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York College Small Business Development Center International Trade Initiative Global Edge Workshop “FINANCING INTERNATIONAL GROWTH PART 2” WEBINAR Thursday, January 12 th 2012. Chip Thomas The American Export Training Institute A Division of Export Risk Management, Inc.

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chip thomas the american export training institute a division of export risk management inc

York College

Small Business Development Center

International Trade Initiative

Global Edge Workshop

“FINANCING INTERNATIONAL GROWTH PART 2”

WEBINAR

Thursday, January 12th 2012

Chip Thomas

The American Export Training Institute

A Division of Export Risk Management, Inc.

Funded in part through a Cooperative Agreement with the Small Business Administration (SBA). All SBA-funded programs are extended to the public on a nondiscriminatory basis. Reasonable accommodations for persons with disabilities will be made if requested at least two weeks in advance.

payment financing scenarios
Payment/Financing Scenarios
  • Pre-Shipment Needs
    • Working Capital
      • Production
      • Packaging
      • Shipment
  • Post-Shipment
    • Payment
    • Financing
    • Risk Protection
sources for payment financing
Sources for Payment/Financing
  • Pre-Shipment
    • Buyer Credit/Financing
    • Banks/Credit Unions
    • Finance Companies
    • Government Agencies (EXIM, SBA…)
  • Post-Shipment
    • Banks
    • Finance Companies
    • Government Agencies (EXIM, SBA…)
payment methods
Payment Methods
  • Cash in Advance
  • Letter of Credit
  • Documentary Collection
  • Open Account
choice of methods
Choice of Methods
  • Buyer - Seller Relationship
  • Buyer’s/Seller’s Credit Standing
  • Country Conditions
  • Other:
    • Logistics
    • Competition
    • “Gut Feeling”
payment terms
Payment Terms
  • Sight - immediate payment; location specific
  • Usance/Time - future payment
  • Deferred Payment - future payment
incoterms 2010
Incoterms 2010
  • Rules for Any Mode or Modes of Transport

EXW = Ex Works

FCA = Free Carrier

CPT = Carriage Paid To

CIP = Carriage and Insurance Paid To

DAT = Delivered At Terminal

DAP = Delivered At Place

DDP = Delivered Duty Paid

  • Rules for Sea and Inland Waterway Transport

FAS = Free Along side Ship

FOB = Free On Board

CFR = Cost and Freight

CIF = Cost Insurance and Freight

financing options for us exporters
Financing Options for US Exporters
  • Banks:
      • Letters of Credit
      • Documentary Collections
  • Other Private Sources:
      • Credit Insurance
      • Accounts Receivable Financing
      • Factoring
      • Forfaiting
  • Government:
      • EXIMBANK and SBA
      • OPIC
      • CCC
      • TDA
      • USAID
letters of credit
Letters of Credit
  • Two Types
      • Documentary/Commercial
        • Active Payment Instrument
        • Active Financing Tool
      • Standby
        • Passive Payment Instrument
        • Passive Financing Tool
          • Performance
          • Financial
          • Trade-Related
20 characteristics of a commercial lc
20 Characteristics of a Commercial LC

1. Irrevocable

2. Issue Date and Expiry Date/Expiry Location

3. Issuing Bank/Advising Bank

4. Importer/Exporter

5. Value/Currency

6. Description of Goods/Services

7. Required Documents

8. Payment Terms

9. INCOTERMS

10. Port-to-Port Information (Dispatch to Destination)

11. UCP 600

12. LC Fees - who pays?

13. Latest Ship Date

14. Presentation Date

15. Partial Shipments (allowed, not allowed)

16. Transshipments (allowed, not allowed)

17. Paying Bank

18. Drawee Bank

19. Reimbursing Bank

20. Confirming Bank

documentary collections
Documentary Collections
  • Disguised Open Account Transactions
  • Less secure than Letters of Credit
  • More secure than Open Account
  • Benefits:
      • Don’t encumber buyer’s line of credit
      • Very inexpensive
      • Effective if properly structured
        • Use of correct INCOTERMS 2010
        • Role of banks and freight forwarders
eximbank programs
Eximbank Programs
  • Pre-shipment:
      • Working Capital Guarantee
  • Post-shipment:
      • Short-Term:
        • Small Business Insurance Policies
        • Single-sale and Portfolio Policies
        • Bank Insurance Policies
      • Medium Term:
        • Single Shipment Policies
        • Repetitive Shipment Policies
        • Guarantees
        • Loans
        • Project Finance
working capital guarantee
Working Capital Guarantee
  • Needed for:
      • Pre-shipment financing
  • To be used when:
      • There is a lack of collateral to acquire bank financing
      • Lender is unwilling to increase line of credit
      • Company needs working capital to finance exports
      • Banks will not lend against foreign accounts receivable
      • Exporter wants to improve cash flow
  • Benefits:
      • Helps pay for raw materials
      • Increases borrowing base
      • Is relatively inexpensive
      • Provides local bank with a 90% guarantee
      • Quick approval
for more information
For More Information
  • Chip Thomas

General Manager

American Export Training Institute (AETI)

419 Leslie Lane

West Chester, PA 19382-7776

Tel: 610-563-6335

  • Email: aeti@aol.com

cthomaspa@gmail.com