Know the signs of business email compromise, or risk losing money that can never be recovered

Business email compromise (BEC) fraud has been increasingly successful, so it has become more pervasive. The FBI recently reported a 270 percent increase in identified victims and exposed loss from BEC events between Jan. 2015 and April 2016.

“They’ve invested more time and better tools to ramp up the level of sophistication to improve their success rate,” says Jim Altman, middle market Pennsylvania Regional Executive, Huntington Bank. “It’s an easy way to get money and it will continue until it’s not.”

Smart Business spoke with Altman about BEC, how to identify it and what CEOs can do to stop it from happening in their companies.

What are the characteristics of BEC fraud and what forms might it take?

BEC happens when a fraudster masquerades as a company executive and uses what appears to be the executive’s company email address in order to instruct employees to move money to an account the fraudster can access.

These messages typically have a sense of urgency, saying something such as, ‘I’m traveling so I won’t be able to respond to email quickly, but I need you to make this transaction for me.’ They typically ask employees to send money to someone they’ve never sent money to before using a wire transfer — and the money can’t be recovered once it has been moved.

Years ago, these emails were often poorly written. But the sophistication has ramped up, making it far more difficult to identify fraudulent emails by that characteristic. They’re also including personal information about the executive obtained through social media, such as, ‘I’m on a campus visit with my daughter and need money sent to this account.’

There’s also a variation of this email involving vendors. In this case, a fraudster compromises a vendor’s email and tells an employee of a client company that the vendor company has switched banks or accounts and payments should be transferred there. That account, of course, doesn’t belong to the vendor.

What could be the consequences of falling victim to BEC fraud?

From a bank’s perspective, these appear to be valid transactions, so it’s not likely to trigger an inquiry by the bank. Companies that can recognize that they’ve been victimized quickly enough can work with their bank to get a hold placed on the funds being transferred, but that’s extremely time sensitive. Usually the money is moved as soon as it hits the fraudster’s account. If that’s happened, there’s little chance of recovering those funds.

Still, the bank’s investigation unit will engage law enforcement to find the fraudster. That, however, doesn’t help get the money lost back into the company’s accounts. Law enforcement is looking for patterns over time to identify and catch fraudsters, but that doesn’t solve the immediate problem of recovering the money that was lost.

How can companies avoid becoming a victim of BEC fraud?

This type of fraud is occurring with greater frequency and companies are taking losses. Preventing it starts at the top. CEOs should send the message down through the organization that it’s not only appropriate but imperative to question an uncommon request and to do so by phone, not in an email response to the person making the request. Instruct employees to knock on executives’ office doors or call, and be comfortable doing so. That’s the toughest part. The cultural norm is that CEOs give instructions and employees follow through with them. Adding this caveat requires a direct approach.

If the fraud is masked as a vendor, there should be a standard procedure employees use to verify the request. Again, don’t rely on email alone. Validate and verify this type of request through another channel to the vendor contact on record.

Communication within an organization is critical to preventing fraud. Anyone who can approve financial transfers within the company must be trained how to spot BEC fraud. Procedures should be in place that instruct these employees how to determine whether a request is or is not valid. In this case, a little prevention goes a long way toward combatting this increasingly common and sophisticated threat.

Insights Banking & Finance is brought to you by Huntington Bank

Be clear about your company’s needs before pursuing a new line of credit

One of the keys to securing an appropriate line of credit for your business is being clear about the problem you’re trying to solve, says Kelly Cook, senior vice president, Technology Banking Group at Bridge Bank.

“Are you trying to fill a cash flow gap between when you invoice for your product or service and when you actually get paid by the customer?” Cook says.

“Or are you trying to solve another problem in your business where you might be looking for additional cash to hire new salespeople or more operations team members. Those represent different types of cash needs that may require a term loan or even an equity investment.”

Clarity of purpose gives your bank or lender a solid starting point to help you find the right solution for your financing need. It also helps you avoid getting the wrong facility in place that could make it harder to obtain credit in the future.

“The more informed your bank or lender is with regard to the health of your business, your needs and your future plans, the better they can help you access additional borrowing capacity or financing to work out of a troubled situation,” Cook says.

Smart Business spoke with Cook about how to determine the appropriate line of credit for your business.

What are the best uses for a line of credit?

A typical line of credit is a working capital, revolving facility used to finance a short-term asset such as accounts receivable or inventory.

