Trade connect finance all slides

1
Export Trade Finance &
Insurance Seminar
Trade Connect
International Trade Finance:
A Banker’s Perspective
Global Trade Cycle Finance
Presented by:
Caroline Brown
FVP, Trade Finance Officer
International Trade Finance, Western Market
May 8, 2013
1

§  Intro to Comerica Bank
§  Tools/Goals of Trade
§  Overview of Global Trade Cycle
§  Methods of Payment
§  Global Trade Cycle Solutions
Objective

Comerica Bank –
An Overview
3

Comerica Bank – An Overview
§  Headquartered in Dallas, Texas.
Locations in Arizona, California,
Florida and Michigan, with select
businesses operating in several other
states, as well as in Canada and
Mexico.
§  $59.3 billion in total assets as of
December 31, 2009
§  #559 among Fortune’s largest
companies
§  #12 among banking companies with
the most commercial and industrial
loans (American Banker)
§  Among the top 10 Ex-Im Bank working
capital lenders
§  #30 among DiversityInc “Top 50
Companies for Diversity” in 2009

§  Leading Letter of Credit Provider within U.S. Comerica ranks #9
among the top U.S. commercial banks, in letter of credit outstandings.1
§  Leading Lender for Ex-Im Bank Working Capital Guarantee Program.
Comerica ranks #7 among the top 10 lenders.2 We hold the “Super”
Delegated Authority and “Fast Track” lender designations.
§  Foreign Correspondent Bank Network. Comerica has coverage
throughout Asia, Europe, Latin America, the Middle East and Africa.
§  Strong Credit Ratings. Comerica has strong credit ratings -- required for
the acceptance of a Standby Letter of Credit. Present Ratings -- “A1” by
Moody’s, and “A” by Standard & Poor’s and Fitch Ratings.
1 Source: Documentary Credit World (FDIC Statistics on Banking), 1st Quarter 2009
2 Source: Ex-Im Bank, FY 2009
Key Facts

§  Global Trends
§  Primary Goals
•  To optimize working capital
•  To mitigate key risks
•  To reduce costs
•  To simplify the trade process
Trends/Goals in Trade
Company

U.S. Exports and Imports
Over the last decade, there has been steady growth in
global trade---U.S. exports grew 35% and U.S. imports
grew 28%.
U.S. Exports and Imports
2000-2009
Value
in
thous ands
($ US D )
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
1,600,000,000
1,800,000,000
2,000,000,000
2,200,000,000
2,400,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports Imports
Source: International Trade Administration

Note: Import data is not available by state

Source: International Trade Administration, TradeStats Express
U.S. Stats
Comerica’s Footprint -- 40% of Total Exports
In 2009, Comerica’s footprint represented 40% of total
U.S. exports. TX is the #1 export market, followed by
CA, #2 (11% of total exports), FL, #5; IL, #6; MI, #9;
and AZ, #24.
#2
#24
#1
#9
#5
#6
0
20,000,0 00
40,000,0 00
60,000,0 00
80,000,0 00
100,000 ,000
120,000 ,000
140,000 ,000
160,000 ,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
California Exports
2000-2009
Value in thousands ($USD)
Exports
Trend/Goals in Trade

California Stats
California Depends on World Markets
California’s export shipments of merchandise in 2009
totaled $120 billion, ranking California second only to
Texas ($163 billion) among the states in terms of total
exports in 2009.
California Exports
1999-2007
V alue
in
thousands
($US D)
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
Exports
Exports – Top Trading Partners
The state’s top 10 trading partners are:
(figures in thousands, $USD)
§  Mexico 17,484, 818
§  Canada 14,280,022
§  Japan 10,905,099
§  China 9,742,859
§  South Korea 5,944,788
§  Hong Kong 5,803,780
§  Germany 4,442,225
§  Taiwan 4,120,871
§  United Kingdom 3,916,277
§  Netherlands 3,567,219
California Exports
2000-2009
Value
in
thous ands
($ US D )
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports
Trend/Goals in Trade

Overview –
The Global Trade Cycle
10

“Global Supply Chain”
“Supply Chain Management”
“Trade Cycle Financing”
“Supply Chain”
“Physical and Financial Supply Chain”
“Global Trade Cycle”
Buying and selling process between companies.
Overview - The Global Trade Cycle

Overview - The Global Trade Cycle

Effective management of the global trade cycle provides numerous benefits:
IMPORTER (BUYER) BENEFITS EXPORTER (SUPPLIER) BENEFITS
§  Optimize working capital
§  Improve cash flow forecasts
§  Take advantage of supplier discount terms
§  Improve supplier relations
§  Increase Days Payables Outstanding (DPO)
§  Optimize use of credit capacity
§  Reduce costs
§  Interest rate and capital arbitrage
§  Reduce working capital needs by using better
inventory control and cash flow management
§  Improve sales forecasts
§  Lower financing rates on required working capital
§  Reduce Days Sales Outstanding (DSO)
§  Manage buyer credit risk more effectively
§  Reduce costs
§  Interest rate and capital arbitrage
Benefits
Overview – The Global Trade Cycle

