Export Lenders worldwide

Export Lenders worldwide
Lenders are generally concerned with two questions:

Can the exporter perform? They want to know that the exporter can
produce and ship the product on time, and that the product will be
accepted by the buyer.

Can the buyer pay? They want to know that the buyer is reliable with a
good credit history. They will evaluate any commercial or political
risk.

If a lender is uncertain about the exporter's ability to perform, or if
additional credit capacity is needed, government guarantee programs are
availalbe that may enable the lender to provide additional financing

Working Capital Loans

For exporters, working capital loan programs are normally associated
with pre-shipment financing. Many small businesses need pre-export
financing to cover the operating costs related to a sales order or
contract. Loan proceeds are commonly used to finance three different
areas:

Labor: The people needed to build or buy the export product.

Materials: The raw materials needed to produce the export product.

Inventory: The costs associated with buying the export product



Factoring

Once a product has been shipped, that inventory is converted to an
Account Receivable (A/R). A list of all Accounts Receivable are
maintained on an aging report while the exporter waits for final
payment. If there is a need for immediate cash, it's possible to sell
the A/R at a discount. This solution is called Factoring.

Factoring is the discounting of foreign accounts receivable that do not
involve drafts as the method of payment. A Factor (an organization that
specializes in the financing of accounts receivable) takes title for
immediate cash at a discount from the face value. Although factoring is
often done without recourse to the exporter, verify these specific
arrangements.

Factors typically provide 70% of the face value with 3-5 working days,
and assume responsibility for collection from the buyer. After final
payment, the Factor will pay the remaining 30% - less a service fee of
4% - 5%.



Forfaiting

Forfaiting is the selling, at a discount, of longer term accounts
receivable or promissory notes of the foreign buyer. These instruments
may also carry the guarantee of the foreign government. Both U.S. and
European forfaiting houses, which purchase the instruments at a discount
are active in the U.S. market. Because forfaiting may be done either
with or without recourse, verify all of the specific the specific
arrangements



Purchase Order Financing

A Purchase Order (P.O.) is a legal agreement signed by a buyer
requesting a seller to provide goods or services. Purchase Orders
normally list the amount of goods or services required and the terms and
conditions of delivery and payment.

Major domestic buyers will normally issue a P.O. with Net 30 to 60 day
terms. Overseas suppliers will usually ask for OD or sight draft Letter
of Credit terms. For an importer, this difference in terms of sale means
that there won’t be any cash coming in during the manufacturing process
or the transit period. Unless a bank or factor will finance the A/R
period, the importer is out of cash until the invoices are finally paid
off.

Purchase Order Financing can be an alternative solution to this cash
flow dilemma. P.O. Financing is a short-term funding technique used to
finance the purchase or manufacture of goods that have been presold to a
creditworthy customer. Lenders that offer this specialized form of
financing will assist in the purchase of product inventory by using the
inventory and confirmed purchase orders as collateral.



Importers, Exporters, Distributors or Manufacturers can use Purchase
Order Financing. Funds are used for issuing Letters of Credit, payment
to suppliers for finished goods, raw materials or direct labor. Purchase
Order Funding is a risky form of financing and therefore costs more
than traditional financing. It requires extensive due diligence, and
lenders are highly selective. If you can meet the prerequisites there
are some excellent P.O. lenders available to offer you a financial
solution



Due Diligence

As part of your due diligence when selecting a bank and a financial solution, ask the following questions:

What are the charges for confirming a letter of credit, processing drafts, and collecting payments?

Does the bank have foreign branches or correspondent banks? Where are they located?

Can the bank provide buyer credit reports? At what cost?

Does the bank have experience with U.S. and state government financing
programs that support small business export transactions? If not, is it
willing to consider participating in these programs?

What other services, such as trade leads, can the bank provide?

Application Information

Banks and non-bank lenders will require business information as part of
their due diligence. This information is packaged with with a loan
application and submitted to the lender. The typical information
required may include some or all of the following:

Year end financial statements for the last three years on the business and signed tax returns.

Current interim financials, normally not older than 90 days.

Current A/R and A/P agings and inventory details

Personal Financial Statements on all owners of 20% or more and each of their last three years tax returns (signed).

Product literature/Business Plan or narrative on how business is
operated, number of products produced and sold (proof of ability to
perform).

Resumes on key management.

Financial projections (P&L) and Cash Flow statement

Proof of 50% product exported.

Purchase Order copies from exporter from foreign buyers (basis for loan/line advances).

Information on Foreign Buyers (ability to pay)