International business

In our global economy, competition isn’t
just around the corner — it’s across the
map. Business owners can tap new customers, vendors and markets that exist
beyond our U.S. borders. While many
Michigan companies are accustomed to
doing business with Canada, the strong
industrial activity taking place in Asia cannot be ignored. Doing business overseas is a
proactive and, in many cases, necessary
growth strategy for businesses.

“As manufacturers and other types of
businesses seek new business partners,
they look toward China and India, which
are two of the fastest-growing economies in
the world,” says Craig Johnson, president
and CEO, Franklin Bank in Southfield,

But just as customs are different in every
country, so are currency and payment
processes. How do you know you can trust
a company you’ve never worked with overseas? A bank can serve as an intermediary.
By taking full advantage of a bank’s international services, you can increase the
security of conducting business in China
and other countries and also perform
smooth monetary transactions so you can
earn repeat business from those foreign

Smart Business discussed with Johnson
a bank’s role in your business’s international affairs.

How might a company learn about overseas
business opportunities and new markets to

Local trade organizations are a great place
to start. Network with other peers in your
industry and find out where they are seeking
new partners overseas. You may find out
about vendor opportunities, customers seeking your products or services, or simply learn
more background on how overseas transactions take place. In the greater Detroit area,
Automation Alley can provide information
and support for businesses related to the
automotive industry who are interested in
crossing borders. Also, connect with the
local office of the International Trade
Administration and U.S. Department of
Commerce to learn about trade events or
interact with an advisory committee.

When starting a relationship with an overseas partner, what securities measures
should a business owner here take?

When you conduct business for the first
time with an overseas partner, there is naturally mistrust between both parties. How do
you know you’ll get paid? What if the goods
are never shipped? International collection
services go beyond wire transfers and exchanging currency, whereby the bank actually serves as a collection agency of sorts. With
collections services, the bank manages the
payment process. Documents such as the
invoice, packing list, document of title and
customs information are sent directly to the
bank. The financial institution then presents
these documents to you for payment, and
then wires your money overseas. This prevents you from having to work through a
new international customer’s payables and
receivables system. Both parties can rest
assured that a trusted mediator is facilitating
the payment transactions.

What if a business owner wants more security with overseas transactions?

International letters of credit are similar to
collections services, but the bank acts as an importer on behalf of your business. Letters
of credit guarantee payment to overseas
customers or vendors. The financial institution provides ‘full faith and credit’ and
assumes liability for the payment transaction. While a letter of credit does not replace
insurance on products, it does protect your
collections process. Letters of credit create
a tracking process whereby payments are
made at certain trigger points, such as when
goods arrive in the United States. A letter-of-credit arrangement is a good way to begin a
relationship with a new international vendor. As you develop a rapport with that
overseas partner, you may feel more comfortable reverting to a traditional transaction method — doing business on ‘normal
terms,’ if you will.

What basic services do banks offer to make
international business more convenient?

Exchange services allow you to buy and
sell foreign currency notes. If you travel
overseas to do business, your bank will
exchange currency for you before and after
trips. Wire transfers are a seamless way to
transfer money in foreign currencies. Also,
your bank can sell you a foreign draft, which
are checks payable in the country of the

How can banks help business owners do
their due diligence on their international

The sooner you discuss any business
plans with your banker, including expansion
into international markets, the more value
he or she can bring to you as an adviser.
Once you have identified a prospective business to partner with overseas, you begin
checking references. Your bank can help
with this by finding out more about the company, its bank, the way it processes payment
and its overall financial health. Above all
this, your bank can help coordinate payment terms and complete transactions in a
secure way.

CRAIG JOHNSON is president and CEO of Franklin Bank in Southfield, Mich. Reach him at [email protected] or (248) 386-9860.