This differs from a longer term, more permanent type of financing like a term loan or equity that might be used to finance an asset with a longer life such as a new office or an increase in staffing. You want the type of financing to match the type of cash needed in the business.

What should you consider before pursuing a new line of credit?

First off, be sure that you clearly outline any existing debt or credit facilities for your prospective lender. Fully disclose any existing leverage, either through a bank loan, a finance company, or any other note or convertible note.

Your existing debt profile will have a strong influence on what a new lender can structure for your business. Depending on what you are trying to achieve, it may make sense to pay off the existing credit facility with a new one.

Where your business is in its life cycle is another factor which could affect the structure of your loan and the type of line of credit you can obtain. If your business is established and growing, you’re likely to get more favorable terms with a credit facility that provides flexibility as well as adequate borrowing availability.

If you don’t have a strong track record, it doesn’t mean financing is unavailable. It could just mean that you might start with a more restrictive structure or higher pricing for a period of time.

How important is a financial forecast in your ability to get a line of credit?

You and your senior leadership team should develop a forecast that represents your best estimate of how the business is going to perform going forward.

A lender is not only interested in where the company has been, it also wants to have a sense for what the future looks like.

Everyone understands that actual future performance will not exactly match the forecast, but the forecast should show performance that can support the line of credit being contemplated.

What is a line of credit collateral audit?

Lenders will often require a periodic collateral audit — a third-party checkup on how a loan’s collateral is performing and a profile of a business’s customer base.

For an accounts receivable line of credit, the audit will evaluate accounts receivable performance — validating that invoices are being issued against contracts or purchase orders, that they are being issued per contract terms and that payments are coming in per contract terms.

The audit will also measure customer profile information such as customer concentration. ●

Insights Banking & Finance is brought to you by Bridge Bank.

How to boost productivity and take steps that will grow your business

Hard work that doesn’t support your customers or generate revenue for your business is only going to get in the way of productivity, says Jon Park, chairman and CEO at Westfield Bank.

“The analogy I use would be running on a treadmill,” Park says. “You’re doing a whole lot of work, but you’re not going anywhere. Some businesses can create work and complexity and tie up money and not get any positive return out of it. Don’t spend time, effort and money on opportunities that aren’t going to be profitable.”

Certainly, there are some goals that are more difficult to achieve and it may take patience to see those projects through to completion. But you’ve got to have a sense for the investments that are worth making and those that are not going to help grow your business.

“If you’re just going to break even, you shouldn’t be doing it,” Park says.

Smart Business spoke with Park about how to better position your company for growth.

Where is a good place to start when plotting the growth of your business?
You need to understand the scalability of your growth and its fixed and variable cost components. Everybody would like to project a straight line of revenue that consistently goes up. But that rarely happens in business.

It bounces up and down and you need some perspective on how you’ll respond if revenue growth does not meet expectations. How can you adjust your expenses along the way? If growth is slower than anticipated, can you scale back expenses? If you’re growing faster than you expected, can you scale up your resources?

Have a plan for either scenario. It’s always better to be proactive and in a position to make informed decisions based on more thoughtful consideration of all the pertinent details.

How do you know if a risk is worth taking?
Risk assessment comes down to your ability to solve for the number of years it will take to recover your cash investment, also known as the earn-back period. The ‘cash investment’ represents cumulative cash spent less incremental new revenue generated for an expansion opportunity prior to the break-even point.

The earn-back period refers to the amount of time after reaching break-even to recoup the upfront cash investment. Aim for an earn-back period of four years or less. If you’re adding a new product, hiring a new sales team or expanding geographically, you want to know how long it will take to get a return on that investment.

If it takes longer than four years, the risk is higher and the return may not achieve targets.

Stress testing can be a useful tool to assessing the worthiness of a risk and addressing the volatility of expenses. So you want to buy a 50-unit apartment building when interest rates are 4 percent. At that rate, you make money. But what happens if the interest rate rises to 6 percent? Do you still make money?

Customer concentration is another problem that can restrict growth. If you rely on one segment or a few customers for the majority of your revenue, and these customers experience a downturn, it could deliver a big hit to your profitability. Take steps to diversify your customer base as much as you can to avoid this situation and ensure stable growth.

How do you prioritize growth opportunities?
Sit down with your management team and prioritize which opportunities are the most attractive. If you have 10 different ways to grow your business, discuss what makes each opportunity attractive and place them in order from most appealing to least appealing.