Tools & Methods of
Payments
14

Methods of Payment
There are four primary methods of payment for global transactions, with the
level of risk varying for each.
Tools & Methods of Payment

The evaluation of risk in global commerce plays a major role in determining
the method of payment to be used for settlement between buyer and
supplier.
RISK EXAMPLES
Country / Political Risk §  Economic instability, government restrictions on payment, war, embargo
Commercial Risk §  Insolvency, unscrupulous buyers, fraud
Currency Risk §  Convertibility of currency, exchange controls
Transportation Risk §  Timeliness of delivery, piracy, pilferage, unions, loss of product
Documentary Risk §  Wrong documents, improperly prepared documents, incomplete documents
Foreign Bank Risk §  Insolvency, creditworthiness
Product Risk §  Quality, quantity
Types of Risk
Overview - Global Trade Cycle

§  Letters of Credit:
§  Commercial Letters of Credit
§  Standby Letters of Credit
§  Documentary Collections
§  Financing:
§  Direct Bank Financing
§  Bankers’ Acceptances (BA)
§  Trade Acceptances
§  Ex-Im Bank Working Capital Guarantee Program (WCGP)
§  Private Insurance
§  Private Export Funding Corporation (PEFCO)
§  Online Solutions:
§  Comerica GlobalTRADE Web
§  Comerica TM Connect Web
§  Comerica eFX
Global Trade Cycle Solutions

SOLUTION DESCRIPTION
§ Commercial Letters of Credit • Irrevocable undertaking by a bank on behalf of its customer in favor of a
designated beneficiary, under which payment is effected only if the beneficiary
presents documents in accordance with the letter of credit terms and conditions.
• Often referred to as Import Letters of Credit and Export Letters of Credit or Trade
Letters of Credit.
• Confirmed Export Letters of Credit provide additional protection to exporters.
(Note: Bank deals only with documents, not goods.)
§ Standby Letters of Credit • Performance Standby Letter of Credit: Irrevocable undertaking by a bank to make
payment to a designated beneficiary in the event that its customer fails to perform
a non-financial contractual obligation (e.g., cover performance of contractors/
suppliers, in lieu of a bid or performance bond).
• Financial Standby Letter of Credit: Irrevocable undertaking by a bank to make
payment to a designated beneficiary in the event that its customer fails to fulfill a
financial contractual obligation (e.g., support advance payment/payment
guarantee, in lieu of cash or security deposit, support IRB/EDC).
Letters of Credit

§ Documentary Collections • Buyer: Bank receives documents conveying title to goods from foreign bank and
delivers documents to its customer in exchange for payment or promise to pay at
a future date.
• Supplier: Bank delivers documents conveying title to goods to foreign buyer’s
bank for delivery to its customer in exchange for payment or promise to pay at a
future date.
Documentary Collections

§ Ex-Im Bank Working
Capital Guarantee
Program (WCGP)
• Working capital loans backed by Ex-Im Bank guarantee (90% of loan amount, including
principal and interest). Enables U.S. exporters -- large and small -- to facilitate the export
of goods and services.
• Comerica holds:
•  “Super” Delegated Authority lender designation (allowing us to commit credit facilities
up to $10 million per borrower, without pre-approval from Ex-Im Bank); and
•  “Fast Track” designation (allowing us to commit credit facilities greater than $10 million
and up to $25 million per borrower, with expedited Ex-Im Bank approval).
§ SBA Export Working
Capital Program (EWCP)
• Working capital loans for small businesses backed by SBA guarantee (guarantees
repayment of up to $1.5 million or 90% of loan amount, whichever is less). Similar to the
Ex-Im Bank WCGP, however, no U.S. content or military/defense product and service
restrictions.
Financing

Questions and Answers
Caroline Brown
First Vice President
Trade Finance Officer
Long Beach, CA
562-590-2525
CVBrown@Comerica.com

Risk
Mi'ga'on
in

Export
Finance

Nous
Sommes
Tous
comme
le
ble
dans
les
champs.

Chacun
unique,

Chacune
la
meme.

Overview

•  Start
with
due
diligence

•  Nego'ate
appropriate
terms
of
sale

•  Use
insurance
to
reduce
risk

Know
Your
Customer

•  Who
and
Where

–  Special
issues
related
to
interna'onal
rela'onships

•  Tax
ID
Number

•  Interna'onal
Credit
Reports

•  Tradi'onal
Methods

–  Trade
references

–  Site
visits

•  Financial
Statements

Nego'ate
Terms
of
Sale

•  Not
one
size
ﬁts
all

– Cash
in
advance

– LeNers
of
credit

– Documentary
collec'ons

– Hybrid
terms

– Credit
Cards

– Open
account

Credit
Insurance

•  What
is
Credit
Insurance?

