offer too much horsepower for a small business. “They need to have more than $1 million of annual sales to consider it,” says Boyne.

Premiums for these policies tend to be priced more attractively than for single-buyer policies. “From an insurance company’s point of view, they are spreading good risk over bad risk,” Boyne concludes.

GET THE RIGHT PRICE

By all accounts, pricing for trade credit insurance is highly complex. Generally speaking, insurance companies take into account a matrix of risk factors in setting premiums, says Daly. “There is no simple, ‘What does it cost?’” he says.

If you are planning to sell your goods to a solid client such as Walmart in a stable country like Canada, your premiums will likely be lower than if you are trading in the oil and gas sector in Venezuela, for instance. However, if you sell to clients in a mix of industries and countries, your rates will reflect the risk across all of them. Generally speaking, Daly says, a company that does $10 million to $20 million in annual sales might need to budget between $20,000 and $30,000 for annual premiums. That is a substantial amount but Daly says it is important to compare the cost to other methods of reducing risk, like letters of credit, to see if you come out ahead.

Shop carefully when you by trade credit insurance, experts say. Quotes aren’t always set in stone, according to Senderovich. “If the application is submitted and the underwriting team sees something they don’t like they will adjust the premium accordingly,” he says.

Make sure you also ask about any brokers’ fees that will be added to your premium, Senderovich advises. These can be all over the map. “They could be as little as $150 per transaction,” Senderovich says. “They could be $500. I’ve seen brokers’ fees of a couple of thousand dollars, where it’s almost 50 percent of the policy premium.”

Bear in mind that your policy probably isn’t protecting you from 100 percent of the risk in your transactions, Senderovich continues. Even if you invest heavily in a policy, you still need to be careful about which customers you choose. “People don’t realize you’re not insuring 100 percent of the risk,” says Boyne. “Maybe it’s 75-85 percent of accounts receivable in a transaction. You’re still going to take part of a loss.”

MAKE YOUR INSURER AN ALLY

One of the biggest benefits of a trade credit insurance policy is having access to risk management expertise that you might lack if you don’t have a department devoted to it at your company. Once you buy trade credit insurance, don’t hesitate to reach out to your insurance team if you need help researching a potential client whom your gut instincts tell you may be troublesome down the road. It will save you many hours of time and potential headaches later.

“They really understand the risks associated with your business,” says Boyne. “They can, in effect, act as your company’s risk management department. You really are getting a partner who helps you manage your risk.”

Daly gives an example of a manufacturer of electronic products who wants to export them into Latin America. “We would help our customers who are thinking about exporting to say we see this as an established trade group that will enable you to take advantage of an opportunity in that market,” he says. “We will help you identify safe buyers or customers to whom you can export. We will enable your growth by identifying where there is clearly a sales opportunity and at the same time a safe sales opportunity.”

Given all of the turbulence going on around the globe these days, safety is something worth considering if you can find a policy at the right price.

Archives, Banking

HOW TO SETTLE UP WHEN DOING BUSINESS IN MIDDLE EASTERN COUNTRIES

June 1st, 2016 Elaine Pofeldt Leave a comment

Jeremy Davis sells about half of the customized Rolex watches that his New York City firm Tempus Machina designs to clients in cities such as Dubai and Abu Dhabi. “They are extraordinarily wealthy and have an extraordinary amount of disposable income,” says Davis. “They can spend $25,000 on a modified Rolex.”

Fortunately, he’s had no trouble getting paid for his wares. The business, founded July 2015, accepts payments from these customers by wire transfer or credit card with no trouble. “It’s a fairly easy process,” he says.

Many companies that want to export their goods or services to the Middle East use a similar approach to Davis’—and discover that it works very well. However, the situation may quickly become more complicated for those that establish a sales office or other presence in Middle Eastern countries and want to open a bank account for purposes such as cutting payroll checks. Strict anti-money-laundering laws force them to shoulder a considerable paperwork burden to open an account.

“It can really slow down the process,” says Rory Adamson, Client Services director at Radius, a U.K. company based in Bristol that provides accounting, HR, compliance and other services to companies that are expanding internationally.

While the process may be slow, it is possible for U.S.-based exporters to open a bank account in the Middle East. Here are some tips.

ASSESS YOUR BANKING NEEDS

“Most exporters from the United States really don’t need a bank account in the region if they are mainly just exporting products there,” says Tim Balconi, co-founder and managing partner at Timarus Group, a Boston-based firm that establishes partnerships between firms in the U.S., Europe and Asia with those in the Middle East. Typically, overseas companies can make payments to U.S. exporters by wire transfer, says Balconi.

