Marsha Sompayrac SunTrust Helps Exporters - How to Get Paid

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    Copyright 2005 SunTrust Banks, Inc.

    Global Trade Solutions

    International Payment & Finance Methods

    Marsha Sompayrac

    SunTrust Bank

    September 21, 2011Norfolk, Virginia

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    Agenda

    Products and Services for Importers/Exporters

    Risk ComparisonInternational Methods ofPayment

    Collections

    Letter of CreditTrade Financing

    SBA

    EXIM BankExport Credit Insured Accounts Receivable

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    International Banking and Risk Mitigation

    Commercial

    - Any event that prevents the buyer from paying or prevents the seller from delivering theproduct or service.

    - Problems with payment arrangements on behalf of the exporter and/or importer

    - Problems with the merchandise on behalf of the exporter and/or importer

    - Additional costs for financing, insurance, and shipping

    - Protracted default- Bankruptcy or insolvency by the buyer

    Political

    - Any event or unforeseen factor not necessarily within control of the buyer and/or exporter

    - Problems with currency exchange

    - Government or political intervention

    - Problems with the movement of merchandise

    - Natural Disasters

    A variety of financing options are available when negotiating payment terms

    RISKS

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    International Trade Products

    Products and Services

    Trade Services Commercial Letters of

    Credit - Import & Export

    Standby Letters of Credit

    Documentary Collections

    Export Credit Insurance International

    Correspondent Banking

    Trade Finance Working Capital Loans

    for exports

    Foreign ReceivableFinancing

    Foreign Buyer Financing Overseas Investment

    Financing

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    Risk Comparison

    INTERNATIONALMETHODS OF PAYMENT

    Exporter Risk

    High

    Importer Risk

    Low

    Trade Terms

    Open Account

    Documentary Collection(Time)

    Documentary Collection (Sight)

    Letters of Credit (Time)

    Letters of Credit (Sight)

    Cash in Advance

    INTERNATIONAL

    METHODS OF PAYMENT

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    Copyright 2005 SunTrust Banks, Inc.

    International Methods of Payment

    Getting Paid and Managing Risk

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    International Methods of Payment

    Time of Payment: prior to shipment.

    Buyer Pays

    Wire Transfer

    Check

    Draft

    Credit Card

    Goods available to Buyer: upon delivery

    Risk to Seller: no risks

    Risks to Buyer: loses use of funds until goods arrive. Sellermay not ship goods as ordered or at all.

    No Credit Approval Required

    Cash In Advance

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    International Methods of Payment

    Time of Payment: upon payment of invoice.

    Goods available to Buyer: upon delivery.

    Risk to Seller: completely relies on Buyer to payinvoice when due.

    Risks to Buyer: no risks.

    Recommended for sales to long-standing customerswith satisfactory payment history

    Open Account

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    International Methods of Payment

    Time of Payment: SIGHT at time of presentation ofthe 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 andafter the cargo has arrived.

    Risk to Seller: possible non-payment of the draft.

    Risk to Buyer: has assurance of shipment, but Sellermay not ship goods as ordered. Must pay to get title togoods.

    Not recommended for sales on extended terms

    Documentary Collections

    Draft or DocumentsAgainst Payment Or Acceptance

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    International Methods of Payment

    Documentary Collections

    Benefits

    More secure than Open Account

    Goods available to Buyer: after payment if ALL Ocean

    Bills of Lading are included with the documents andafter the cargo has arrived.

    Risk to Seller: possible non-payment of the draft.

    Risk to Buyer: has assurance of shipment, but Sellermay not ship goods as ordered. Must pay to get title togoods.

    Dont encumber Buyers line of credit

    Inexpensive

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    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 itscustomer.

    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 ofthe credit are met.

    The exporter is not obligated to perform if the terms of the LC are notacceptable.

    Commercial letter of credit can be paid at sight or at period in future

    Time Letter of Credit can be discounted if seller doesnt want to wait until

    LC maturity. Simple form of trade finance.

    What is a Letter of Credit?