– How
does
credit
insurance
work?

– Basic
Insurance
assump'ons

•  Applied
to
credit
insurance

– Risk
protec'ons
oﬀered

•  Insolvency

•  Protracted
default

•  Poli'cal
risks

Why
Credit
Insurance

•  Flexible
tool

–  Risk
protec'on

–  Financial
leverage

•  Buyer
advantages

–  Least
cost
ﬁnancing

•  Seller
advantages

–  Enhanced
collateral
posi'on
with
lender

»  Foreign
receivables

»  Concentra'ons
of
risk

–  Backup
or
replacement
of
internal
credit
process

–  Lower
administra've
burden
than
documentary
collec'ons

Who
Oﬀers
Credit
Insurance

•  ExIm
Bank

(U.S.
Government
program)

•  The
Private
Market

How
To
Choose

–  Cost/Rate

•  How
are
premiums
calculated
and
paid?

–  Minimum
Premiums

–  Deduc'ble

–  Available
cover

•  Key
buyers

•  Single
buyer

•  Poli'cal
risks

•  Country
availability

•  Content
restric'ons

–  Diﬀerences
in
Underwri'ng
Support

Using
Credit
Insurance

•  Terms
and
Condi'ons:

–  Know
your
policy.

•  Stop
Shipment

•  Repor'ng

•  Claim
ﬁling
requirements

•  Exclusions

•  Policy
Administra'on

–  Updates

•  New
Customers
and
Increased
Limits

•  Longer
Terms

•  New
products

•  New
Countries

Claims

•  Claim
Triggers

– Wai'ng
periods

– Insolvency

•  Claim
ﬁling
deadline

•  Documentary
Requirements

– The
big
three

WRITTEN
Purchase
Orders

Invoice

Bill
of
Lading

Things
Need
to
Match.

More
on
Credit
Limits

•  Named
buyer
limits-‐the
simple
solu'on

•  Discre'onary
Credit
Limits

– Rules
based

– Compliance
with
condi'ons
is
key
to

successful
claims

– Some
examples

•  Ledger
history

•  Third
party
informa'on

•  Internal
procedures
become
part
of
the
policy

Assignment
of
Proceeds

•  En'tles
lender
to
claim
payments

•  Does
not
enable
lender
to
ﬁle
a
claim

•  May
en'tle
lender
to
policy
onforma'on

•  The
ExIm
enhanced
assignment

Specialty
Brokers

•  Familiar
with
specialized
policy
requirements

•  Infrastructured
to
assist
clients

•  Knowledgable
about
the
market

•  Able
to
provide
op'ons
for
cover

– Best-‐ﬁt

– Lowest
cost

www.tarne'nsurance.com
805-‐375-‐2373

CA
LIC
0C75675

E X P O R T T R A D E S E M I N A R
CREATING AN INTERNATIONAL
CREDIT POLICY

A/R IS AN IMPORTANT PERCENTAGE OF
A TYPICAL COMPANY’S ASSETS
WHR GE CAT NWL DBD HON AVERAGE
A/R 2,038 287,489 18,673 1,112 488 7,429
TOTAL ASSETS 15,396 685,328 88,743 6,222 2,593 41,853
% AR / TOTAL
ASSETS 13% 42% 21% 18% 19% 18% 22%
FY 2012 – US Million
A/R
Total Assets

SALES & COLLECTION
• Making sales is important,
but collecting on those
sales is critical
• Without sales a company
cannot continue to
operate, but a sale is not
truly a sale until collected

WHAT IS A CREDIT POLICY?
A Credit Policy can
be defined as a
general course of
action used to guide
frequently
encountered
situations designed to
achieve strategic
objectives
Credit Management: Principles & Practices, 4th Edition

WHY SOME COMPANIES DON’T HAVE A
CREDIT POLICY?
•  Sales department
exercise control over
the credit process
•  Management teams
not convinced of the
value of credit policy
(concerned it may
stifle sales)
•  Senior management
lack knowledge or
direction on how to
write and implement a
policy
•  Management
unwillingness to devote
the needed resources
to write and implement
a policy document.

PROBLEMS BECAUSE LACK OF
CREDIT POLICY
•  Subjective and inconsistent decisions
•  Poor communication (internal and external)
•  No quantification of analysis
•  Limited control
•  Inadequate visibility and aggregation
•  Unaware of how to profitably manage
receivables
•  Reactive mode environment rather than
Proactive mode

REASONS TO HAVE A CREDIT POLICY
•  Improve decision making
•  Clear guidelines for dealing with customers in
credit terms
•  Provide corporate strategy for credit
operations
•  Operational guide for credit staff
•  Elimination of unauthorized special credit deals
•  Simplifies the work of auditors and compliance
with government issues
Source: FCIB International Credit Policy webinar.

