Overseas sales and exports can really help business owners grow their companies. But, when the company gets its first international inquiry, an owner might say, “I always deal cash in advance. Send me a check. I’ll send you the product.”

That’s not how the world works, says Art Rice, vice president and manager of International Operations and Product Management at FirstMerit Bank.

“The world rarely operates on cash in advance anymore. So, it may be days, weeks or months between the actual sale of the merchandise or service and the resolution of the accounts receivable,” he says.

This extended sales cycle can strain your working capital, but the U.S. government has several programs to help, Rice says, including the Export-Import Bank of the United States (Eximbank) and the Small Business Administration (SBA).

And your banker can be very helpful as you get into international sales or expand into new markets, says Frank Pak, vice president, International Division, at FirstMerit.

“We can serve as a great referral source to other professionals involved in supporting exporters, and also referring them to government assistance centers like the U.S. Export Assistance Centers or the SBA, an international lawyer, a freight forwarder, export insurance broker, etc.,” he says.

Smart Business spoke with Rice and Pak about available export support programs.

What are some export support programs?

The Export Working Capital Programs of the Eximbank and the SBA provide an exporter with funds for things like materials and payroll while producing the product. Banks receive a 90 percent guarantee on the loan’s principal and interest, because the government wants to encourage U.S. job creation. Also, the work in process can be included in the advance funding calculations.

It’s better to work with a bank that has Delegated Lending Authority from the Eximbank or Preferred Lender designation from the SBA for this program as it can expedite the process and assures that you’re working with an experienced lender.

Credit Insurance on foreign receivables is when an exporter purchases protection against non-payment of its foreign receivables from Eximbank or a private insurance company. Normally, banks don’t allow the foreign accounts receivable to be included in a company’s borrowing base because of the perceived heightened risk when buyers are located in a foreign country.

With insurance, an exporter has the opportunity to offer longer repayment terms. For example, a company, that typically offers no more than 60-day terms to its customers, sees its competitors in foreign markets offering 120-day terms. With export credit insurance, the exporter is able to take the risk of longer terms that will enable it to be more competitive. Also, if it assigns the insurance policy to its bank, the bank can advance against those receivables, improving cash flow.

For larger export sales, buyers in higher interest rate countries often look for some form of extended payment terms. Typically referred to as buyer financing, the exporter can decline and lose the sale, offer unprotected terms or use a form of insurance to protect its medium term receivable. The U.S. government supports such sales with programs called Medium Term Loan Guarantees. A bank is willing to participate because repayment is guaranteed by the U.S. government. The exporter benefits because it satisfies what the buyer needs and receives payment from the bank almost immediately after shipping its product. While there are restrictions, successful exporters have used such programs for 70 years.

What’s important to know about using export programs like these?

You don’t have to go it alone. Your banker is an advocate who can help you find the right resources as you set up your export program and understand the advantages and disadvantages of available payment methods.

Contacting your banker early in the process, as you’re developing your business plan and researching markets, will shorten your learning curve and help you become successful sooner. Banks can also direct you to government resources, which have additional tools available to support exporters as they expand into new markets. Reach out to your bank now, even if you’re just thinking about exporting overseas, because your banker will be happy to share his or her expertise.

Art Rice is vice president and manager of International Operations and Product Management at FirstMerit Bank. Reach him at (330) 384-7178 or arthur.rice@firstmerit.com.

Frank Pak is vice president, International Division at FirstMerit Bank. Reach him at (216) 317-7399 or frank.pak@firstmerit.com.

Insights Banking & Finance is brought to you by FirstMerit Bank

Published in Akron/Canton

Today’s technology is making it easier for consumers to plan a trip overseas. With just a few mouse clicks, you can book the best flight deals, find accommodations, scope out the local attractions and even map out a detailed travel itinerary.

But even with so many resources to consult for travel advice, consumers may overlook important financial considerations in the trip planning process, says Art Rice, the VP and Manager of International Operations and Product Development for FirstMerit Bank.  For anyone planning a trip overseas, Rice offers the following financial tips:

Do your homework

Rice counsels first-time travelers to first do as much research as possible in advance of an overseas trip. Take time to learn about the country you’re visiting, including the differences in the culture and financial marketplace. Where is it safe or wise to use a credit card? How much pocket change should you carry?

"It’s just being aware of the culture, who you are with and how you account for transactions,” Rice says.  Doing research up front is useful in identifying unforeseen costs and fees. How much will you need to pay for courier and insurance expenses or premiums on credit card purchases?  You may also find ways to save. Are there opportunities to barter in the country? Factor this into the overall trip cost to anticipate how much money you’ll actually be spending.