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    Letters of CreditBenefits

    More secure than Open Account

    Foreign Bank promises to pay exporter if documentsare in compliance with letter of credit

    Goods available to Buyer: after payment if all OceanBills of Lading are included with the documents andafter the cargo has arrived.

    Risk to Seller: LC void if seller docs are not incompliance, i.e. have discrepancies

    Risk to Buyer: has assurance of shipment, but Seller

    may not ship goods as ordered. Must pay to get title togoods.

    Versatilecan build in terms for buyer and still haveassurance of payment from overseas bank

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    International Methods of Payment

    Letter of Credit

    Importer Exporter

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    International Methods of Payment

    Letter of CreditImporter Exporter

    Advising Bank

    Documents

    Issuing Bank

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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?

    Trade Finance may be the solution to your customers needs and theway to make exports a manageable part of your growth strategy.

    SBA Export Express

    SBA Export Working Capital Program

    EXIM Bank Working Capital Program

    Insured Foreign Receivables Financing

    Both SBA and EXIM assists US exporters to obtain loans to producegoods or services for export. They guarantee repayment to the lender,making it possible for banks to extend financing to the exporter. Theydo not compete with commercial lenders, but assumes the risks theycannot accept.

    SunTrust Bank is a delegated lender for both SBA and EXIM BankPrograms

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    International Trade Finance

    SBAs Export Express Working Capital

    Guarantee Program

    The program supports single transactions or multiple salesunder 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. Streamlinesprocessing and costs of smaller SBA loans for exporters

    VERSATILE -- Can be used for working capital, issue standbyletters of credit for advance payment guarantees, participationin foreign trade shows, or translation of product literature foruse in foreign markets

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    International Trade Finance

    SBAs Export Working Capital GuaranteeProgram

    The program supports single transactions or multiple salesunder a revolving line

    Guarantees 90 percent of a commercial bank loan up to$5,000,000

    Letter of credit or open account purchase orders withacceptable insurance or exceptionally strong buyer

    Can be used to purchase goods and services or pay for labor& materials to put together an export order

    At the minimum, loan must be collateralized by export- relatedAR and inventory

    No US content requirement or military sales restrictions

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    International Trade Finance

    FEES and RATES

    Guarantee Fee:

    Maturities of 12 months or less = 1/4 percent

    Maturities greater than 12 months = 2-3% depending on loan size

    Interest Rates/Lender Fees are Negotiable

    ELIGIBILITY

    A business must meet SBAs industry size standards and have been

    in business for at least 12 continuous months

    SunTrust Bank is a delegated lender for SBAs Export Working Capital

    Guarantee Program

    One of few banks in country to be awarded this designation

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    International Trade Finance

    Export Import Bank of the US Export WorkingCapital Guarantee Program

    The program covers 90% of the loans principal and accrued interest

    STB minimum loan request is negotiablethere 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 entiretransaction

    Loans Can Be either Transaction Specific or Revolving

    High Advance Rates on Inventory and Receivables, including work in Process

    . Some restrictions to the program (military exports and some countries are

    excluded)

    Financing Provided for Short, Medium, and Long Term

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    International Trade Finance

    Export Credit Insurance & Insured Foreign ReceivablesFinancing

    Insurance Available through EXIM Bank and Private Sector Insurers

    Enables US exporters to extend open account terms to international buyers

    Insured export receivables looked upon favorably by banks. Exporters may be

    able to borrow against insured foreign A/R.

    Insurance policies that protect US exporters against foreign buyer default

    Commercial risk insurance (buyer bankruptcy and insolvency)

    Political risk (war, inconvertibility of currency)

    Short Term and Medium Term Insurance Policies

    Multi Buyer or Single Buyer Policies

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    Copyright 2005 SunTrust Banks, Inc.

    Contact:

    Marsha SompayracDirector, Global Trade Solutions919 E. Main Street, 2nd FloorSunTrust BankRichmond, VA 30303Tel: 804-782-5558Marsha.Sompayrac @ Suntrust.com

    Hai-nah EllisonVice President, Global Trade Solutions919 E. Main Street, 2nd FloorSunTrust BankRichmond, VA

    Tel: 804-782-7476Hai-nah.Ellison@ Suntrust.com

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