Businesses that want to succeed need to recognize and take advantage of the fact that competing globally is more important than ever.
And doing business internationally is not as difficult as you may think. With the right technology, even the smallest of businesses can engage in the global marketplace through the Internet.
But, global expansion is more than just selling your product overseas. There are a lot of factors to consider, the most important of which is how you will find and make use of international banking services.
“You have to work with a bank that understands your business, your industry and the goals you want to achieve,” says Darlene Nowak-Baker, executive vice president and lending manager with First Place Bank. “By taking advantage of the international banking services your bank offers, you’ll be able to successfully compete on a global scale.”
Smart Business spoke with Nowak-Baker about international banking, the services your bank can provide to help you succeed and how to use those services to expand your business globally.
Why is now a good time to take advantage of international banking services?
Everything is global now. If you want to remain competitive, you almost have to expand your business globally. Because the U.S. dollar is relatively weak right now against other currencies, it’s becoming easier to find overseas business partners who are interested in your product. Foreign bank accounts extend your international reach by leveraging local accounts and services in the countries that are essential to your business.
When the U.S. dollar regains strength against foreign currencies, should companies abandon international banking?
The current outlook for the dollar is continued weakness due to low interest rates, persistent liquidity concerns and the still-rebounding housing market. Still, the dollar will regain strength at some point, and when you establish a foreign trade opportunity, you build long-term relationships that have the ability to stay successful no matter what the domestic economic cycle happens to be.
Also, once you go global, it’s difficult to go back. There are always going to be open borders, so international banking will always be a viable option.
What are some typical products available in international banking?
Typical financing products help customers receive the credit they need to achieve their global business goals, with financing options to expand overseas operations. Some typical financing products include trade cycle financing, import, export and standard letters of credit (LCs), documentary collections, short-term and medium-term financing, and export-risk mitigation.
International LCs streamline the fine points, reduce the uncertainties of international payments and generally make it easier for your business to trade with new vendors and customers, protecting both parties. The bank issues the LC guarantees payment on the buyer’s behalf, and to receive payment, the seller must present documents as required by the terms of the LC.
The use of LCs provides confidence in making and receiving payments from foreign companies. Domestic companies can make sure their suppliers receive timely payment, and they also minimize the risk of not being paid by overseas customers.
How can commercial letters of credit help a business operate globally?
Commercial LCs are issued by the importer’s local bank and can be authenticated by a U.S. bank. When they are used for export, they secure payment from the company importing your goods. When they are used for an import, they are used as an instrument for paying overseas suppliers and are issued by your bank, thereby guaranteeing payment on your behalf.
Your supplier is then required to present documents to receive payment. These LCs are different than traditional standby LCs, which are commonly used in domestic sales transactions and for security deposits, insurance premium payments and/or in lieu of bonds.
What services does an international banker provide that can help you succeed globally?
First and foremost, your banker needs to assess your needs and goals in order to design a program that will best benefit you and your business. Your bank’s international banking services department should provide you with LCs; escrow; international collections, both bank-to-bank incoming and bank-to-bank outgoing; international check collections and encashment; international bank notes, both buying and selling; international wire transfers, both incoming and outgoing; and forward contracts. There are also the usual currency exchange services.
Can an international banker also provide language skills?
Your international banker will often be multilingual, but he or she is merely a provider of products, not a conduit between you and the foreign company you’re doing business with. Most banks can provide an interpreter or have documents translated for the customer if need be, but your banker’s focus should be on servicing you, not on negotiating documents.
In addition, it is standard that most contracts involving U.S. companies, both originating in the United States and those originating abroad, are written in English.
Darlene Nowak-Baker is an executive vice president and lending manager with First Place Bank. Reach her at (248) 358-6403 or DNowak-Baker@fpfc.net.