PowerPoint PresentationGlobal Trade Solutions
Risk Comparison – International Methods of Payment
Documentary Collections
Export Credit Insured Accounts Receivable
Highlight for the client/prospect, what you are going to review during today’s presentation.
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Standby Letters of Credit
Foreign Receivable Financing
Foreign Buyer Financing
Overseas Investment Financing
International Methods of Payment
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International Methods of Payment
Time of Payment: SIGHT at time of presentation of the draft
Time of Payment: TIME at a future date.
Goods available to Buyer: after payment if ALL Ocean Bills of Lading are included with the documents and after the cargo has arrived.
Risk to Seller: possible non-payment of the draft.
Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods.
Not recommended for sales on extended terms
Documentary Collections
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More secure than Open Account
Goods available to Buyer: after payment if ALL Ocean Bills of Lading are included with the documents and after the cargo has arrived.
Risk to Seller: possible non-payment of the draft.
Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods.
Don’t encumber Buyer’s line of credit
Inexpensive
International Methods of Payment
A payment instrument issued by a bank on behalf of its customer.
The issuing bank substitutes its own credit standing for that of its customer.
The issuing bank undertakes to pay for the goods or services provided by the beneficiary of the LC; the beneficiary looks to the bank for payment, instead of the buyer (applicant of the LC).
The LC assures the beneficiary (exporter) of payment when the terms of the credit are met.
The exporter is not obligated to perform if the terms of the LC are not acceptable.
Commercial letter of credit can be paid “at sight” or at period in future
Time Letter of Credit can be discounted if seller doesn’t want to wait until LC maturity. Simple form of trade finance.
What is a Letter of Credit?
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More secure than Open Account
Foreign Bank promises to pay exporter if documents are in compliance with letter of credit
Goods available to Buyer: after payment if all Ocean Bills of Lading are included with the documents and after the cargo has arrived.
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International Trade Finance
TRADE FINANCE TOOLS
These traditional payment methods are fine, but what if your customer wants extended terms of payment or your competitors are offering better terms? You need financing to put the order together?
Trade Finance may be the solution to your customer’s needs and the way to make exports a manageable part of your growth strategy.
SBA Export Express
Insured Foreign Receivables Financing
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SBA’s Export Express Working Capital Guarantee Program
The program supports single transactions or multiple sales under a revolving line
Maximum loan amount limited to $500,000
Guarantees 90 percent of a commercial bank loan up to $350,000 and 75 percent from $350,000-$500,000
Program minimizes government mandated forms. Streamlines processing and costs of smaller SBA loans for exporters
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SBA’s Export Working Capital Guarantee Program
The program supports single transactions or multiple sales under a revolving line
Guarantees 90 percent of a commercial bank loan up to $5,000,000
Can be used to purchase goods and services or pay for labor & materials to put together an export order– Pre Export Financing
Can be used to support standby letters of credit for performance bonds or advance payment guarantee
At the minimum, loan must be collateralized by export- related AR and inventory
No US content requirement or military sales restrictions
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Maturities greater than 12 months = 2-3.75% depending on loan size
Interest Rates/Lender Fees are Negotiable
ELIGIBILITY
A business must meet SBA’s industry size standards and have been in business for at least 12 continuous months
SunTrust Bank is a delegated lender for SBA’s Export Working Capital Guarantee Program
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International Trade Finance
Export Import Bank of the US Export Working Capital Guarantee Program
The program covers 90% of the loan’s principal and accrued interest
STB minimum loan request is negotiable – there is no maximum amount
At the minimum, loan must be collateralized by export-related AR and inventory
Goods must have at least 50% US cost content to guarantee the entire transaction
Loans Can Be either Transaction Specific or Revolving
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Some restrictions to the program (military exports and some countries are excluded)
Financing Provided for Short, Medium, and Long Term
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Insurance Available through EXIM Bank and Private Sector Insurers
Commercial risk insurance (buyer bankruptcy and insolvency)
Political risk (war, inconvertibility of currency)
Short Term & Medium Term Insurance Policies, Multi Buyer or Single Buyer Policies
Enables US exporters to extend “open account” terms to international buyers
(protect US exporters against foreign buyer default)
Insured export receivables looked upon favorably by banks. Exporters may be able to borrow against insured foreign A/R.
Good option for service companies who have little inventory for collateral
© Copyright 2005 SunTrust Banks, Inc.
Contact:
SunTrust Bank
919 E. Main Street, 2nd Floor
SunTrust Bank
Richmond, VA
Tel: 804-782-7476
Hai-nah.Ellison@ Suntrust.com