There are at least twenty US Government Agencies offering some sort or another of Export Credit Financing to US companies and/or direct Export Assistance.
In addition to financing, these Agencies offer numerous programs to assist US companies with market research by industry, product or country; export assistance and counseling; export licensing, control and trademark protection; vetted importer/buyer contacts; logistics identification. The vast majority of these programs and services are offered to US companies free of cost or at very low cost.
Of the approximate thirty million US businesses in operation, only about one percent are exporters. Of that one percent about one in five are both exporting and importing. About three-fifths of the total numbers of companies that export are exporting to only one foreign destination.
The majority of US exporters offer open account credit terms to their foreign buyers without coverage for the risk of slow payment, non-payment or default. Many other exporters offer their products delivered utilizing one of the least favorable Incoterms delivery codes that places their risk at a higher level.
As an example, ask yourself and a few others of your exporter contacts if they can accurately describe, under the international terms of delivery and sale, when does risk transfer and then vet their answers. Without question the majority of US exporters, based on our research, do not fully comprehend when risk transfers on their exports. Thus, the majority of US exporters are exporting at a rate that is not the most beneficial to them. Not beneficial to the US exporter based on payment risk and terms and sales!
Payment Risk to the exporter, from most secure to least secure, is as follows:
1: Cash in Advance
2: Letters of Credit
3: Documentary Collections
4: Open Account
In business now for our 16th year it still is a wonder to me why the vast majority of US exporters operate under open account credit terms with no guarantee of repayment or loss coverage when the US Government has formulated dozens and dozens of programs specifically designed to finance the exporter and reduce and/or eliminate risk. When you add the private international trade credit insurance companies into the mix of options, such as Euler Hermes or Atradius as example, you begin to better understand my concern.
These US Government backed programs cover direct loans, loan guarantees, working capital loans, credit insurance, project finance, investment insurance, political risk insurance, currency risk insurance, grants for feasibility studies and other export related needs, training grants, market development grants and many other programs.
When so many US companies that are exporting yet are so cash strapped that they resort to factoring or forfaiting their open account receivables it is a reflection of the lack of understanding of the most basic principles of export credit financing…or a lack of understanding of basic business principals of finance. With just a few adjustments most any US exporter can adjust accordingly and vastly increase revenue and income…and sleep much better with the knowledge that your exports and payment are secure!
With the hundreds and hundreds of US Government, Regional, State and Local entities offering free or reduced cost financing, marketing, sales and export counseling assistance one would think that the number of US companies exporting would be much greater than the one percent that do.
Yes we agree that it may appear to the exporter at first glance to be a labyrinth which they do not understand how to navigate…we understand that. However, if that first view seems to be overwhelming, one should look at the number of opportunities provided to the US exporter and realize that it really is a rather simple process to go from not exporting, not receiving capital financing and insurance, market access and buyer identification to full-fledged exporting with government backed loans, credit insurance and the most secure buyer payment risk levels available.
As another specific example of the wisdom of exporting utilizing US Government programs to identify and vet foreign buyer clients, guarantee payment risk, access working capital financing while reducing risk and improving your income statement, I spoke on this topic at a conference at the 2015 World Ag Expo in Tulare, CA. I was the only private company to speak on the panel along with the SBA, Commerce, ExIm Bank and the CITD.
My discussion topic covered just how simple and inexpensive it actually is to go from no or few exports to significantly greater exports in less than 90 days. I related to the attendees for an all-in cost of $7,500 a US exporter can receive market studies, identify 9 – 15 vetted importers, meet face-to-face with the prospective buyers in three different countries at the US Embassy in that country along with interpreters. Again, all in for less than $7,500…and this includes everything including all travel and hotel accommodations!
As the US is the second largest exporter on the planet and 95% of all commerce in the world exists outside of our borders it behooves US companies, small, medium and large, to enter into the world of exporting while working with the various US programs to reduce risk and improve their gross profit numbers.
The opportunities for finance exporting covers most all agriculture commodities, food and beverages, raw materials, manufactured goods, replacement parts, project construction and professional services. Further, both new and used/refurbished goods are eligible for export credit financing along with local foreign in-country costs. Tenor length can be from 90 days up to 18 years, depending on the useful life of the products being exported. All the while you, the exporter, receives full payment upon confirmation of the product being exported…in other words confirmation that the product has left our shores.
Current interest rates offered to you the exporter or to your buyer importer are considerably lower than any conventional financing option and most assuredly lower than factoring or forfaiting.
Just to give you a few more examples of what is possible and how to add value to your company one should understand that most all used equipment and machinery a company owns is more valuable to them if it is exported rather than being utilized here. For example all used aircraft, automobiles, tractors, farm equipment, dairy equipment, food processing equipment, capital equipment, medical equipment, mining and dredging equipment, oil and gas equipment and on and on are far more valuable on the export market than they are being used here in the US after receiving all tax credit benefits most all US companies enjoy.
Again, all of these items, new and used, are eligible for export credit financing which further insures the maximum return to the US exporter.
Upon review of our website (www.gdmdistributors.com) one can see that we here at GDM Distributors are well versed in the intricacies of finance and exporting to best benefit the US exporter. Our team of professionals welcomes the opportunity to consult with your company be it a small, medium or large enterprise…be it a one man or woman operation or an operation with thousands of employees. We welcome the opportunity to consult with you and your company on any level of export finance options and/or the actual export of your product or service. Working with our team we are certain we can add value to your operations.
GDM Distributors, Inc.