DIFFERENCE BETWEEN CREDIT
PROCEDURES AND FORMAL CREDIT POLICY
Credit Policy outlines
company’s strategic
and operational
requirements from
credit sales
Procedures are the
every day working
practices of the
credit department:
who does what and
how
r
Source: FCIB International Credit Policy webinar

WHERE TO START?
•  Look beyond individual customers in a way
that reflects an understanding of just how
credit fits into overall corporate goals
•  Policies that guide the credit function are
developed and monitored within the
context of a corporate strategic-planning
framework.
•  Specific credit policies and procedures are
formulated to achieve corporate goals
Credit Management: Principles & Practices, 4th Edition

SOLID FOUNDATIONS
•  Strategic planning is the
key ingredient that
underlies credit policy
and procedures
•  Strategic planning entails
the coordination of long-
range plans with a
particular focus upon
strategies, controls and
desired results
•  Link credit policy and
procedures closely to
cost controlsCredit Management: Principles & Practices, 4th Edition

CHARACTERISTICS OF A CREDIT POLICY
Your policy should keep you competitive while
avoiding unnecessary losses
How your industry works and how your company fits
into your industry will have a large affect on your
credit policy

PRINCIPLES TO FOLLOW WHEN
ESTABLISHING YOUR CREDIT POLICY
Market
Position
Customer
Type
Merchandise
Type
Markup
Pricing
Product
Availability
Location
Financial
Strength
Economic
Trends
Government
Regulations

PRIMARY SECTIONS TO INCLUDE
Mission Statement
Goals
Define Credit Limit Authority
Credit Evaluation
Credit Limits
Terms
Account Monitoring
Credit Hold
Collections
Credittoday.net

GLOBALIZATION
•  Globaliza(on
is
not
just
a
cliché.
It

is
happening
all
around
us
as

businesses
increasingly
look
at

the
world
as
if
it
had
no
na(onal

boundaries.

•  With
globaliza(on,
compe((on

intensiﬁes.

Under
these

circumstances,
the
only

companies
that
will
succeed
are

those
that
are
capable
of

providing
customers
ﬁrst-‐class

products
and
services,
along
with

compe((ve
payment
terms

THE THREE C 'S OF OF
INTERNATIONAL CREDIT
• Country
(Sovereign)Risk
• Currency Risks
• Cultural Risks

BASIC TECHNIQUES AND RULES
•  Evaluate
the
stability
of
the
government
of
the

country
in
which
the
importer
is
located
and
review

events
that
might
aﬀect
sales
to
a
par(cular
foreign

country
and
foreign
customers

•  Some
of
the
most
common
barriers
or
complexi(es

associated
with
expor(ng
include:
diﬀerences
in

language;
credit
terms
[terms
of
sale];
shipping

terms;
and
foreign
exchange
problems

•  Understand
the
local
meaning
as
well
as
the

textbook
transla(ons
of
business
terms
and

terminology

BASIC TECHNIQUES (CONTINUED)
•  Become
familiar
with
methods
available
to
mi(gate

the
risks
associated
with
export
sales
transac(ons

•  Meet
with
your
company's
top
management
to

consider
proﬁt
margins,
sales
terms,
and
the
amount

of
risk
considered
acceptable
to
the
expor(ng

company

•  Understand
your
own
country's
export
laws
as
well

as
rules
and
regula(ons
and
laws
in
each
of
the

countries
you
plan
to
export
into

•  Credit
managers
have
to
take
some
risks,
but
they

must
be
calculated
risks

MINIMIZE THE RISK
• Request
a
signed
credit
applica(on

• Obtain
and
evaluate
credit
informa(on

• Request
the
most
recent
ﬁnancial
statements

• Request
trade
references
from
at
least
three

U.S.
trade
references
-‐
preferably
vendors

selling
in
large
dollar

• Request
bank
references,
checking
accounts,

and
loan
informa(on.

MINIMIZE THE RISK (CONTINUED)
• Get
ra(ngs
on
all
the
references
and
keep
them

updated

• Run
a
credit
report

• Establish
the
terms
of
sale

• Establish
the
credit
limit

• Specify
in
what
currency
payment
will
be
made

• If
payment
is
not
in
U.S.
dollars,
include
wriSen

agreements
on
the
exchange
rate

MINIMIZE THE RISK (CONTINUED)
• Get
the
customer's
agreement
to
credit
terms
in

wri(ng

• Make
sure
the
credit
terms
are
also
printed
on

the
invoice

• Stay
current
in
world
aﬀairs

• Monitor
media
coverage
of
the
customer's

country

• Study
the
demand
for
the
product
shipped

• Be
aware
of
how
(tle
passes

SOURCES OF INFORMATION
• Interna(onal
Trade
Administra(on
(ITA)

• FCIB
/
NACM

• EXIM
Bank

• World
Bank

• Graydon,
D&B,
Coface,
CrediSoday,
Atradius

• The
Economist,
Bloomberg-‐Businesweek,

Barron’s,
Financial
Times,
WSJ

THANK YOU
Diego Jiménez, CICP ICCE
djimenez@accuride.com

Presented By
Tim Bastian, International Certified Credit
Executive

}  Non-Financial Companies have three FX risks
to manage.
1.  Transactional Risk- Contract Import and
export activity as well as borrowing or
lending in foreign currencies.
2.  Operational Risk – Future operational cash
flows from non-contract business.
3.  Translation Risk – From the financial
statement rollups in multi-national
companies to a single currency.

