1 International Transaction Methods When Exporting John F. Strayhorn, President Global Insurance Services, LLC.
2 Who We Are Global Insurance Services was established in 2001 as a independent credit insurance broker based in Ellicott City, MD. We are a regional leader in arranging credit insurance for export and domestic sales having access to the major underwriters in the industry.
3 Focus On Financial Transaction Terms Cash In Advance Letter of Credit Cash Against Documents Open Account Open Account With Credit Insurance
4 Cash In Advance Importer pays for product prior to departure from your site. Good for exporter Not so good for importer as they pay up front and then wait for product. Poor use of funds from importers perspective. Harder to buy your product.
5 Letter of Credit Defined A letter of credit is a document issued by a financial institution assuring payment to a seller of goods and/or services provided certain documents have been presented to the bank.
6 Letter of Credit Continued Parties Involved: Beneficiary (Exporter) Applicant (Importer) Issuing Bank (Importers bank) Advising Bank (Exporters bank)
7 Letter of Credit Continued Excellent for Exporter: Paid when you ship goods/ document presentation to bank Not so good for Importer Importer has to have either a line of credit for letter s of credit or cash collateralize the LC. Ties up Importers funds and or credit lines Fees for line of credit and LC itself are multiples the expense of your LC costs.
8 Cash Against Documents Defined A payment arrangement in which an exporter instructs a bank to hand over shipping and title documents to the importer when the importer fully pays the accompanying draft. Also called documents against payment.
9 Cash Against Documents Less good for exporter Exporter not paid until product arrives at port Potential product resell issue if importer doesn t pick up goods Better than LC for importer Importer pays once he is ready and when goods arrive in port. No credit line expense associated w/transaction
10 Open Account Defined A trade arrangement in which goods are shipped to a foreign buyer before and without written payment guarantee of payment. Higher risk of non-payment for Exporter Excellent for Importer. Makes it easy to buy your product.
11 Open Account With Credit Insurance Credit Insurance is a product that insures the exporters open account receivables against non-payment. This is the fastest growing method to transact business in international trade. Excellent for Exporter-Mitigates Risk. Excellent for Importer-Frees up credit lines.
12 Short-Term Export Credit Insurance Refers to sales on credit terms less than 360 days (usually 120 days or less). Supports sales of agricultural products, capital, non-capital product & services. Insures Seller against Buyer receivable default. The credit insurance market is made up of 8 major private credit insurance underwriters & Ex-Im Bank (U.S. Gov t).
13 Requirements for Short-Term Credit Insurance Either Single Sale or Portfolio basis Cost generally ranges between 0.15% to 1% of the invoice ($150-$1,000 per $100,000). Premium payments can be structured as pay-as-you-go format, up-front annual payment or financed quarterly depending on underwriter.
14 Why use Short-Term Export Credit Insurance? Grant terms to match and beat competition Cheaper and easier than letters of credit Gives importer time to receive & install or re-sell product before paying, making it easier to buy your goods. Protects exporter against default from Political and Commercial risks (i.e. slow pay/insolvency)
15 Single Sale vs. Multi-Buyer (Portfolio) Single Sale approach Cover selectively those deals that need insurance for risk or competitive reasons. Coverage 90-98%. Portfolio approach--use your good customers to offset the not-so-good ones. Underwriters prefer a spread of risk which lowers premium rate. Coverage 90-98%.
16 Permits Expansion of Your Borrowing Base Banks will not lend against uninsured foreign receivables. Credit insurance is assignable to your bank for the purposes of expanding your borrowing base to include INSURED foreign receivables. Larger borrowing base= GREATER FINANCIAL FLEXIBILITY.
17 Ex-Im Bank s Express Export Credit Insurance Policy. Set up for Small Businesses: <$7.5MM in export credit sales. <500 employees. Ex-Im Bank qualifies the buyer and obtains credit reports No deductible, 95-98% coverage.
18 Ex-Im Bank s Express Export Credit Insurance Policy Policy is assignable to a bank for borrowing base expansion purposes. Set rates. Open account terms 1-60 days cost $0.65/$ or $ for a $50,000 transaction. Terms of sale can be up to 360 days. Insures shipments worldwide.