Appealing growth opportunities offer profitability, scalability of resources and don’t have concentration risks. Focus on three or fewer growth opportunities at a time to boost your odds of success. When you try to do too many things at once, it spreads your team thin and results in sub-optimal implementation.

Insights Banking & Finance is brought to you by Westfield Bank

Buying equipment isn’t always the best answer. Consider these options.

Too many times how a company finances equipment is the last decision made. But it shouldn’t be.

“Often companies see they have a lot of unencumbered money on their balance sheet and decide they’ll use it to buy equipment outright,” says Jim Altman, middle market Pennsylvania regional executive, at Huntington Bank. “That’s often a mistake because they’re purchasing and funding a long-term asset with short-term funds when it’s better to line up long-term liability for the purchase of a long-term asset.”

He says the recent downturn should have been a lesson that being illiquid is detrimental. By keeping cash on their balance sheets, companies can avoid the pitfalls of the inevitable next cycle.

“Tying up cash in an equipment purchase also limits options for expansion, whether geographic, additional product offerings or acquisition of another company,” he says. “Equipment financing can preserve that liquidity for future opportunities.”

Smart Business spoke with Altman about financing an equipment purchase.

What should companies consider as they look to finance an equipment purchase?

Financing an equipment purchase is usually done by leasing, financing through a loan or buying it outright. To determine which is best, there are three considerations.

First are the economic factors. This deals with liquidity: trying to manage cash with lower payments, improve margins or reduce tax burden.

A second factor is purpose. How will the equipment be used? Is this for a long-term or short-term project?

The third factor is technological. Some equipment will be obsolete in 18 months — smartphones, for instance — while other technology, like plastic injection machines, have not changed significantly in many years. How long the technology is expected to last until it’s obsolete will impact how an equipment purchase is best financed.

What are the advantages and disadvantages of leasing instead of owning equipment?

Compared to ownership, payments are lower when leasing equipment since the company is essentially renting it for a prescribed term. This option generally gives companies flexibility, especially when acquiring specialized equipment for a short-term project.

Leasing is also advantageous when a project requires equipment with technology that will soon be obsolete.

A disadvantage to leasing is the lessee doesn’t get the depreciation benefits. There are, however, noncash deductions to the tax basis. The money doesn’t come out of pocket, but it will help reduce taxes overall.

Leasing also isn’t the best option when acquiring sustainable equipment that will be used for a long time.

What types of leases are available to companies that wish to lease equipment?

There are typically three lease options, through only two are used in business. There are operating/tax leases, capital or dollar out leases, and synthetic leases.

An operating/tax lease is completely off balance sheet — the monthly rent goes into profit and loss statements. The lessee is giving up some tax benefits, but hopefully the bank is providing tax benefits to the company that reduce its payments. Companies can ask their bank for operating treatment or a tax lease to establish rates and terms to get this benefit.

A capital lease, in some ways, acts like a loan. In this arrangement, the lessee gets all of the depreciation benefits associated with the equipment, but they must put it on balance sheet, which is public information. Those obligations might impair funded debt to earnings before interest, taxes and amortization, but the lessee is technically the owner of equipment.

Synthetic leases are not used much anymore. They set up a company to pass Generally Accepted Accounting Principles in terms of the depreciation rules in the tax code that differ from the Financial Accounting Standards Board 13 for treatment of operating leases. A company can purposely fail tax to take the depreciation, but this has fallen out of favor.

Equipment finance specialists, only available at certain banks, can help companies choose the best financing option for the situation. They’ll walk a company through the three fundamental questions and direct a company to the right choice.

Insights Banking & Finance is brought to you by Huntington Bank

How remote deposit capture technology can help your business

Remote deposit capture technology (often referred to as RDC) is a tool that provides a better understanding of your company’s cash position, in addition to saving you time and money, says Debbie Miller, vice president and commercial deposit specialist at Consumers National Bank.

“You are able to print daily reports of your deposits and have better, more detailed records for an audit or your accountant,” Miller says. “You can assign others in your office to make the deposits and you’ll no longer need to copy your checks before depositing them, which will save time, paper and toner. You also won’t need deposit slips or to endorse the back of the check when making a deposit.”

Remote deposit capture technology allows businesses to deposit checks electronically at remote locations for virtually instant credit to the intended account. Paper checks are digitally scanned and an image of the check is electronically transmitted to the customer’s bank.