Political Risk Country Economic Outlook
Inflation Deflation
Timing
Margins
Volume

}  As a U.S. retailer, your supplier for swim suits
is in Brazil whom is seeing 13% inflation,
while the dollar remains stable. The supplier
is under pressure to raise prices. Options:
A.  If you have a contract in dollars, the
supplier would need to look at offsets to his
increasing cost. (hedges/swaps)
B.  If no contract, your price may go up or you
may need a different supplier to maintain
your cost.

}  You are selling machined goods to Mexico
with the sale in Dollars and while you have
your invoice out, the Dollar strengthens
against the Peso.
1.  It will cost your customer more money to
pay you.
2.  The customer may try to hold funds up
hoping for a correction to the exchange rate
between the Peso and the Dollar.

}  Solutions:
1.  You can discuss simple solutions with your
customer. A pre-payment will lock their
Peso cost to Dollar at quoted levels through
delivery.
2.  Credit insurance options to protect from
defaults resulting from currency shifts.

1.  Always Hedge to the risk not for profit.
2.  When getting FX quotes from your banker
make sure you ask for the buy/sell rates
together to get the best price on order.
Example: Buy/Sell Dollar to Yen, 1 Million.
This way you learn the spread between
currencies and do not over pay in either
direction.

}  FCIB Membership – Courses and a web based
Knowledge Center with solutions made
available to you.
}  Your Accountant that has international
experience.
}  Your Attorney with international trade
experience.
}  Your Banker who has an International
Currency trading desk and international
banking experience.

}  U.S. Department of Commerce – Commercial
Import/Export Department.
}  Your Insurance Broker (some major insurers
can provide solutions for international FX
risks.)

}  Foreign FX strategies to determine risk and
what the best method to offset those risks is
a complicated subject that can not be learned
from a short seminar, use your team of
international professionals and other
resources to best determine what will work
for your situation.

Thank you to all of the sponsors of the event.

SAVE THE DATE
For FCIB’s 24th Annual Global
Conference!
September 15-17, 2013 at the
Hyatt Regency Philadelphia, Pennsylvania

Financial Support for
Exports
Export-Import Bank of the United States

Who We Are
▪ Mission – To create and sustain jobs by increasing U.S.
export sales
▪ Oﬃcial Export Credit Agency (ECA) of the U.S.
Government since 1934
▪ 85% of all transactions are to small businesses
▪ Target 20% of all authorizations to small businesses
▪ Self-sustaining

Ex-Im Supports a Variety of Industries
▪ Manufacturing
▪ Construction
▪ Medical
▪ Mining
▪ Power-generation
▪ Aircraft and Avionics
▪ Services
▪ Renewable Energy
▪ Agribusiness
▪ Wholesale/Retail
▪ Oil and Gas

Open in Over 155 Countries

1. Brazil

2. Colombia

3. India

4. Indonesia

5. Mexico

6. Nigeria

7. South Africa

8.Turkey

9.Vietnam

Working Capital Guarantee
on Exporter Loans
Medium and Long Term
Insurance & Guarantees on
Buyer Loans
Pre-Export Post-Export
Exporter Finance Chain
Export Credit Insurance on
Buyer Credit

Working Capital Guarantee—Basic Parameters
90% guarantee on principal and interest
for export-related inventory and A/R
– Guarantee also covers certain
liquidation costs
Generally one year or less
Must be fully collateralized
Covers exporter performance risk
Note: Provides no protection to exporter
against foreign buyer non-payment

Benefits to Exporter/Borrower
• Finance foreign a/r to generate additional working capital
• Finance costs of new, foreign POs
▪  Generate additional Gross Profit Margin by increasing
foreign sales
▪  Incentivize your Banker to issue Standby L/Cs covering
your Advance Payment Guarantee, Bid/Tender Bond, or
Performance Bond for only 25% (10% by special
circumstance) cash collateral.

