Last week, on a business trip down the California valley, I was reminded, again, of the vast differences between those business owners who have invested the time and understand debt financing options and those who do not understand.
We held several meetings over the course of two days related to various sectors of our business, products and finance. What quickly became evident was that one team was quite adept at analyzing the financial options offered by our team and understanding the wisdom of utilizing foreign Export Credit Agency (ECA) financing to enhance their bottom line while reducing their debt load.
On the other hand, a separate meeting with another business owner revealed a not uncommon fact: he was completely unaware of ECA financing having recently purchased millions of dollars in foreign products…and paying cash up front no less.
Now, this business owner had taken a business, improved the products and grown sales over time. The owner is in a business sector where opportunity and growth are wide open for expansion to those offering “A Grade” products. Without question the owner understands his product and industry well as evidenced by his growth.
Yet, in two meetings with this owner, it quickly became apparent that the owner had no knowledge of ECA financing, trade credit insurance invoice financing or international insurance business coverage.
The knowledge difference between the two group meetings was not uncommon in the least. Many business owners are quite knowledgeable in many sectors of their overall business. However, most every business owner who starts a small business, and successfully grows the business, seems to believe that they know everything and are adhering to the proper principles of business….how else would they still be in business they ask.
Just recently I received the latest newsletter from Shipping Solutions (http://www.shippingsolutions.com/), the Minnesota based Export Document Software company. The article related the story of being asked who the company was and what services they offered. Mr. David Noah, President of the company, answered that the company offered tailor made software allowing the exporter to produce required export documents, export compliance verifications and AES filings. Needless to say, those within listening distance had no clue what he was speaking of.
My point is that Mr. Noah’s company offers a valuable service to those in the international trade business. Their products are accurate, dependable and current and, equally as important, allow the exporter to reduce their cost of export/COGS while becoming more vertically integrated.
Yet, most US exporters would rather spend additional funds and let the freight forwarder handle the document filings. In essence, another example of inefficiencies in the value chain.
These same inefficiencies exist, as I have conveyed, in the financing and debt value chain of most every US importer and US exporter. Most business owners will accept the higher interest rates offered by their local bank rather than accepting the lower interest rates offered by an ECA. Again, most are completely unaware of what the options are to finance their import or export while reducing their debt load, enhancing working capital and reducing risk.
As I stated last year in an earlier blog, $488 billion dollars had been financed a few years back by the top ECAs. Surely that dollar amount has increased today. The question is how much have you and your company accepted in ECA financing since I wrote that blog last year?
In reviewing the December 2016 report from the Federal Reserve titled “Financial Accounts of the United States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic Accounts” (light, summer time beach reading it ain’t) shows clearly the debt load of US households and businesses. Just think for one moment, if US importers and exporters were to reduce their debt load just a fraction, say 4%, through ECA and invoice trade credit insurance financing, how many billions of dollars that would free up to be reinvested and spent in the US economy! Just how many jobs, well-paying jobs, can the corporate world create just by understanding the international ECA financing programs.
With over $13 trillion dollars in worldwide negative yielding debt currently on the books, a US corporate debt reduction of 4% is not something you just shake a stick at.
How many billions of dollars would be saved if just one business sector dedicated themselves to enhancing the import/export financing options of their association members?
As an example of just one business sector, take a look at the number of US family owned dairies that have gone out of business in the last five years. What are their dairy associations and trade magazines doing to keep the family owned dairy farmer in business? Imagine what could and still can be done to keep these farms in operation by a deep review of their overall business operations. Take a look at the blog I wrote last year concerning Dairy and Beef farmers and you get an idea of what I’m trying to convey. Further, take a look at the number of dairies that have gone out of business in the great state of Tennessee.
Again, it all starts with the Financing! Financing should not be a cost. Financing should and can be a revenue stream enhancement line item.
Our team of professionals offers you and your company the opportunity to enhance and grow your business through domestic and international ECA financing programs. From small Mom and Pop importers and exporters to multi-national entities, Hundreds of Billions of Dollars in extremely low interest funds are available to be utilized by US and Foreign Importers and Exporters.
We at GDM Distributors, Inc. welcome the opportunity to review the options available to you and implement the programs to facilitate growth and prosperity at your company.
Gregory Woods, President.
GDM Distributors, Inc.