07 private export finance solutions all
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TRANSCRIPT
GLOBAL ACCESS FOR SMALL BUSINESS
Private Export Finance Solutions
November 18, 20111:30 p.m.
Presenters:
Gary K. LuxonComerica Bank
Troy W. BrownriggBrownrigg Companies LTD
Bruce BroganFifth Third Bank
Martha I. GabrielseJPMorgan Chase
Bill RichesonPNC Bank
Trade Cycle Financing
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Pre-Shipment Period Post-Shipment Period
Trade Cycle Financing
Export Finance Timeline
Import Shipment
InvoiceBill of Lading
Exporter
Sale
Importer
Payment
Working Capital Financing/PO Finance▪ Bid & Performance Standby L/Cs▪ Export Letters of Credit
Non-LC Solutions▪ Ex-Im Bank Working Capital Program
Foreign Buyer Financing▪ Letters of Credit and Bankers Acceptance Financing (to 180 days)
Non-LC Solutions▪ Documentary Collections and TA Financing▪ A/R Credit Insurance▪ Discounting BAs and Foreign A/Rs▪ Ex-Im Bank: Direct Buyer Financing
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Collateralized by export-related inventory and foreign accounts receivable
Inventory, including raw materials and WIP, advance up to 75%
Foreign accounts receivable advance up to 90%
Supports establishment of standby letters of credit and indirect exports
Generally one year but can be up to three years
Covers exporter performance risk
Note: Provides no protection to exporter against foreign buyer non-payment.
Ex-Im Bank Working Capital Guarantee
Credit facility established by a commercial bank that is backed by an Ex-Im
Bank guarantee at 90% of principal and interest used to support an
exporter’s working capital needs:
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Transaction Specific
Transaction Specific
Revolving
Revolving Multiple transactions or
specifically identified ones
May be committed for up to
three years with annual reviews
Lines of Credit
Ex-Im Bank Working Capital Guarantee
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Receivable Loan to Buyer
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Goods Re-sold/UsedGoodsProduced
Extended Terms
Cash in Advance
Open Account
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Trade Transaction Timeline
Payment Methods: 4 Methods
Buyer (Importer) Perspective
• Open Account• Documentary Collections• Letter of Credit• Cash In Advance
Seller (Exporter) Perspective
• Cash In Advance• Letter of Credit• Documentary Collection• Open Account
LowestRisk
HighestRisk
BestCashFlow
WorstCashFlow
Buyer and Seller have Reversed Priorities!
Trade Credit Insurance
Who Buys Trade Credit Insurance? Any company that sells goods on credit terms (Net 30/60/90 days) and is
exposed to the risk of non-payment.
Questions to Consider. Has your company considered growing it's export sales in light of the
historical low level of the US Dollar verses other currencies? Has one of your key customers ever defaulted on a payment or filed for
bankruptcy? Can your company benefit from purchase order financing? How well do you really know your buyers?
Types of Policies. Multi-Buyer and Single-Buyer. Credit risk is underwritten based on total
sales or approved limits per buyer.
Trade Credit Insurance
Mitigating Risk: Insure foreign account receivables and services against non-payment of foreign and domestic buyers. Coverage protects against commercial(insolvency, bankruptcy, default) and political(war, political violence, transfer) risks.
Marketing: Know you have the security and competitive edge to take our product global. Increase your sales by expanding into foreign markets.
Financing: Access additional credit by using insured accounts receivables to increase your borrowing capacity.
Costs: Net 60 - Multi-Buyer - $10,000,000 Sales Basis - $40,000 Min. Premium –
12 month - 90% Coinsurance - Foreign and Domestic.
Services: Due Diligence on your Top 20 Buyers, Discretionary Credit Limits, and
Loss Payee / Enhanced Assignment Endorsements.
Our Strategic Partners and Carriers include: Zurich, Coface, Chubb, Chartis(AIG), Great American, EXIM Bank.
Documentary Letter of Credit: Use it to provide short term finance to your Buyer!
Buyer has requested extended payment terms of 90 days from date of shipment
Seller has countered that they will not offer such terms on Open Account basis, but would consider if Buyer provides acceptable LC and agrees to absorb the associated additional costs of financing
Seller talks with their bank, to obtain indicative pricing for 3 key credit/finance driven fees associated with this arrangement:
Confirmation fee Acceptance commission Discount charges
Buyer’s bank issues the LC
Seller’s bank is the Advising and Confirming Bank
LC is payable via a Time Draft to be drawn at 90 days from date of Ocean Bill of Lading
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Seller ships and presents documents to their bank, requesting that the Accepted Draft be discounted.
Documents are examined and found to be in compliance with the LC Time Draft is Accepted under the LC, creating a Bankers Acceptance Seller’s bank discounts the Bankers Acceptance, depositing funds to the account
of the Seller Seller’s bank collects the full amount due under the Bankers Acceptance from the
Issuing Bank at maturity
Illustrative Fees: $300,000 sale to Saudi Arabia at 90 days date of shipment Confirmation fee 1.5% per annum. LC expires 90 days from date of issuance: $1125 Acceptance commission 2% per annum. Documents presented and Bankers Acceptance is
created10 days after shipment, leaving 80 days left until the payment due date: $1333 Discount charges 90 day LIBOR + 2%. Bankers Acceptance is discounted with 80 days left to
maturity: $1833
Total “financing” costs: $4291. 1.43% of the face value of the sale, or 5.72% if you multiply the 90
day cost by 4, to express it as an annualized or 360 day cost
Documentary Letter of Credit: Use it to provide short term finance to your Buyer!L
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Eximbank Medium Term Buyer Finance
• General overview• What goods can be financed• Maximum term• Fees and charges• Information required for pre-qualification• Credit Issues• Processing Time• Examples
QUESTIONS & ANSWERS
Global Access for Small Business
Private Export Finance Solutions
CONTACT INFORMATIONGary K. Luxon, Director – International Trade FinanceComerica [email protected]: 313-222-4903
Troy W. Brownrigg, Licensed Agent – International ProductsBrownrigg Companies [email protected]: 248-373-5580
Bruce Brogan, VP - Global Trade SolutionsFifth Third [email protected] Office: 248-603-0412
Martha I. Gabrielse, VP - Global TradeJPMorgan [email protected]
Bill Richeson, SVP - Global TradePNC [email protected]