The downside of wire transfers is they can be slow. You could call Dan Nainan an exporter of services—he’s a New York City comedian who performs in Middle Eastern countries such as Oman, Qatar and the United Arab Emirates. He had an unfortunate experience when he received the 50 percent deposit for one such show by wire.

“I remember it took almost two weeks for my payment to come in for my first show in Dubai,” recalls Nainan. “For me that’s awful. I have to have a deposit in order to be confirmed for a show.” Fortunately, he received it in time to travel there to make his curtain time.

For more recent shows in Dubai, Nainan has asked clients to instead transfer money to his Thomas Cook Borderless Prepaid MasterCard in U.S. dollars. His manager in India initially set it up for him, and he draws the money from the card by using it to make purchases. “I love it,” he says. “It works like a MasterCard.”

Some business owners find they can bypass wire transfers by using providers such as PayPal. Sarah Baldwin, who provided her marketing communications services to a client in Saudi Arabia last year, received her payments from that customer mainly through PayPal and occasionally via Western Union.

“What I like about PayPal is it keeps track of everything,” says Baldwin, based in Highland Park, Chicago. “If someone becomes behind on payments, you can send a friendly reminder under your logo.”

If you sell a product directly to consumers in the Middle East, another way to bypass banking hassles may be to handle transactions through Amazon. The online retailer has expanded its services in the Middle Eastern region and provides affordable shipping from the U.S., notes Balconi. “More consumers in the region are buying products via Amazon, which can be purchased through credit card, PayPal, etc.,” Balconi says.

PACE YOURSELF

If you plan to open a business entity in the Middle East, you will most likely need to open a bank account, unless you are doing business in a free trade zone. In many Middle Eastern countries, companies that want to set up a business entity need to open a bank account first. Unfortunately, opening a bank account may take a couple of months as a company meets the bank’s anti-money-laundering requirements, says Adamson. “The documents they require can be expensive for small companies to provide,” he adds. That is because of costs such as notarization.

On top of this, to open a bank account in many Middle Eastern countries, companies often need to establish a company license in a country first, says Balconi. Some companies require a local sponsor to set up a company license. In other countries, companies may appoint a leader from the U.S. to act as the general manager on that local license. However, this can’t be done entirely from a distance. “They would have to travel there occasionally,” says Balconi.

One way to speed the process somewhat is to research free trade rules in your industry for the country you are entering to find out about specific paperwork requirements, Adamson suggests. Make sure you have a business plan ready and can document whom your directors will be, he advises. Be prepared to address questions if your business is structured in a complicated way. “In my experience, the banks aren’t used to seeing complex corporate structures as much as in Europe and the U.S.,” he says.

CONSIDER YOUR OWN BANK

If you are already doing business through an international bank based in the U.S., there may be some advantages to asking that bank to help you set up a bank account in a distant country where it operates. “In my opinion, if a company is already banking with a bank in the U.S. that is operating in the Middle East, it is much easier to open a bank account because they obviously already have a history,” says Balconi. However, Adamson says that local banks can sometimes bring advantages, too. “Using a local bank can be just as quick, if not quicker,” he says.

FIND A MIDDLEMAN

Another option for opening a bank account in the Middle East is to use an intermediary. Radius, for instance, works with firms ranging from Silicon Valley technology companies to Rust Belt manufacturers to set up their operations in distant countries. The company’s treasury service division will frequently open a trust account for clients in an overseas country, so the clients don’t have to set one up. Through an electronic portal, clients can control transactions, such as cutting payroll checks, issuing payments to vendors and paying government fees, which Radius does on their behalf. “We are trying to be the overseas back office for our clients,” says Adamson. For businesses that don’t want to take the DIY approach, services like this may offer a welcome relief from paperwork. n

Archives, Banking, Banking on Global Trade

EXPORT CREDIT AGENCIES abide

April 6th, 2016 Elaine Pofeldt Leave a comment

When credit insurance broker Joel Berman reached out to the Export-Import Bank of the United States to secure $1 billion worth of coverage for a fire engine manufacturer that wanted to export its vehicles to China, he got a prompt reply: “Do you want $1 billion or two?”

The fire engine company’s export deal ultimately fell through, but the experience underlined for Berman what it can be like to work with Ex-Im Bank under the right circumstances. “My standard commercial markets would have choked at $1 billion,” says Berman, founder of Credit Insurance International Risk Management in Smithtown, New York. “They couldn’t handle that kind of exposure.”

