1. How to Get Paid For and Finance Your Export Sales
3. 3 INTERNATIONAL METHODS OF PAYMENT
4. 4 Open account... are you really sure? (You ship the goods, they sell them and then pay you...maybe)
5. 5 Cash in Advance? (They send you the money then you ship the goods!) Be careful! Don’t ship before you are sure you are in receipt of collected funds
wire transfer: make sure they have complete instructions & verify receipt
check - determine that check has been paid by drawee bank
foreign check - may take up to 3 weeks to clear
6. 6 Trade Services (Traditional Bank Products) A. Letter of Credit (sight)
The buyer’s bank promises to pay the seller if the seller presents documents that comply with the conditions listed in the letter of credit. Payment will be at sight (immediate) upon presentation of conforming documents.
B. Letter of Credit (time)
The same as above except that payment will be at a designated time after presentation of compliant documents. Example: 30 days after bill of lading date. Provides terms for buyer but seller must wait for payment.
C. LC Discount & Acceptance (time)
A simple form of trade finance, which gives the buyer time to pay but your company receives cash following shipment. Build in the cost!!
7. 7 Trade Services (Traditional Bank Products) (continued) D. Collections (sight)
Similar documents as in letter of credit but there is neither bank examination nor promise of payment by bank. Should be used with strong or long established buyer as it carries risk of non-payment by the buyer. .
E. Collections (time)
Similar to sight, but gives buyer time to pay. Like open account but carries a “protest” mechanism.
8. 8 Commercial Letter of Credit arrangement by a bank to settle international commercial transaction
provides a measure of security for parties involved
creates contractual framework for trade transaction payment
9. 9 Letters of Credit L/Cs are a payment mechanism, not a quality assurance device. To assure quality, product inspection must be made. (e.g.: SGS or other method)
Bank guarantee of payment. If the documents outlined in the Letter of Credit are in complete compliance with the terms and conditions of the letter of credit, payment will be made.
Documents are checked for “discrepancies”, or differences between what is required and what is submitted. Discrepancies will usually delay payment.
10. 10 Payment under L/C is effected against receipt of documents only...not against shipment or examination of merchandise
if documents comply with credit terms
11. 11 Confirmed Letter of Credit A confirmed letter of credit carries the obligation of both the issuing bank and the confirming bank to pay the exporter if the terms and conditions of the credit are met.
Foreign country risk is eliminated, as the risk moves to the US bank.
Cash flow may improve, as payments are from a US vs. Overseas bank.
Additional expense, as another bank (confirming) is now involved in the transaction.
12. 12 If you want your L/C confirmed... consult with SunTrust Bank whether or not L/C can be confirmed, if issued
request confirmation when setting up sales contract with buyer
determine up front who will pay confirmation commission
13. 13 Letters Of Credit Standby
14. 14 Documentary Collections International Method of Payment
No Credit Approval Required
Collection processing handled in Atlanta
SunTrust acts as collecting bank for payment against shipping documents pertaining to international transaction
Not recommended for sales on extended terms
15. 15 One of the most common questions for people interested in international trade is “What is the best method of payment for international shipments?”
16. 16 One of the most common questions for people interested in international trade is “What is the best method of payment for international shipments?” (continued)
17. 17 These 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 customer’s needs and the way to make exports a manageable part of your growth strategy.
Who Can Receive Financing?
** Seller (Exporter)
** Buyer (Importer)
** Buyer’s Bank (If buyer’s credit is poor)
** Foreign Country or Agency
18. 18 Trade Finance Tools Export-Import Bank of the U.S.
Pre Export Working Capital Program
Insurance and Guarantees for short, medium and long term financing
Private Insurance covering commercial and political risk
19. 19 EXIM Bank Programs 1. EXIM Bank Programs
US Government Agency that supports US exporters whose products contain at least 50 percent US content. EX-IM Bank does not compete with commercial lenders, but assumes the risks they cannot accept.
Short term, medium term, and long term financing programs
Coverage in over 150 countries
Some restrictions to the program (military exports and some countries are excluded)
20. 20 EXIM Working Capital Gntee .
**Assists US exporters to obtain loans to produce goods or services for export. Exim guarantee repayment to the lender, making it possible for banks to extend financing to the exporter.
** Loans Can Be either Transaction Specific or Revolving
** High Advance Rates on Inventory and Receivables, including
Work in Process
21. 21 EXIM Medium Term Program Guarantee or Insurance
Post Export Financing – “Foreign Buyer Financing”
**1-5 year repayment, exceptionally 7 years and <$10 million
** 15 percent down payment, 85 percent financed amount
** Guarantees can be used for both products and services
** Fixed Rate or Floating Rate Financing Available
22. 22 EXIM Long Term Program Long Term Guarantee/Loan
Amounts over $10 million and > 7 years
15 percent down payment, 85 percent financed amount
Buyer financing of very large items (aircraft) and project finance
EXIM will consider making loan directly to the foreign buyer. No US commercial bank exposure.
23. 23 Export Credit Insurance
Available through EXIM Bank and Private Sector Insurers
**Enables US exporters to extend “open account” credit terms to international buyers.. Insured export receivables looked upon favorably by banks.
**Provides 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
24. 24 Avoid Quoting Price without knowing the financing details!
Train your sales team to build your portion of financing costs into the sale. This minimizes eroded margin and is exactly what your foreign competition is doing
25. 25 International Banking at SunTrust Offering a full range of international financial solutions to
meet our clients’ needs including:
International Methods of Payment and Currency Risk Management to facilitate trade and mitigate financial risks
Financing vehicles for importers and exporters
Established global network of correspondent banks
Focus on high quality service and finding customized solutions