Working Capital Guarantee for Exporter
TO QUALIFY:
•  Three years in business
•  One year exporting
•  Positive net worth, profitable prior year
•  Minimum Financial Requirements:
–  Current Ratio
–  Net Sales / Total Assets
–  Debt to Worth
–  (Net Profit + Depreciation, Depletion, & Amortization
Expense) / Current Portion of Long Term Debt
–  EBIT / Interest
–  Cost of Sales / Inventory; and
–  Sales / Accounts Receivable

Global Credit Express – Term Sheet
Borrower: A U.S. company exporting U.S. goods/
services
Purpose: for finance of the business of exporting
rather than specific export transactions
Amount: Max. $500,000
Type: Line of credit
Period: six months or one year
Interest Rate: Ex-Im CIRR* + 2.6% p.a. fixed
Fees: $500 Application; $2500 Referral Fee; 2.5%
flat Exposure Fee on amount of Line of Credit; Legal
Fees est. $150 0 -$3000
*CIRR: currently 1.39% fixed; see
http://www.exim.gov/tools/
commercialinterestreferencerates/

Global Credit Express – Term Sheet (2)
Collateral: (i) a first or second perfected security
interests in the general assets of the Borrower.
(ii) owner(s) with 20% or more ownership provide
personal guarantee(s)
Documentation: (i) Application Package, (ii) Ex-Im
Commitment Letter w/Term Sheet, (iii) Loan, Credit
and Guarantee Agreement; (iv.) Promissory Note.

Global Credit Express – Eligible Borrowers
•  is a small business by SBA definition
•  min. three years of revenue producing operations
•  one year of exporting experience
•  no tax liens or judgments
•  exports goods made in USA or services performed
by U.S. citizens
•  possesss a business FICO score of 180 or higher

Export Credit Insurance
Exporter Benefits:
• RISK PROTECTION: Protects the exporter
against non-payment by their foreign buyers
• MARKETING TOOL: Enables the exporter to
extend open account credit terms to new and
existing foreign buyers
• FINANCING AID: Allows lenders to add
insured, foreign receivables into the borrowing
base

Single-Buyer, Single Country
Small Business Multi-buyer
Small Business Multi-buyer – Express Insurance
Standard Multi-buyer
___________
A small business is defined by the Small Business
Administration at this site:
http://www.sba.gov/size-standards-tool?ms=nid4060
In addition, Ex-Im provides its Small Business policies only to
those Small Businesses who had average $7.5 mm or less export
sales on credit terms over the past three years.
Short-Term Policy Types

Exporter Qualifications to apply for Small Business or
Standard Multi-buyer Policy:
1.  In same line of business for at least three years.
2. Have at least one year of exporting experience.
3. Had an operating profit in their most recent fiscal
year.
4. Dun & Bradstreet Paydex of 50 or higher and no
derogatory information.
5. Signed financial statements for the last fiscal year
that show positive net worth. Net Worth at the most
recent fiscal year-end is at least 10% of requested
policy limit.
6. No material adverse issues.

Export Credit Insurance
Cost for a Policy Quote: $ - 0-
Cost for a one-year Policy: $ -0-
Cost to insure a Buyer: about $.65 per US$100.00
Information Needed on the Buyer:
$100,000 – a credit report
$250,000 – credit report and two trade
references
$300,000 – financial statements on Buyer
Coverage Amount: 90%/95%
Claim Window: 90 – 240 days from invoice due date

Medium & Long Term Buyer Loan Insurance/Guarantees
For international buyers purchasing U.S. capital
equipment and services:
▪ 85% ﬁnanced, 15% cash down payment
▪ Medium-term
– Repayment typically up to 5 years and
amounts up to $10 million
▪ Long-term
– Greater than 5 years and over $10 million

M/T Insured Foreign Buyer Loan – the structure
•  U.S. Exporter, a manufacturer of capital equipment
whose
•  Foreign Buyer, who wants to finance the purchase
with “Customer Finance”.
•  Commercial bank, or “lender”, providing a loan to
the Foreign Buyer, and cash to the U.S. Exporter,
which loan’s principal and interest payments are:
•  Insured (or guaranteed) by Ex-Im Bank of the U.S.

M/T Insured Foreign Buyer Loan – Eligible
Borrowers/Buyers
•  Minimum operating history of 3 years
•  Current financial statements with Notes:
•  Loans under $1 million: signed, unaudited
•  Loans over $1 million: CPA audited,
international accounting standards
•  Borrowers w/annual sales <US$50 million
equivalent may require owner(s) Guarantees
•  Financial condition, evidenced by financial
statements, yield financial ratios per “Medium
Term Credit Standards”, see:
http://www.exim.gov/tools/upload/ebd-m-39-1.pdf

M/T Insured Foreign Buyer Loan – Eligible
Borrowers/Buyers (2) i.e., “loan package”
•  Credit agency report – favorable
•  Commercial banking reference
•  Positive operating profit and net income, past two
years
•  Positive cash flow, past one year
•  Total Liabilities no more than 1.75x tangible net
worth
•  Amount of credit is no more than 40% of tangible
net worth
•  Interim statements disclose no deterioration

20
Call Ex-Im Bank Regional Export Finance Center
nearest your location:
Irvine, CA: 949-660-1341
David Josephson, Western Regional Director
(949) 660-0726 Direct
David.josephson@exim.gov
www.exim.gov
More Information