Most small and midsize exporters don’t need quite as much coverage as the fire engine maker, but for companies that need export credit insurance or who are seeking export financing, the agency can be a useful partner. Although Ex-Im Bank is known for helping big companies such as Boeing, Ex-Im says that more than 90 percent of its transactions—a total of more than 2,300 in fiscal year 2015—were with small businesses. And it is back up and running after its reauthorization in December, following its much-discussed shutdown after Congress let the agency’s lending authority expire in July 2015.

Ex-Im isn’t the only export credit agency that offers financial help to small and midsize exporters. U.S. firms that do business overseas can also get support from the U.S. Small Business Administration (SBA), the U.S. Department of Agriculture (USDA) or the Overseas Private Investment Corporation (OPIC), the U.S. government’s development financing institution. The support that export credit agencies provide ranges from insurance to loan guarantees, depending on the agency.

Is export credit agency financing right for you? That’s not always an easy question to answer. Here are some tips from experts to help you determine if it will be a good fit, if so which agency you should choose and how to make the most of the relationship.

FIND A WILLING GUIDE TO THE INSURANCE MAZE

If you’re shopping for export credit insurance, navigating the alphabet soup of agencies that help insure exporters can be very time consuming if you’re unfamiliar with them. Finding a good broker of trade credit insurance can make the process easier. A good place to start is Ex-Im Bank’s list of brokers that offer its trade credit insurance, available at exim.gov. Ex-Im’s insurance offers protection against commercial risks like nonpaying customers and political risk such as war.

While Ex-Im offers competitive rates, Ed Marsh, export adviser to American Express, notes that a number of private insurers such as Coface and Euler Hermes offer their own products. “Often, the insurance underwriting requirements are easier with private carriers,” says Marsh.

The Overseas Private Investment Corp. (OPIC) also provides insurance to protect American firms from political risk associated with overseas development projects—such as a country nationalizing a facility like a bottled water plant a U.S. firm has built there. It offers coverage in 150 developing countries, among them high-risk countries such as Iraq, Afghanistan and Pakistan. A specialized product like this may be important if you are doing business in a country that is facing a lot of turmoil. “It’s really hard to measure political risk,” says James Howard, an adjunct assistant professor of mathematics at the University of Maryland University College.

A good broker can help you determine if an export credit agency’s products are the best ones for you or if you should go with a commercial policy. “It’s about price and coverage: What is it going to cost me and am I going to get the coverage I want on what I want to sell,” says Gary Kirshenbaum, a vice president with Chicago-based Alper Services and director of the agency’s Alper Global Trade Risk Management division.

EXPLORE ALL OF YOUR FINANCING OPTIONS

Your hunt for export financing will be easier if you work with a bank that is experienced in working with exporters. Ex-Im Bank’s Lender Locator tool on its website can be a good place to start. Ex-Im guarantees working capital loans and finances purchases by foreign buyers, among a variety of other services.

Many cities also have district export councils that can point you toward banking professionals who can help you and offer other guidance, notes Bill Prout, a Houston, Texas-based commercial banker with Bank of Texas, a division of BOK Financial, and chair of the Houston District Export Council. To find a district export council in your area, go to districtexportcouncil.org.

“The key is connecting with an experienced banker as well as someone who understands the international side of banking,” says Prout. “If you just walk into your local branch, I don’t know that you will necessarily get the right person.”

Bear in mind that Ex-Im Bank doesn’t work with every exporter. If you run a business that has less than one year of operating history, is selling to military and defense clients overseas, or makes a product that does not include more than 50 percent of U.S. made content, you will not qualify for the agency’s programs, according to Gayle Roenbaugh, senior trade sales manager, Global Trade and Receivables Finance with HSBC Bank USA, NA.

In such cases, your bank may suggest you work with the SBA, instead. The SBA’s Export Express Loan Program offers expedited financing up to $500,000. The SBA also provides working capital loans up to $5 million and international trade loans of up to $5 million that can be used for purposes such as building or expanding facilities in the U.S. that will be used to produce goods and services involved in international trade.

What if you’re involved in exporting an agricultural commodity? The USDA may be able to help you. The Foreign Agricultural Service of the U.S. Department of Agriculture offers several programs to help U.S. agricultural exporters compete in foreign markets. The USDA’s Commodity Credit Corp., for instance, runs programs that give United States agricultural exporters or financial institutions a guarantee that they will be repaid for short- and intermediate-term commercial export financing to foreign buyers.

Understand that while export credit agencies perform some bank functions, they are guarantors to banks and don’t provide bank services, so you cannot do all of your banking through them. “There is always a private sector financial institution doing the funding and providing traditional bank services such as letters of credit, depository accounts, etc.,” says Roenbaugh. By viewing export financing as a team sport, you’ll be able to keep all of your bases covered.

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