Smart Business spoke with Miller about the benefits of this technology and how it can help your business.

What are the primary benefits for a business that uses remote deposit capture technology?

Businesses that use remote deposit capture technology realize a number of benefits that can save both time and money. First, it’s a tool that is always available and is not subject to the hours that your local branch office is open. You can deposit personal and commercial checks directly from your office, which reduces your risk of check fraud by limiting the number of people who will handle the checks. In addition, you can get convenient on-demand check image research and deposit history data online, which puts more information at your fingertips. This technology also enables you to more easily consolidate funds from multiple locations.

What are some things to keep in mind as you make the transition if you haven’t been using it? 

The transition to remote deposit capture technology is typically an easy one to make when you work with your bank, which provides you with the necessary software and hardware. The bank will set up everything and provide the training needed to make the process run smoothly. Beyond that, there are numerous everyday tasks that you might encounter that take you away from your work that can be eliminated by using this tool.

Remote deposit capture eliminates the need to make a trip to the bank, stand in line and wait for a teller to approve your deposit. If there is inclement weather, which often happens in the winter and makes travel by road more difficult, you can save the trip and use technology to make the deposit. How many times have checks sat on your desk waiting to be deposited because you just made a trip to the bank or have too many more pressing commitments on that particular day to make the trip? When you deposit checks electronically, you can do it one at a time or in batches.

Security is another concern. Have you ever thought about what would happen if the deposit was lost or stolen on the way to the bank? In addition to reducing that risk, if something unforeseen does happen, remote deposit capture technology allows you to run a history report versus hunting around and trying to recreate a deposit if it’s lost or stolen. You’ll also avoid having to pay the bank a fee for research because you didn’t make a copy of the checks you deposited and are in a situation where you need that information.

What’s the best way to find a service that fits your business?

Take the time to sit down with your business banker to get updated on the newest products and services that can help your business. Remote deposit capture technology has improved over the years and has become a standard service that many businesses use, providing numerous benefits. It’s not just a valuable tool for companies that aren’t in close proximity to a local bank. It’s become a tool that enables businesses to focus more intently on providing a great product and a high level of service to their customers.

Insights Banking & Finance is brought to you by Consumers National Bank

Give employees the tools to help your customers learn about new technology

Employees play a vital role in helping your customers understand and get comfortable with new technology, says Kurt Kappa, Senior Vice President and Market Leader, Cuyahoga County, at Westfield Bank.

“When your employees demonstrate confidence as they use and answer questions about new products and services, they empower customers with the same self-assurance,” Kappa says. “It enables customers to see past the fear and understand the benefits that the new technology can provide.”

As technology continues to expand exponentially on all fronts, many businesses are faced with the challenge of creating a retail experience that blends technology and human interaction. The goal is to create a superior customer experience, but that’s not always easy with the varying degrees of comfort that customers have with technology.

“You want your customers to buy, not be sold on what you offer,” Kappa says. “You don’t want to push the widget of the week to show that you’re on the cutting edge. Educate and offer the conveniences of technology so customers can decide if it is a fit for their needs.”

Smart Business spoke with Kappa about how to create a blended experience that satisfies customers from all points of view.

How can technology enhance the relationship you have with your customers?
Many customers still enjoy the opportunity to come into a store or office and have a face-to-face meeting with the people who represent a particular business. As business leaders, you can’t put a price tag on those relationships and technology doesn’t mean they have to go away. What it does provide is an opportunity to focus on more important matters.

If you go to your bank and you’re depositing a stack of checks, technology affords the opportunity to make the deposit a very small part of your visit. Instead, you’re able to spend more time talking about your company’s growth plan and how the bank can help you move it forward. You can still have those conversations and reduce the amount of time it takes to manage other tasks that are important, but don’t require any dialogue.

One of the problems with self-service technology is that it can create a feeling for customers that they are being pushed out the door or that you’re looking to reduce your staff. That’s not the goal of most companies, however, and that message needs to be communicated to customers.

How does your approach to technology help customers feel more comfortable?
It starts with the education of your employees. If you’re opening a new location that has enhanced technological capabilities, it’s best to roll everything out in stages. You begin by introducing the new systems to your team and allowing them to see, touch and use the software or equipment.

Have support teams in place to offer training or to answer questions. Then you have a session where your team can use the new systems in a live environment, but without any customers. Again, there is an opportunity to learn and to ask questions.

