International Transaction Methods When Exporting. John F. Strayhorn, President Global Insurance Services, LLC.

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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.

We are a regional leader in arranging credit insurance for export

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.

payment to a seller of goods and/or services

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.

credit for letter s of credit or cash collateralize the LC.

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.

and title documents to the importer when the importer fully

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

t pick up goods Better than LC for importer Importer pays once he is

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.

This is the fastest growing method to transact business in international

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).

Supports sales of agricultural products, capital, non-capital product & services.

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.

15% to 1% of the invoice ($150-$1,000 per $100,000).

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)

Gives importer time to receive & install or re-sell product before paying, making

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%.

need insurance for risk or competitive reasons. 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.

Credit insurance is assignable to your bank for the purposes of

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.

Open account terms 1-60 days cost $0.65/$100.00 or $325.

19 Food Products Insured Insurable Food/Ag products include: Ice Cream, Tea, Candy, Fish, Logs, Lumber, Cattle, Peanuts. Apples, Eggs, Chicken, Wheat, Soybean, Lentils, Canned Corn, Flaxseed. Sweet Potatoes, Grapes, Almonds.

20 For More Information John F. Strayhorn, President Global Insurance Services, LLC. Telephone Number: Cellphone Number: Fax Number:

LLC. Telephone Number: 410-480-0040 Cellphone

21 Other Product Offerings Domestic Credit Insurance Credit Reports (Int l & Domestic) Collection Services (Int l & Domestic) Cargo Insurance (Int l & Domestic)

SBA EXPORT LOAN PROGRAMS

SBA EXPORT LOAN PROGRAMS Patrick Hayes, Regional Manager SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH 44114-216-522-4731 patrick.hayes@sba.gov SBA