Transcript Document
Global Trade Solutions International Payment & Finance Methods October 28, 2011 Norfolk, Virginia © Copyright 2005 SunTrust Banks, Inc. Agenda Products and Services for Exporters Risk Comparison – International Methods of Payment Documentary Collections Letter of Credit Trade Financing SBA EXIM Bank Export Credit Insured Accounts Receivable 2 Products and Services International Trade Products Trade Services Commercial Letters of Credit - Import & Export Standby Letters of Credit Documentary Collections Export Credit Insurance International Correspondent Banking 3 Trade Finance Working Capital Loans for exports Foreign Receivable Financing Foreign Buyer Financing Overseas Investment Financing Risk Comparison INTERNATIONAL METHODS OF PAYMENT INTERNATIONAL METHODS OF PAYMENT Trade Terms Exporter Risk Importer Risk Open Account High Documentary Collection(Time) Documentary Collection (Sight) Letters of Credit (Time) Letters of Credit (Sight) Cash in Advance 4 Low International Methods of Payment Getting Paid and Managing Risk © Copyright 2005 SunTrust Banks, Inc. International Methods of Payment Documentary Collections Draft or Documents Against Payment Or Acceptance Time of Payment: SIGHT at time of presentation of the 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 and after the cargo has arrived. Risk to Seller: possible non-payment of the draft. Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. Not recommended for sales on extended terms 6 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 and after the cargo has arrived. Risk to Seller: possible non-payment of the draft. Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. Don’t encumber Buyer’s line of credit Inexpensive 7 International Methods of Payment What is a Letter of Credit? A payment instrument issued by a bank on behalf of its customer. The issuing bank substitutes its own credit standing for that of its customer. 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 of the credit are met. The exporter is not obligated to perform if the terms of the LC are not acceptable. Commercial letter of credit can be paid “at sight” or at period in future Time Letter of Credit can be discounted if seller doesn’t want to wait until LC maturity. Simple form of trade finance. 8 Letters of Credit Benefits • More secure than Open Account • Foreign Bank promises to pay exporter if documents are in compliance with letter of credit • Goods available to Buyer: after payment if all Ocean Bills of Lading are included with the documents and after the cargo has arrived. • Risk to Seller: LC void if seller docs are not in compliance, i.e. have discrepancies • Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. • Versatile– can build in terms for buyer and still have assurance of payment from overseas bank 9 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? You need financing to put the order together? Trade Finance may be the solution to your customer’s needs and the way 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 produce goods or services for export. They guarantee repayment to the lender, making it possible for banks to extend financing to the exporter. They do not compete with commercial lenders, but assumes the risks they cannot accept. SunTrust Bank is a delegated lender for both SBA and EXIM Bank Programs 10 International Trade Finance SBA’s Export Express Working Capital Guarantee Program The program supports single transactions or multiple sales under 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. Streamlines processing and costs of smaller SBA loans for exporters VERSATILE -- Can be used for working capital, issue standby letters of credit for advance payment guarantees, participation in foreign trade shows, or translation of product literature for use in foreign markets 11 International Trade Finance SBA’s Export Working Capital Guarantee Program The program supports single transactions or multiple sales under a revolving line Guarantees 90 percent of a commercial bank loan up to $5,000,000 Can be used to purchase goods and services or pay for labor & materials to put together an export order– Pre Export Financing Can be used to support standby letters of credit for performance bonds or advance payment guarantee At the minimum, loan must be collateralized by export- related AR and inventory No US content requirement or military sales restrictions 12 International Trade Finance FEES and RATES Guarantee Fee: Maturities of 12 months or less = 1/4 percent Maturities greater than 12 months = 2-3.75% depending on loan size Interest Rates/Lender Fees are Negotiable ELIGIBILITY A business must meet SBA’s industry size standards and have been in business for at least 12 continuous months SunTrust Bank is a delegated lender for SBA’s Export Working Capital Guarantee Program One of few banks in country to be awarded this designation 13 International Trade Finance Export Import Bank of the US Export Working Capital Guarantee Program • The program covers 90% of the loan’s principal and accrued interest • STB minimum loan request is negotiable – there 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 entire transaction • 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 14 International Trade Finance Export Credit Insurance & Insured Foreign Receivables Financing Insurance Available through EXIM Bank and Private Sector Insurers Commercial risk insurance (buyer bankruptcy and insolvency) Political risk (war, inconvertibility of currency) Short Term & Medium Term Insurance Policies, Multi Buyer or Single Buyer Policies Enables US exporters to extend “open account” terms to international buyers (protect US exporters against foreign buyer default) Insured export receivables looked upon favorably by banks. Exporters may be able to borrow against insured foreign A/R. Good option for service companies who have little inventory for collateral 15 Contact: Marsha Sompayrac Director, Global Trade Solutions 919 E. Main Street, 2nd Floor SunTrust Bank Richmond, VA 30303 Tel: 804-782-5558 Marsha.Sompayrac @ Suntrust.com Hai-nah Ellison Vice President, Global Trade Solutions 919 E. Main Street, 2nd Floor SunTrust Bank Richmond, VA Tel: 804-782-7476 Hai-nah.Ellison@ Suntrust.com © Copyright 2005 SunTrust Banks, Inc.