Next, you could do a soft opening where you are open for business, but you’re not publicizing your new offerings. There are always glitches when you roll out a new program or system and those can be resolved with less pressure. At the final stage after you’ve worked through the problems, you’re ready to go live and market your new capabilities to maximize the opportunity.

What else can you do to earn customer loyalty?
If you talk about being a community business and cultivating relationships, you need to take actions that reflect those promises. Get your senior management team involved in community events and with the local chambers of commerce.

Be part of the community and be involved in efforts to make it better. When you show that you care about the area in which you do business, you show customers that you’re about more than just making money for your business. That can go a long way toward helping customers to feel good about turning to you for the products and services you offer.

Insights Banking & Finance is brought to you by Westfield Bank

Why your search for an investor has to be about more than just money

Success in the world of biotechnology and life sciences requires a level of patience that is foreign to most types of businesses and industries.

On average it takes 10 to 12 years and over $1 billion in capital to get a new drug from the laboratory to the market to be sold to consumers, says Rob Lake, senior vice president and head of Life Sciences at Bridge Bank.

With such great effort needed to get your product out the door, you want partners you’ll be comfortable working with for extended periods of time. When you face challenges, as most growing businesses do at some point, the relationship you have with your financial partner can go a long way toward determining your future.

“Some lenders tend to over steer,” Lake says. “So on top of whatever is already going on at your company, a relationship with an inexperienced lender can make it that much more difficult to manage your business.
“That can be very stressful for a management team and an investor group trying to position your company to work through the issues and get back on track.”

Smart Business spoke with Lake about the real value of selecting a lender or bank that truly understands the challenges your business faces.

What should you consider when looking to raise capital in the life science industry?

You need a lender who understands your business. A standard bank that does commercial and industrial lending is likely to underappreciate the peaks and valleys of a life sciences company, such as navigating through regulatory agencies or the uncertainties of clinical trials.

There is such a thing as ‘greener capital.’ A knowledgeable lender knows how to react to bad news, and how to chart the best course of action to keep things on track. It’s like piloting a small plane. If there is turbulence, you’re not going to want to over steer in one direction or the other to try to stabilize the aircraft.

You want to keep it as steady as you can and it will stabilize once you get through the bad weather. The same applies to working with a lender that clearly understands the issues life sciences companies face and will work through occasional challenges along the way to help the company achieve its goals.

What are some key things to know before you meet with a lender?
You need to think about what you would do if things with your business don’t go according to plan and compare it with the underwriting rationale of the lender. Lenders will typically underwrite to a downside case to explore that scenario.

What if you do not get approval on an expected date and it takes another year to get that approval? How would such a delay affect your company financially? How much more money would you need to raise? What will it take to get there? Do you have the resources to get there?

The base case is a little more optimistic scenario and the downside case is if the wheels completely fall off. The more likely case is a third option in which the wheels don’t totally fall off, but maybe you have a flat tire. How do you fix it and get through that scenario?

It’s helpful to hear the lender’s mentality as they go through the downside process.  There are lenders in the space that offer more favorable terms (i.e., more capital or lower cost); however, it could cost more money in the long run (fees and legal expenses) if they haven’t thought through what the downside looks like.

What are lenders looking for in a borrower profile?

Lenders like business models that are diverse and have novel intellectual property supported by an underlying ‘platform technology.’ Multiple shots on goal help the lender mitigate risk.

They also want to understand the value proposition and see that it makes sense from a commercial viability standpoint. Ultimately, does the product and or service you’re developing address an unmet need?  Improve patients’ lives or clinical outcomes?  Save the health care system money?

Validation is another important attribute lenders like to see. This could come from many sources including the quality and reputation of your investors, strategic partners, a positive reimbursement decision or revenue traction.

Insights Banking & Finance is brought to you by Bridge Bank.

How to make your franchise dream a reality with SBA financing

Franchise opportunities are on the rise, with more than 3,100 franchise concepts available in almost 300 industries. The International Franchise Association indicated, in its Franchise Business Economic Outlook for 2015 report, that the number of U.S. franchise establishments is projected to increase.

“With the rise in franchise opportunities, there’s an increase in financing to support the franchise concept, including through the U.S. Small Business Administration (SBA),” says Romona Davis, vice president of SBA commercial lending at Ridgestone Bank.

Smart Business spoke with Davis about franchise financing and how SBA loans fit in.

