© copyright 2005 suntrust banks, inc. global trade solutions export financing methods october 17,...

© Copyright 2005 SunTrust Banks, Inc.

Global Trade Solutions

Export Financing Methods

October 17, 2008

Norfolk, Virginia

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International Trade Products

Products and Services

Trade Services Commercial Letters of Credit

- Import & Export Standby Letters of Credit Documentary Collections Export Credit Insurance International Correspondent

Banking

Trade Finance Working Capital Loans for

exports Foreign Receivable Financing Foreign Buyer Financing


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International Trade Finance Global Trade Solutions

Traditional payment methods are fine, but what if your customer wants extended terms of payment or your competitors are offering better terms?

TRADE FINANCE TOOLS

SBA Export Working Capital Program

EXIM Bank Working Capital Program

SBA and EXIM assists US exporters to obtain PRE EXPORT 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. EX-IM Bank does 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

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EXIM & SBA Working Capital Guarantee Programs

BASIC PARAMETERS

The programs supports single transactions or multiple sales under a revolving line

Both programs cover commercial banks for 90 percent of the loan’s principal and accrued interest

Loan must be collateralized by export related accounts receivable and export related inventory

SBA loan maximum is to $1,666,666 exposure

EXIM loan amount – no maximum

Delegated Authority lender under EXIM Bank up to $5 million and SBA Preferred Lender

SBA Export Express


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Loan Facilities

Transaction Specific: (Supports a single export purchase order (large ticket item)

Transaction Specific Revolving: Structured to support several export purchase orders normally 2-5)

Revolving Line of Credit: Multiple buyers/Multiple export purchase orders


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USES OF PROCEEDS

Finance Foreign A/R

Purchase finished products for export

Pay for raw materials, supplies, labor and overhead to produce goods or services for export

Support standby letters of credit serving as performance or payment guarantees for benefit of exporter

ELIGIBILITY

Export Related Inventory may include raw materials, work in process, and finished goods and MUST be located in the United States

Programs do not always require A/R to be insured but we strongly recommend it as it protects the exporter


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Basic Application Requirements

SBA/EXIM Joint Application Form

Three years FYE financial statements (plus tax returns), if applicable

Guarantor’s personal financial statement + 3 years tax returns

Company history (type of business, export experience, etc)

Ownership/Management background

Transaction Information


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Criteria and ProgramRequirements Ex-Im SBA

Maximum loan amount None $1,666,666

US content requirement 51% US content requirement N/A

Military sales Sales restricted to foreign military N/A

Quality of F/S requirement Loan Amt > $5MM - Audited2.5MM - $5MM - Reviewed$1MM - $2.5MM - Compiled$1MM - under - Internally prepared

N/AN/AN/AN/A

US citizenship requirement N/A Principals must be UScitizens or legal permanentresidents

DocumentationRequirements

Standard STB and Ex-Im docs Credit agreement required

Special SBA loan docs; SBA certified attorney

Monthly servicing fee N/A .50% (specific Compass set up)

Advance Ratios Inventory 75%Accounts receivables – up to 90%

Inventory – 75%Accounts Receivables – up to 85%

Summary Chart – Program ComparisonsGlobal Trade Solutions

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International Trade Finance

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


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Export Credit Insurance – Pros and Cons

More Aggressive Sales Strategy

Enter Higher Risk Emerging Markets

Obtain Financing – Key Purchasing Consideration

Increased Credit Exposures While Selling on Open Account

It DOES NOT make a a bad credit good

It DOES NOT cover product disputes or contract cancellations

It is CONDITIONAL: claim payment will be made only if insured can

demonstrate conformity to the policy’s terms and conditions

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Who Uses Credit Insurance?

Western Europe– 83 percent of World Market

Rest of World– 17 percent of which North America uses only 6 percent

US Firms Typically Insure Inventory, Buildings, People

But 94 percent of domestic receivables in US are not insured

Accounts Receivable is 2nd most fluid asset after cash

How is ECI Priced?

Pricing Based on Country Risk, Industry Risk, Buyer Risk, Terms of Payment, Loss Record, Deductible

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INSURED FOREIGN RECEIVABLE FINANCING (IFRF)

Post shipment financing– a financing solution that allows banks to accept the insured export receivables of our domestic exporting clients as collateral in their borrowing base

Most banks’ credit policy excludes advancing against export A/R unless it is insured and monitored by the international division of the bank

Eliminates foreign risk component; AR can be viewed as “domestic” risk

Exporter (our client) is the insured party/administers policy – the bank is loss payee

Provides coverage against commercial (protracted default, insolvency) and political (war, insurrection, acts of God) risk of foreign buyer

Various policies available to insure one buyer or entire book of export AR

Policy coverage averages 90 percent- bank may be able to advance up to that amount against foreign A/R

WIN-WIN for exporter, foreign buyer, and bank

© Copyright 2005 SunTrust Banks, Inc.

Contacts:

Marsha Sompayrac

Director,


SunTrust Bank

919 E. Main Street, 2nd Floor

Richmond, VA 23219

(804) 782-5558

[email protected]

Hai-nah Ellison

Vice President,


SunTrust Bank

919 E. Main Street, 2nd Floor

Richmond, VA 23219

(804)782-5558

[email protected]

© copyright 2005 suntrust banks, inc. global trade solutions export financing methods october 17,...

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