U.S. Small Business
AdministrationInternational Trade Finance Programs
Trade Connect Export Workshop
Los Angeles Area Chamber f Commerce
May 8, 2013

Martin Selander
International Trade Specialist
U. S. Small Business Administration
U. S. Export Assistance Center
2303 Martin Court #315
Irvine CA 92612
(949) 660-8935
Serving exporters of Southern California,
Nevada, and Hawaii

SBA Los Angeles District Office
330 North Brand Blvd #1200
Glendale CA 91203
(818) 552-3210
SBA Santa Ana District Office
200 West Santa Ana Blvd #700
Santa Ana CA 92701
(714) 550-7420

Additional information available
on line
www.sba.gov/oit
Including copies of all required
application forms, program info
and national staff directory

  Export Working Capital Program
  SBA Export Express
 International Trade Loan
SBA Export Finance
Assistance Programs:

  Pre-Shipment Guarantee
Loan proceeds to acquire/produce
goods or services for export
  Post-Shipment Guarantee
Discounting accounts receivable
Export Working Capital Program

Short Term +Transaction Based
Loan repayment from assignment of
payment proceeds from foreign buyer:
-Letter of Credit
-Open Account
Unlike more traditional financing, loan
repayment not based upon borrower
cash flow or profitability

  Single Transaction
or Revolving Credit Line.
Disbursements must be linked to specific
export transaction, contract, PO, LC,
invoice, etc.
  Maximum gross loan limit $5,000,000.
(no minimum). Maximum 90% SBA
guaranty to the lender
Features

Negotiable between applicant and lender
SBA fee is one quarter of 1.00% of the SBA guaranteed
portion for 12 months or less
Example
$100,000 loan
x 90% SBA guaranty
=$90,000 SBA guaranteed portion
x0.25%
=$225.00 fee due from borrower
Interest Rates & Fees

  A) UCC lien on raw materials-inventory
purchased with SBA funds
 B) Assignment of contract proceeds
 C) Personal guaranty
 D) Additional collateral may be
required on a case-by-case basis.
Collateral

  Exporter must demonstrate ability to perform / i.e. in
business 12 months (Note other “non-export” SBA loans
are available from SBA District Office)
 Minimal collateral
 Service & Trading companies are eligible
 Country limitation schedule
 Credit Insurance
 Applications processed at SBA USEAC
Eligibility & Features

  Provides financing to small
businesses whose borrowing
needs are too small to be
profitably met by traditional SBA
programs
  “Small” = maximum loan
$500,000 (no minimum)
  Flexible use of proceeds
SBA Export Express

  No SBA application forms
  No SBA underwriting or credit
review (eligibility review only)
  “Application” faxed or emailed by
bank to SBA national processing
center in Sacramento
  SBA turnaround 24-48 hours
SBA Export Express
Incentives/Advantages

  Lender to obtain a brief narrative from
applicant to clarify how loan proceeds will
be utilized.
  Applicant in business for at least 12
months.
  Proceeds are to be used to develop or
expand applicant’s export markets.
SBA Export Express
Eligibility

n  Finance Export Development activities supported by U.S.
Department of Commerce Commercial Service: Gold Key, ICP, etc
n  Other marketing costs such as participation in a foreign trade
show or translation of product literature for use in foreign markets.
n  Real Estate acquisition or construction to support production of
goods for export.
n  Acquisition of machinery or equipment (i.e. computers, forklifts,
etc) to be used in the production of goods for export.
n  Permanent long term working capital infusion
SBA Export Express
Use of Proceeds

 Maximum loan amount $5,000,000
 Applicant must establish that the loan proceeds will expand an existing
export market or develop new ones
 Provides long term financing for small business engaged or preparing to
engage in exporting
 Examples: purchase fixed assets, such as land and building, expand or
renovate existing facilities, purchase machinery and equipment,
permanent working capital, debt refinance in limited cases
 Application package must be submitted from lender to SBA (does not
allow for streamlined faxing of application as in the Express program)
The International Trade Loan

FOREIGN AGRICULTURAL SERVICE
United States Department of Agriculture
EXPORT CREDIT
GUARANTEE
PROGRAM
GSM-10
2
FACILITATING
TRADE
FINANCE

WHAT IS
GSM-102?
GSM-10
2
•  It’s not a loan…
•  It’s not a grant…
•  It’s a guarantee
Backed by the full faith and credit
of the United States Government

PURPOSE OF THE
PROGRAM
Promotes the export of U.S. agricultural products by facilitating the
financing component via a credit guarantee.
USDA guarantees the letter of credit to emerging markets where
sales may not occur without the financing and guarantee.
GSM-10
2

