Download pdf - Marsha Sompayrac SunTrust Helps Exporters - How to Get Paid

8/13/2019 Marsha Sompayrac SunTrust Helps Exporters - How to Get Paid

1/21

Copyright 2005 SunTrust Banks, Inc.

Global Trade Solutions

International Payment & Finance Methods

Marsha Sompayrac

SunTrust Bank

September 21, 2011Norfolk, Virginia


2/21

2

Agenda

Products and Services for Importers/Exporters

Risk ComparisonInternational Methods ofPayment

Collections

Letter of CreditTrade Financing

SBA

EXIM BankExport Credit Insured Accounts Receivable


3/21

3

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


4/21

4

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


5/21

5

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


6/21


International Methods of Payment

Getting Paid and Managing Risk


7/21

7


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


8/21

8


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


9/21

9


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


Draft or DocumentsAgainst Payment Or Acceptance


10/21

10



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


11/21

11


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?


12/21

12

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


13/21

13


Letter of Credit

Importer Exporter


14/21

14


Letter of CreditImporter Exporter

Advising Bank

Documents

Issuing Bank


15/21

15

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


16/21

16


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


17/21

17


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


18/21

18


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


19/21

19


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


20/21

20


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


21/21


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