export payment methods and financing webinar tekle sebhatu, ph.d. november 18, 2011 [email protected]
TRANSCRIPT
![Page 1: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/1.jpg)
Export Payment Methods and Financing Webinar
Tekle Sebhatu, Ph.D.
November 18, 2011http://www.stcinternational.us
![Page 2: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/2.jpg)
Import Payment Methods and Risks Agenda
• The different payment methods• Questions you should consider before
selecting payment method• Risk associated with each payment method• Letter of credit and discrepancies• Financing options• Q & A
![Page 3: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/3.jpg)
Consider the Following Questions Before Selecting Payment Method
• Do you have a good relationship with your buyer?• Can you extend credit? • What payment method are you asking? Why?• Do you need financing to make the purchase from
your supplier (middleman)?• What are your options if buyer refuse to accept the
product? What will you do?• Can you afford to loss it all and your business
survives?
![Page 4: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/4.jpg)
Payment In Advance
Brazilian Importer
American Exporter
1. Importer Pays for Goods
2. Exporter Ships Goods After Being Paid
![Page 5: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/5.jpg)
Open Account
Brazilian Importer American Exporter
1. Exporter Ships the Goods
2. Importer pays after the Goods are Received
![Page 6: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/6.jpg)
Consignment
Brazilian Importer American Exporter
1. Exporter Ships the Goods
2. Importer pays after the Goods are Resold
![Page 7: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/7.jpg)
Consignment• Buyer receives goods before payment• Buyer pays on agreed terms of payment after
goods are resold.• Goods available to buyer upon delivery• Buyer: No risk• Seller: High risk (relies on buyer to sell and pay)• Seller often extends credit to buyer to remain
competitive
![Page 8: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/8.jpg)
Documentary Collection
Figure 15-3
2. Exporter ships Goods
Brazilian Bank
3.Exporter Delivers
Docs.
1. Negotiation
Brazilian ImporterAmerican Exporter
American Bank4. Bank Delivers
Docs.
5. Importer
Pays
6.Bank Provides
Docs
8.Exporter’s
Bank Pays
Exporter 7. Bank
Pays
![Page 9: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/9.jpg)
Documentary Collection Document Against Payment(D/P) or Sight Draft
• Buyer pays to receive documents (Presentation of the draft)
• Goods available to buyer after payment is made
• Buyer risk: might receive wrong goods• Seller risk: buyer not paying for the goods• Not used for extended terms.
![Page 10: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/10.jpg)
Principal Parties to a Letter of Credit Transaction
• The Applicant: Buyer (importer) requesting LC to be issued.
• The Beneficiary: Seller (exporter) in whose favor the LC is issued.
• The Issuing Bank: Buyer’s bank issues the LC.
• The Advising Bank: Seller’s bank Authenticate LC and advise seller
• The Negotiating Bank: Seller’s Bank, reviews documents (LC) documents, forwards to the Issuing Bank (Importer bank).
• The Confirming Bank: Seller’s Bank, guarantees payment to seller if the Issuing Bank fails to pay (Optional).
![Page 11: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/11.jpg)
Types of Letters of Credit
• Revocable or Irrevocable• Transferable• Back-to-back• Usance• Red clause• Revolving• Standby
![Page 12: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/12.jpg)
Letters of Credit
Figure 15-3
5
Brazilian
Issuing Bank
4
1 Brazilian Importer
American Exporter
American
Advising Bank 7
2 109
3
6
8
11
![Page 13: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/13.jpg)
Common Discrepancies
• Letter of Credit Expired• Late Presentation of
Documents• Late Shipment• Short Shipment• Shipment - Incorrect
Ports• Incorrect Insurance
• Inconsistent Documents
• Description Differ on L/C and Invoice
• Partial shipment not allowed
• Documents Not Signed
![Page 14: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/14.jpg)
14
Benefits of Using LC to Buyer• Timely delivery of goods• Buyer in a better position to ask better prices
and faster deliveries.• May attract large number of suppliers who
believe in LC• Power to refuse payment if there are any
mistakes in the documents • Risk of loosing money is minimized if the
seller fails to provide all shipping documents
![Page 15: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/15.jpg)
What Lenders Look!What Lenders Look!
CollateralCollateral
CharacterCharacter
Cash flowCash flow
The 5 “C” Lenders
Look When Evaluating Loans
The 5 “C” Lenders
Look When Evaluating Loans
CapitalCapital
ConditionsConditions
![Page 16: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/16.jpg)
Private Sector Financing OpportunitiesPrivate Sector Financing Opportunities
Private Sector Export
Financing
Export intermediariesExport intermediariesPrivate trade finance companies
Private trade finance companies
FactoringFactoringBuyers and suppliers
ForfaitingForfaiting
Commercial BanksCommercial Banks
![Page 18: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/18.jpg)
SBA Export Express Loan • Participate in foreign trade show• Translation of product brochure/catalog• General lines of credit for export purposes• Transaction specific/complete export orders• SBA Guaranty
• 85% of loan up to $150K• 75% of loan $150K - $250K (maximum)
• Terms (negotiate fixed or variable with lender)• 6.5% over prime for <$50K OR 4.5% loan > $50K
• Loan maturity – 5-10 years (working Capital) or 10-15 years (machinery and equipment)
• Qualify- 12 months in business
![Page 19: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/19.jpg)
Free Powerpoint template from www.brainybetty.com
19
![Page 20: Export Payment Methods and Financing Webinar Tekle Sebhatu, Ph.D. November 18, 2011 stcintL@q.com](https://reader038.vdocuments.us/reader038/viewer/2022103015/5517f754550346c1568b4e45/html5/thumbnails/20.jpg)
Thank You for participating!
For additional information please visithttp://www.stcinternational.us
Email: [email protected]