PROGRAM
DESCRIPTION
Objective
• Protects U.S. exporters or U.S. banks against the non-payment of the
importer’s foreign bank under a Letter of Credit (L/C)
Terms
• Guarantees up to 98% of the loan principal
• Covers a portion of the interest
• Fees are based on country risk and length of financing
• Fees dependent on frequency of principal repayments
Coverage
• Coverage up to 2 years
• Over 190 agricultural products
• Freight costs are usually covered
• Over 140 banks covered in almost 80 countries
GSM-10
2

PROGRAM
PARTICIPATION
• Approved Countries/Regions
• Approved Foreign Banks
• Qualified U.S. Exporters
• Approved U.S. Banks
• Importers do not need to be approved
GSM-10
2

• Not just for bulk commodities
• High-value processed products are also covered
• Not just for large corporations
• Approximately 47% of participants are SME’s
• Not just for large dollar transactions
• Transaction sizes have no minimum. Many are under
$1 million USD
GSM-102 is…
MISCONCEPTION
S
GSM-10
2

Consumer-ready - Intermediate - Bulk
ELIGIBLE
COMMODITES
ü 100% produced in USA
ü High-Value products (90% U.S. Content)
GSM-10
2

HOW MUCH IS
THIS GOING TO
COST?Guarantee fee
(fully transparent)
Cost of L/C
Financing costs
GSM-10
2

COMPARISONGSM-10
2
WITHOUT
GSM-102
WITH
GSM-102U.S. exporter reluctant to
ship without being paid
in advance
Bank in region may be
unwilling to provide
credit to importer
Any financing to importer
may have very short repayment
terms & higher interest rates
U.S. exporter more likely to ship
since USDA carries 98% of the risk
and payment is received upon
presentation of documents
Presence of loan term extended by
the U.S. bank to the foreign bank
may encourage extension of credit
by the foreign bank to the importer
Importer now in better position to
negotiate favorable loan terms with
GSM-approved bank in the region

BENEFITS TO AN
EXPORTER
§ Open new markets and expand sales where risk may be greater
§ Minimal cost – fees average about 1 percent
§ Reduce importer and foreign bank risk
§ Get paid quickly by assigning guarantee to U.S. bank and
delivering shipping documents that conform with L/C
§ Ability to lower all-in-costs to the buyer
GSM-10
2

Foreign Bank
Less risk – USDA assumes almost all risk in
the event of nonpayment
Ability to leverage country & foreign bank limits
Reduce capital requirements due to USDA
guarantee
Ability to lend at reduced rates because of
USDA guarantee
Ability to lend up to 2 years
BENEFITS TO U.S.
BANKS
Establish or improve correspondent banking
relationships
Service U.S. exporter clients & expand
relationships
GSM-10
2

12
HOW TO GET
STARTED?
Exporter
Get a DUNS number
Submit qualification
application
Negotiate sales contract with
buyer
Submit request for guarantee/
pay guarantee fee
Contact U.S. bank
(if assigning guarantee)
GSM-10
2

13
HOW TO GET
STARTED?
Provide most recent audited
financial statements
Documentation from federal or
state agency regulator
Identify shareholder
ownership & management
Contact information of
principal and U.S. regulator
U.S. Bank
GSM-10
2

Africa & Middle East
Central America
Caribbean
Central Asia
Mexico
China
Russia
South America
South Korea
Southeast Asia
Vietnam
Turkey
MARKETSGSM-10
2

2007 2008 2009 2010 2011 2012
Claims Registrations
.26% 4.23%5.23%
.49%
$5.32 billion
$1.44 billion
$3.09 billion
$4.12 billion
$4.13 billion
$3.11 billion
REGISTRATIONS
(USD BILLIONS)
GSM-10
2

GLOBAL USAGE
FY 2011 – 2012 (in USD millions)
+Eurasia Region discontinued in 2012
0
200
400
600
800
1000
1200
2011
2012
$USDMillions
GSM-10
2

Soybeans
26%
Yellow Corn
20%
Wheat
18%
Soybean Meal
11%
Cotton
6%
Rice
3%
Breeding
Cattle
3%
Beef
2%
Other
11%
TOP
COMMODITIES
FY 2012
GSM-10
2

FY 2013
PROGRAMMING
Country/Region ($5.5 Billion per Farm Bill)
Africa/Middle East Region $ 400 Million
Caribbean Region $ 300 Million
Central America Region $ 550 Million
Central Asia Region $ 50 Million
China Region $ 200 Million
Korea, South $1,000 Million
Mexico $ 400 Million
Russia $ 250 Million
South America Region $ 600 Million
Southeast Asia Region $ 450 Million
Turkey $ 700 Million
Vietnam $ 100 Million
Reserve $ 500 Million
TOTAL: $5.5 Billion
GSM-10
2

FOREIGN AGRICULTURAL SERVICE
United States Department of Agriculture
ADDITIONAL
INFORMATION
Teri Ryan
202.720.0663
teri.ryan@fas.usda.gov
www.fas.usda.gov/excredits/ecgp.asp
See how your business can benefit from GSM-102
Contact Us

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