International payment risk export finance webinar sept 26

September 26, 2012 Welcome to the Webinar "Understanding International Payment Risks and Export Financing Solutions” The webinar will start shortly Today’s Presenters… Julie Balzano  Export Development Director NMMA   Pembroke Pines, FL Charlotte Starfire  Director SunTrust, Global Trade  Solutions Atlanta, GA Rebecca Torres  Commercial Officer,  U.S. Department of Commerce,  Clearwater, FL  Ian MacDonald President Underwater Lights USA, LLC Fort Lauderdale, FL NMMA Export Development w Ne Program • Launched in July 2012 • To support the industry’s growing export needs & opportunities • Position NMMA globally as THE sourcing destination • Offer more programs & services to member companies – – – – – USA Pavilions at International Shows Webinars Inbound buying delegations to Miami Boat Show Market research tools Trade lead program Mark Your Calendar: 2013  Marine Equipment Trade Show (METS): Nov 2012  Next Webinar: 15 step crash course on creating an export plan: December 2012  Inbound buying delegation to MIBS: Feb 2013  Rio de Janeiro Boat Show: April 2013  Korea Int’l Boat Show: May 2013  World Yacht Show: Sanya, China: Oct 2013 Strategic Partnership Contact: Julie Balzano Export Development Director Tel: 954-441-3234 E-mail: jbalzano@nmma.org www.nmma.org/international U.S Department of Commerce Marine Technology Team Presentation by Rebecca Torres, Commercial Officer U.S Export Assistance Center, Clearwater, FL U.S Commercial Service Network  Trade specialists in over 100 U.S cities and 83 countries worldwide tied to U.S Embassies  Industry specialization  Corporate and Trade Association Partnerships  Customized client solutions  Quantifiable results USFCS/NMMA Strategic Partnership Sign up at: http://export.gov/nmma/ Marine Industry Specific Webpage International Methods of Payment and Financing Strategies for Exporters Getting Paid and Managing Risk Prepared for the National Marine Manufacturers Association Charlotte Starfire September 26, 2012 Prepared for: National Marine Manufacturers Association Charlotte Starfire September 26, 2012 Risks and Benefits of Documentary Collections Importer  Relies on the exporter to ship goods as ordered  Payment is made before goods can be inspected  Doesn’t tie up buyer’s credit Exporter  Retains control of title to the goods until payment is made  Transaction is facilitated through banks  Collections are a simple and inexpensive payment method, but less secure than letters of credit 22 Open Account  Recommended for sales to long-standing customers with satisfactory payment history  Exporter takes both commercial and political risks  Risk to Seller: completely relies on Buyer to pay invoice when due  Risks to Buyer: no risks Export credit insurance provides risk mitigation against both commercial and political risks 23 Export Credit Insurance When U.S firms think of insurance they typically think:  Finished Goods  Work in Progress  Buildings/Equipment  People However, should they also consider credit insurance for accounts receivable:  AR is their 2nd most fluid asset after cash  Timed Payment Obligations  If a company writes off $100K in AR and their margin is 10%, it will need $1million in new sales to offset the hit to its bottom line Yet, > 94% of open account sales by US firms are uninsured How Does Credit Insurance Help?  Mitigate payment risk  Expand sales by offering better terms  Increase access to working capital 24 Financing Strategies for Exporters Working Capital Guarantee Programs: Ex-Im Bank and SBA  Delegated Authority Lenders under the U.S Export-Import Bank’s (Ex-Im Bank) Export Working Capital Program are permitted to commit an Ex-Im guaranty for loans without prior approval from Ex-Im  Preferred lender with the Small Business Administration’s (SBA) Export Working Capital program can commit an SBA guaranty for loans up to $5 million  Funding available for procurement, inventory, or production of export orders, including services  Financing up to 90% of foreign accounts receivable and 75% of export related inventory  Support for pre or post export financing Export-Import Bank of the U.S  Export Working Capital Program  Foreign Buyer Financing  Export Credit Insurance  Delegated Authority Lender U.S Small Business Administration  Export Working Capital Program  Export Express  International Trade Loans  PLP Status 25 SBA Export Express  