Monitor exchange rates

Exchange rates for foreign currency change daily, so travelers should recheck every few days to get the most updated figures. But it’s also important to understand where you’re getting the exchange rates, Rice says. Many people will check the newspaper or Internet to monitor exchange rates for hard currency; however, these numbers can be off as much as 10 percent in either direction.

The rates seen in The Wall Street Journal are meant for multi-million dollar electronic transfers, and most website quotes are averages of current buy and sell rates. Instead, consumers should ask their bank to get the most accurate exchange rates.

Hit the bank

An easy way to save money on overseas travel is to order foreign currency before departure. Some banks, such as FirstMerit, supply popular foreign currencies to their local branches at no charge to the customer and on short notice.  Exchange money at one of these banks to avoid service fees and ensure that you have some pocket money to spend when you reach your destination.

Credit cards are definitely convenient for overseas purchases, but make sure you find out what fees you may be charged in addition to the exchange rate.

Fill in your credit card company

While consumers should never be without an international credit card overseas, carrying one makes you more vulnerable to identity theft and fraud. That’s why some credit card companies turn off the ability for cards to work outside of the cardholder’s local area. To ensure any overseas transactions are approved without a hitch, it’s critical that travelers keep their credit card companies in the loop about their travel plans, especially extended trips. 

“You don’t need to clear your trip with your credit card company, but to make things go smoothly when you’re out of the country, it is nice to alert them that you’re going to have non-traditional transactions posting to your account,” Rice says.  When making any purchases, you’ll also want to keep track of receipts as well as the name and number of the vendors. This information will help you refute any illegitimate charges on your statement after you return.

How to reach: FirstMerit Bank, www.firstmerit.com or Arthur.Rice@FirstMerit.com, (330) 384-7178

 

Published in Chicago

Today’s technology is making it easier for consumers to plan a trip overseas. With just a few mouse clicks, you can book the best flight deals, find accommodations, scope out the local attractions and even map out a detailed travel itinerary.

But even with so many resources to consult for travel advice, consumers may overlook important financial considerations in the trip planning process, says Art Rice, the VP and Manager of International Operations and Product Development for FirstMerit Bank.  For anyone planning a trip overseas, Rice offers the following financial tips:

Do your homework

Rice counsels first-time travelers to first do as much research as possible in advance of an overseas trip. Take time to learn about the country you’re visiting, including the differences in the culture and financial marketplace. Where is it safe or wise to use a credit card? How much pocket change should you carry?

"It’s just being aware of the culture, who you are with and how you account for transactions,” Rice says.  Doing research up front is useful in identifying unforeseen costs and fees. How much will you need to pay for courier and insurance expenses or premiums on credit card purchases?  You may also find ways to save. Are there opportunities to barter in the country? Factor this into the overall trip cost to anticipate how much money you’ll actually be spending.

Monitor exchange rates

Exchange rates for foreign currency change daily, so travelers should recheck every few days to get the most updated figures. But it’s also important to understand where you’re getting the exchange rates, Rice says. Many people will check the newspaper or Internet to monitor exchange rates for hard currency; however, these numbers can be off as much as 10 percent in either direction.

The rates seen in The Wall Street Journal are meant for multi-million dollar electronic transfers, and most website quotes are averages of current buy and sell rates. Instead, consumers should ask their bank to get the most accurate exchange rates.

Hit the bank

An easy way to save money on overseas travel is to order foreign currency before departure. Some banks, such as FirstMerit, supply popular foreign currencies to their local branches at no charge to the customer and on short notice.  Exchange money at one of these banks to avoid service fees and ensure that you have some pocket money to spend when you reach your destination.

Credit cards are definitely convenient for overseas purchases, but make sure you find out what fees you may be charged in addition to the exchange rate.

Fill in your credit card company

While consumers should never be without an international credit card overseas, carrying one makes you more vulnerable to identity theft and fraud. That’s why some credit card companies turn off the ability for cards to work outside of the cardholder’s local area. To ensure any overseas transactions are approved without a hitch, it’s critical that travelers keep their credit card companies in the loop about their travel plans, especially extended trips. 

“You don’t need to clear your trip with your credit card company, but to make things go smoothly when you’re out of the country, it is nice to alert them that you’re going to have non-traditional transactions posting to your account,” Rice says.  When making any purchases, you’ll also want to keep track of receipts as well as the name and number of the vendors. This information will help you refute any illegitimate charges on your statement after you return.

How to reach: FirstMerit Bank, www.firstmerit.com or Arthur.Rice@FirstMerit.com, (330) 384-7178

Published in Cleveland