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Transcript of © 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender. Services provided by: Bank...
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
MANAGING PAYMENT RISKAND
FINANCING EXPORTS
AFP 6-11-2014
Fernando Almeida
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Why is International Trade Important to AZ?
Supports more than 700,000 jobs
Ranked 24th in the US in goods exported in 2012
Customers in 208 countries buy Arizona-grown and manufactured goods and services
90 percent of AZ exporters are Small or Medium sized companies
Foreign-owned companies invest in Arizona and employ more than 73,000 Arizonans
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Why is International Trade Important to AZ?
Top Export Markets:
Mexico $ 6.5 BL
Canada $ 3.1 BL
Japan $ 1.8 BL
China$1.7 BL
U. K. $ 1.7 BL
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
RISKS FOR THE SELLER / EXPORTER Commercial Risk
Bankruptcy
Political Risk
War, revolution, confiscation
Foreign Exchange Currency devaluation
Exchange controls
Export Compliance Policies BIS; ITAR; OFAC
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
METHODS OF PAYMENT
1. Cash in Advance
2. Letter of Credit
3. Documentary Collection
4. Open Account
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
PAYMENT IN ADVANCE
Wire transfer (bank to bank)
Payment by check
Collection delay – defeats the intention of receiving money before shipping goods.
Credit card [for low dollar value]
Fear of fraud
Downside - Losing sales to competitors who may offer
flexible payment terms
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Commercial Letter of Credit
1. Promise to pay the beneficiary
2. Issued by a bank for account of its customer
3. To pay named beneficiary for:
• Stated amount and
• Within stated period
4. Presentation of specified documents in STRICT compliance with the terms of the letter of credit
5. Payment at sight or at a future time
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
TYPES OF LETTERS OF CREDIT
Documentary / Commercial
Standby
Bid and Performance Bonds
Advance Payment
Warranty
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
RISKS ASSOCIATED WITH LETTERS OF CREDIT
Financial strength of the Issuing Bank
Country risk
- Consider Confirmation
Documentary risk – Discrepancies
Fraudulent L/C’s – advised directly to the beneficiary without the intermediary bank
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
DOCUMENTARY COLLECTIONS
A. Documents Against Cash Goods are released to the buyer after payment is made.
This is only applicable on ocean shipment.
Under air shipment, airway bill is not needed to claim the goods. The exporter has a higher risk of not getting paid.
B. Documents Against Acceptance Time draft
Extending credit to the buyers
Payment is due at a specific time after the buyer accepts the time draft.
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Risks Associated with Documentary Collections:
Merchandise refusal by buyer
Non payment (on time draft)
DOCUMENTARY COLLECTIONS, cont’d.
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
OPEN ACCOUNT
Most Risk – products are shipped first , payment received later.
Accounts Receivable Insurance to mitigate risk
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Export Financing Solutions
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Financial Challenges in International Sales
Exporters face three major challenges:
Obtaining working capital financing for export orders (P/O financing)
Extending credit terms to foreign buyers
Financing capital goods
Why? . . .
Sources of repayment are outside the U.S.
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EXPORT-IMPORT BANK OF THE U.S.
Ex-Im Bank is an independent agency of the United States.
Established in 1934
To date, supported more than $474 BL of U.S. exports
H Q in Washington, DC
5 Regional Offices
Mission: Support the financing of U.S. exports in order to sustain jobs.
Self-sustaining agency
Does not compete with the private sector
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EX-IM BANK PROGRAMS
Working Capital Guarantees (exporter financing)
Global Credit Express
Foreign Accounts Receivable Insurance
Medium & Long Term Loan Guarantees (buyer financing)
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
WORKING CAPITAL GUARANTEE
Program Highlights:
Pre-Export Financing
Meet Manufacturing Cost
Labor, material, parts, overhead
Bid/Performance/Advance Payment Bond
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
WORKING CAPITAL GUARANTEE
1. Provides a 90% guarantee of repayment (Principal and Interest) on loans made to exporters
2. Minimum US content of >50%
3. Advance Rate of 75% on export inventory and 90% against export accounts receivables
4. Ex-Im Bank won’t support exports of military/defense products and services.
5. Export must take place from the US
6. Not for start-ups
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
19
WCGP Benefits - Expansion Of Borrowing Base
Expansion of Borrowing Base: Asset Based Facility WCGP
Collateral Amount Advance Collateral Advance Collateral
Exportable Inventory
Raw Materials $ 200,000 20% $ 40,000 75% $ 150,000
WIP $ 200,000 0% $ 0.00 75% $ 150,000
Finished Goods $ 600,000 50% $300,000 75% $ 450,000
Subtotal $1,000,000 $340,000 $ 750,000
Foreign Accounts Receivable (A/R)
Open Account $ 800,000 0% $ 0.00 90% $ 720,000
Letters of Credit $ 200,000 90% $180,000 90% $ 180,000
Subtotal $1,000,000 $180,000 $ 900,000
Total Borrowing Base$520,000 $1,650,000
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Global Credit Express
1. Pilot Loan Program
2. Provides working capital to fund export activity.
3. Maximum loan is $500,000
4. Streamline processing and quick turn-around time
5. Requires no borrowing base or monthly reporting
6. In business for 3 years and one year of exporting experience
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EXPORT CREDIT INSURANCE
Post-Export
Insuring foreign receivables
A.EX-IM BANK
Multi-Buyer or Single Buyer Policy
Covers political and commercial risk for up to 95% of the invoice amount.
Covers bankruptcy and protracted defaults, war, revolution, revocation of import license.
No minimum premium, “pay-as-you-ship”
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EXPORT CREDIT INSURANCE
Requirements:
Minimum > 50% U.S content
Must be shipped from U.S.
Defense products are excluded
Country Limitation Schedule
Small Business Multi-Buyer Premium Rates:
1-60 days - 0.55%
61-120 days - 0.90%
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EXPORT CREDIT INSURANCE, cont’d.
Other Insurers
Attradius
FCIA Management
Coface
Euler-Hermes
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
EX-IM Bank Medium Term Financing
100% coverage on loans to foreign buyers
Capital equipment and related products
15% down payment required
Repayment terms based on contract price and export items
Medium Term: 5 to 7 years
Renewable Energy & Water Treatment Equipment: Up to 15 years
© 2008 BOK Financial Corporation. Member FDIC. Equal Opportunity Lender.Services provided by: Bank of Albuquerque, N.A., Bank of Arizona, N.A., Bank of Arkansas, N.A., Bank of Kansas City, N.A., Bank of Oklahoma, N.A., Bank of Texas, N.A., Colorado State Bank and Trust, N.A.
Fernando AlmeidaSenior Vice PresidentInternational Trade & TreasuryBank of Arizona16767 N. Perimeter Dr. Suite 200Scottsdale, AZ 85260
Phone: 602-808-5364
Email: [email protected]