The SBA Export Express offers small businesses the working capital necessary to develop or expand their export markets  Target clients include – Manufactures, wholesalers, export trading companies and service exporters who demonstrate that loan proceeds will enable them to enter a new export market or expand an existing export market  Max $500,000 line of credit or term loan, one year in business required  SBA guarantees between 75% to 90% of the loan amount  Proceeds can be used for export working capital purposes, international trade shows, purchase real estate and equipment related to exports, standby letters of credit when required as a bid/performance bond or advance payment guarantee 26 Foreign Receivable Financing Insured Foreign Receivables Financing (IFRF)  Export accounts receivable financing  Advances made at the time export shipments are made  Source of repayment and collateral is insured export accounts receivable  Private sector export credit insurance or Export-Import Bank insurance is assigned to the bank 27 Currency Risks What sales are overlooked when pricing only in USD? Should you consider a sales program in foreign currency? Strategy:  Establish a relationship with a currency partner that provides you access to a wide range of currency risk management products and advisory services  Working closely with your currency partner to implement a hedging strategy to mitigate your FX exposure and protect your profit margins  Sales agreements that contain a statement which protect Buyer and Seller from excessive moves in the currency market 28 Currency Risks You might want to consider: Foreign currency accounts, used to collect your foreign currency receipts and provide you the ability to disburse payments for expenses you may be incurring in that same currency Countries/Currencies Most Adaptable to Local Currency Pricing Australia Canada Denmark 12 countries Euro based Great Britain Hong Kong Japan Mexico New Zealand Norway Singapore South Africa Sweden Switzerland Numerous restricted currencies and Countries Check with your currency partner 29 Directing Methods of Payment Plan Ahead Be proactive - take control of the transaction Decide what your best alternatives are and prioritize them Be clear - name a payment method as basis of transaction For L/C’s - use a letter of instruction, and request a specimen copy of L/C prior to issuance  For L/C’s - Request a review from BOTH your banker and freight forwarder prior to shipment  For Drafts/Collections – check out the collecting bank before shipment     30 International Trade Strategy  Understand your objectives  Understand your methods of payment and the risks with each  Understand the impact exporting will have on your working capital  Understand that a long-term commitment to exporting is necessary 31 Contact SunTrust for International Services  Charlotte Starfire  Director  Global Trade Solutions  303 Peachtree Center  Suite 225  Atlanta, GA 30303  404-588-7508  Charlotte.Starfire@suntrust.com 32 A Real Life Testimonial… • Manufacturer of underwater lights • Based in Fort Lauderdale, Florida • 25% of sales are international The Challenge: • After the crisis in 2009, international customers stopped paying their bills • Struggled to ascertain financial viability of our foreign buyers • Lost our confidence to extend credit Became a gamble for us • We couldn’t take on the added risk! The Solution: Ex-Im Bank’s Export Credit Insurance •Completed application and, once pre-qualified, we had confidence again to extend credit to foreign buyers (both new and existing) •If customer doesn’t pay, we mitigate our risk with this policy •Reimburses us 95% of insured amount - after account becomes 90 days past due •Costs us approx 1.5% on the amount we insure Helped us retain our international business! Thank You! Q&A ... Charlotte Starfire September 26, 2012 Prepared for: National Marine Manufacturers Association Charlotte Starfire September 26, 2012 International Payment Risks  So you have decided to export? ??  Order... Political risks vary by country/region and are a concern only in international sales 14 International Methods of Payment Comparison of Risks Exporter Risk High Trade Terms Importer Risk Open... satisfactory payment history  Exporter takes both commercial and political risks  Risk to Seller: completely relies on Buyer to pay invoice when due  Risks to Buyer: no risks Export credit