Export Import Bank Financing Programs The Export Import Bank of the United States (Ex Im Bank) is the official export credit agency of the United States. Ex Im Bank assists in financing the export of U.S.
Terms and Techniques to Manage Receivables, Protect Assets and Enhance Working Capital TERM / TECHNIQUE DEFINITION APPLICATIONS ADVANTAGES DISADVANTAGES Open Account Terms Seller makes shipment and awaits
Bad Debt Protection What is? > Coverage provided to companies who sell products to other businesses (b2b) on short-term credit (30/60/90 days) for both domestic and export sales > Indemnification for bad
Chapter 19 Financing International Trade J. Gaspar: Adapted from Jeff Madura, International Financial Management 19. 1 Slides by Yee-Tien (Ted) Fu Merchandise Trade Merchandise trade, i.e., exports and
SOLUTIONS GUIDE Solutions Guide for Financial Institutions Say yes to your customers more often If you want to enhance the lending value of your customer s assets or use our guarantees as security, consider
Companies turning to Trade Credit Insurance in an unpredictable and debt-laden world Companies turning to Trade Credit Insurance in an unpredictable and debt-laden world On the heels of a period of financial
Atradius Presents: Financing and Business Insurance Part 2: Brett Halsey President Introduction to Credit Insurance Atradius Presents Introduction to Credit Insurance What is Credit Insurance? Definition
ALTERNATIVE FUNDING SOURCES FOR YOUR BUSINESS Alternative Funding Sources Poor financial management is one of the biggest reasons why more than half of small businesses don t survive. This is particularly
Overview of Financial Solutions The Etra Advisory Group provides solutions to businesses for growth, expansion, cash flow, refinance and acquisition. We cover the world of business financing that banks
FINANCING EXPORTS Sandro Murtas Small Business Administration Office of International Trade Regional Manager firstname.lastname@example.org Tel: 504-756-5353 Separating Myths from Facts Myth Small Businesses Don
These manuals are created as resource guides for members of Saskatchewan Trade and Export Partnership (STEP). For more information on these manuals please contact Saskatchewan Trade and Export Partnership
FACTORING AND FORFEITING the faster way to get your money 3 CONTENTS FACTORING 4 DOMESTIC FACTORING 5 1. Supplier s factoring (Reverse factoring) 5 2. Selective factoring with right of recourse 6 3. Individual
Optimizing Payment Cycles for Trade Payables and Receivables Houston Treasury Management Association Space City Cash Conference September 2013 Madeline Sprague, HSBC Bank USA, N.A. Global Trade & Receivables
A Bridge Capital White Paper Improve cash flow. Get paid. Access cash for your business Why factor? If your business needs immediate working capital but your clients are taking more than 30 days to pay
Xynergy Commercial Capital LLC How Can Work For You The Problem Short of cash and must pay suppliers, lease, bills and salaries? No need for stress, get your payments in advance for your invoices and pay
M Simpson Associates A Straight Talking Consultancy Business specialists with the ability to see through the smoke and get to the bottom line quickly Exclusive Business Insight from M Simpson 1 2 3 4 INVOICE
Finances - Accounting INTERNATIONAL FACTORING A VIABLE FINANCING SOLUTION FOR FIRMS Assoc. Prof. Ph.D Giurc Vasilescu Laura University of Craiova Faculty of Economy and Business Administration, Craiova,
Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Credit is the lifeblood of South Louisiana business, especially for the smaller firm. It helps the small business owner get started, obtain equipment, build inventory,
www.mfactors.co.za FACTORING TRADE FINANCE BRIDGING FINANCE Who is Merchant Factors? Merchant Factors was founded in 1998 by our CEO, Johnny Philippou. It had become quite evident at the time that most
Introduction...page 1 Options for Mitigating Credit Risk...page 2 A Guide to Credit Insurance from Euler Hermes What is Credit Insurance?...page 3 The Basis of Credit Insurance...page 5 Conclusion...page
Trade Credit Practice, UK MANAGING TRADING RISKS THROUGH THE ECONOMIC RECOVERY OCTOBER 2013 CONTENTS The trading landscape for UK based companies... 1 Payment default and bad debt... 2 Insurance benefits...
Invoice Finance All businesses rely on receiving money for goods and services that they provide and if everyone paid their bills on time wouldn t life be much simpler! Invoice Finance is the means by which