You are on page 1of 16

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

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

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
High

Open Account

Importer Risk

Documentary Collection(Time)
Documentary Collection (Sight)
Letters of Credit (Time)
Letters of Credit (Sight)
Cash in Advance

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

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.
Dont encumber Buyers line of credit
Inexpensive

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 doesnt want to wait until
LC maturity. Simple form of trade finance.

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

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 customers 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

SBAs 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

SBAs 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 SBAs industry size standards and have been
in business for at least 12 continuous months
SunTrust Bank is a delegated lender for SBAs 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 loans 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:Banks,
804-782-7476
Copyright 2005 SunTrust
Inc.

You might also like