Why do people purchase a franchise?

Franchising is looked at as a way to start a business that already has a track record. There’s usually brand recognition, assistance with site selection, training, R&D of new products and services, off-site marketing assistance, and overall guidance and support from the franchisor and other franchise owners. It can be viewed as a team approach.

Do franchisors provide the debt financing?

Some franchisors carry the entire debt financing per franchise owner, while others carry a fraction of the loan through a franchisor-owned finance company.

Many franchisors still don’t offer financing but work directly with companies or mediators who specialize in securing financing for their prospective franchisees. Mediators typically provide assistance with business plans and packaging of potential franchise opportunities for submission to banks, nonbank lenders and other funders.

Where does the SBA come in?

The SBA can be a valuable resource for franchise financing. An SBA loan through a bank or nonbank lender provides a loan guarantee up to 85 percent. In addition to the loan guarantee, the SBA provides other guidance as it relates to franchise financing.

The SBA has a franchise committee that reviews existing franchise brands. This review covers the franchisor’s business operations, the agreement governing the franchisor/franchisee relationship and other related documents. The results are compiled in the SBA Franchise Registry. Not all franchises have been reviewed by the SBA; therefore, be sure to obtain a copy of the Franchise Disclosure Document (FDD) — presented to buyers in the presale disclosure process — along with the Franchise Agreement for further review by your bank.

The SBA loan guarantee also can offer a lower down payment and longer loan term with no balloon payment. In the event a franchise concept has limited hard assets (i.e., service company), the SBA loan could mitigate the proposed collateral shortfall.

What do business owners need to know before investing in a franchise?

Franchising is a contractual relationship. The brand owner doesn’t manage or operate its locations. However, the franchisor does allow the business owner to use the licensor’s brand and method of doing business to distribute products or services to consumers.

The franchisee pays the franchisor an initial upfront fee to acquire the franchise as well as an ongoing royalty fee. Training and support is provided by franchisors.
Franchising can offer peer support and networking. Each franchisee has an exclusive territory, so cooperation is not only possible but also built into the business model through annual conferences, regional meetings, websites, etc.

All prospective franchisees should review the FDD. This legal document provides the history of the franchisor, ownership, types of franchises offered, business experience, litigation, financial performance and more.

From a financing perspective, lenders desire applicants with experience and/or transferrable skills in the franchise-related industry, a 20 to 30 percent down payment, adequate personal credit history, a detailed business plan and projections that demonstrate the ability to repay the loan.

What else would you recommend?

Research multiple franchise brands. Once you’ve identified a prospective brand, conduct a thorough examination prior to contacting the franchisor. Then, interview the franchisor and follow up with its references. Once you’ve finalized your decision, meet with your banker to see if you qualify for SBA financing — to make your dream a reality.

Equal Housing Lender.  Member FDIC

Insights Banking & Finance is brought to you by Ridgestone Bank

Research, specialized financing needed before doing business overseas

Middle-market companies that can capture a segment of business in a foreign market have a tremendous opportunity to increase their revenues and outpace competitors in the same industry. Exporting products overseas, however, requires fastidious research upfront.

“Research is needed to determine if the company’s product has enough of a price and/or quality advantage in the target market,” says Jim Altman, middle market Pennsylvania regional executive at Huntington Bank. “The other critical element is getting the funds needed from a lender that is qualified to finance international transactions.”

Smart Business spoke with Altman to learn more about what it takes to export into foreign markets.

Where should companies start that have never done business internationally?

A good first step is to call the local U.S. Export Assistance Center, which is part of the Department of Commerce. The professionals there will conduct market research in the target country to determine if the product would be competitive in that market. They will research and advise with regards to market potential as well as any potential regulatory compliance requirements for the product being sold. In addition, they can set up meetings with potential foreign buyers, and vet those companies and their owners.

How do companies finance a deal that takes place between two countries?

Many companies don’t realize that only banks with a capable trade finance unit can provide the types of loans needed for such transactions.

A trade finance unit can work with The Export-Import Bank of the United States to secure special types of credit guarantees that mitigate inherent collateral risk associated with credit lines used to support export sales. Additionally, trade finance departments can help companies mitigate payment default risk posed by a foreign buyer. This is done by constructing letters of credit or providing credit insurance.

The reason that exporters should consult with a trade finance specialist is that export-related collateral — export related inventory and foreign accounts receivable — are not eligible for borrowing against in a standard revolving line of credit.

In addition, many single sale contracts where a company is selling a more complex, specialized product will require work in process finance. This is a feature traditional loan products typically cannot accommodate or if they do, the advance rate is marginal at best, somewhere in the 20 percent range.

With respect to foreign accounts receivable, domestic banks don’t have the internal resources to understand lien rights in multiple jurisdictions, so in most instances, placing a lien against foreign accounts receivable is a non-starter with your commercial bank. Trade finance departments have experience in managing and understanding various risks associated with selling abroad. Additionally, they are well versed in structuring credit lines that can be fully utilized to support export transactions.

At what point should companies reach out to get financing in place for foreign deals?

Once a rough outline of a contract with a foreign partner is in hand that indicates which party is paying for cost of freight and cargo insurance, it’s time to contact your bank’s trade finance specialist and your freight forwarder. There are fees for the risk-mitigating government guarantees that need to be priced in along with the logistics fees to fully understand the true margins on that sale before moving forward with a deal. And it’s always prudent to factor at least ½ of 1 percent extra in to your project cost to account for unforeseen expenses that are not related to actual production.

Breaking into a foreign market for the first time isn’t as much of a mystery as many companies assume it to be. There are ample resources available in the U.S. to help companies understand their target market and how to finance the deal.

Start by having an informal conversation with a bank’s trade finance unit. The people who work in these departments often have connections to logistics providers, lawyers and the like who understand international business and can facilitate a strong entrance into a foreign market.

Insights Banking & Finance is brought to you by Huntington Bank

Give employees the tools to help your customers learn about new technology

Employees play a vital role in helping your customers understand and get comfortable with new technology, says Aaron M. Barnhart, Senior Vice President and Retail Sales Leader at Westfield Bank.

“When your employees demonstrate confidence as they use and answer questions about new products and services, they empower customers with the same self-assurance,” Barnhart says. “It enables customers to see past the fear and understand the benefits that the new technology can provide.”

As technology continues to expand exponentially on all fronts, many businesses are faced with the challenge of creating a retail experience that blends technology and human interaction. The goal is to create a superior customer experience, but that’s not always easy with the varying degrees of comfort that customers have with technology.

“You want your customers to buy, not be sold on what you offer,” Barnhart says. “You don’t want to push the widget of the week to show that you’re on the cutting edge. Educate and offer the conveniences of technology so customers can decide if it is a fit for their needs.”

Smart Business spoke with Barnhart about how to create a blended experience that satisfies customers from all points of view.

How can technology enhance the relationship you have with your customers?
Many customers still enjoy the opportunity to come into a store or office and have a face-to-face meeting with the people who represent a particular business. As business leaders, you can’t put a price tag on those relationships and technology doesn’t mean they have to go away. What it does provide is an opportunity to focus on more important matters.

If you go to your bank and you’re depositing a stack of checks, technology affords the opportunity to make the deposit a very small part of your visit. Instead, you’re able to spend more time talking about your company’s growth plan and how the bank can help you move it forward.

You can still have those conversations and reduce the amount of time it takes to manage other tasks that are important, but don’t require any dialogue.

One of the problems with self-service technology is that it can create a feeling for customers that they are being pushed out the door or that you’re looking to reduce your staff. That’s not the goal of most companies, however, and that message needs to be communicated to customers.

How does your approach to technology help customers feel more comfortable?
It starts with the education of your employees. If you’re opening a new location that has enhanced technological capabilities, it’s best to roll everything out in stages. You begin by introducing the new systems to your team and allowing them to see, touch and use the software or equipment.

Have support teams in place to offer training or to answer questions. Then you have a session where your team can use the new systems in a live environment, but without any customers. Again, there is an opportunity to learn and to ask questions.

Next, you could do a soft opening where you are open for business, but you’re not publicizing your new offerings. There are always glitches when you roll out a new program or system and those can be resolved with less pressure. At the final stage after you’ve worked through the problems, you’re ready to go live and market your new capabilities to maximize the opportunity.

What else can you do to earn customer loyalty?
If you talk about being a community business and cultivating relationships, you need to take actions that reflect those promises. Get your senior management team involved in community events and with the local chambers of commerce.

Be part of the community and be involved in efforts to make it better. When you show that you care about the area in which you do business, you show customers that you’re about more than just making money for your business. That can go a long way toward helping customers to feel good about turning to you for the products and services you offer. ●

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