Global impact Featured

8:00pm EDT September 25, 2008

The U.S. Commercial Service provides a number of services designed to help small and medium-size businesses expand international sales. With trade specialists in more than 100 American cities, the primary thrust of the U.S. Commercial Service is to help equip businesses with the knowledge and tools necessary to navigate the foreign market.

Over the past several years a confluence of factors — including free trade agreements, technological advancements and U.S. government programs and partnerships — have converged to simplify the export process. According to Caroline Brown, first vice president at Comerica Bank, now is the ideal time for businesses to engage in exporting.

“A company can increase its sales and margins significantly by entering the export market,” she says.

Smart Business spoke with Brown about the U.S. Commercial Service, the services it provides and how a company can secure export financing.

What is the U.S. Commercial Service?

The U.S. Commercial Service is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration (ITA). To increase trade and investment, ITA helps small and mediumsize companies navigate foreign markets by providing counseling and acting as an advocate throughout the exporting process. Its services include market research, trade events that promote a company’s product or service to qualified buyers, introductions to qualified buyers and distributors as well as counseling. In some cases, it provides guidance to companies that are already exporting and are looking to broaden their market. Other times, it works with companies that are new to exporting and have no experience at all.

How does the U.S. Commercial Service partner with corporate organizations to build awareness of exporting opportunities?

Because the U.S. Commercial Service is a government agency and has limited resources, it partners with other entities through innovative government-private sector partnerships. The Partnership Program is based on a ‘force multiplier effect.’ By using each other’s organization, data bases and global/regional networks they are able to reach as many small and medium-size enterprises as possible. Under the Partnership Program, seminars are co-sponsored to support the domestic and international marketing efforts of these enterprises. Topics vary from basic seminars to market or industry specific issues. A popular alternative to the traditional seminar is the webinar, a seminar conducted on the Internet and telephone.

How are corporate partners selected?

The U.S. Commercial Service looks for corporate partners that are considered to be best in class, have a recognizable name, are regionally or globally strong, and are involved with international trade and business. Also, corporate partners must possess a significant customer base that is either currently seeking to expand its international business or seeking to enter the international business field.

How can a company secure export financing?

Financing is an important component for companies expanding into exporting. Typically, companies know their product and tend to focus on the marketing aspect. However, it is also important for companies to think about financing very early in the transaction — not after they have closed a deal, received an order or finalized a price.

Trade cycle financing can cover everything from the purchase order stage all the way through the collection cycle — or it might involve financing one portion of the transaction. In working with exporters, we supplement our programs with government-established programs that can guarantee a portion of the risk for us. Two programs that have been very helpful to exporters we work with are loan guarantees offered by the Export-Import Bank of the United States (Ex-Im Bank) and the Small Business Administration (SBA).

In some cases, companies have to hold their product for inventory purposes, sell it to a client on open account and wait to collect. When you are exporting, as compared to a domestic transaction, the trade cycle is going to get larger because the company you are doing business with is located much farther away. This creates gaps in working capital. We help finance export transactions by making short-term working capital loans that are guaranteed by either Ex-Im Bank or the SBA. The loan proceeds can be used, among other things, to cover overhead, labor costs and purchase of the goods.

What other options are available?

Exporters may need foreign credit insurance, which is very useful in mitigating risk on foreign transactions. Export credit insurance policies protect against both the political and commercial risks of a foreign buyer defaulting on payment. In addition to the risk mitigation, insured receivables can be used to obtain bank financing.

CAROLINE BROWN is first vice president at Comerica Bank. Reach her at (562) 590-2525 or cvbrown@comerica.com. Comerica Bank has recently entered into a formal partnership with the U.S. Commercial Service to expand the outreach to more potential exporters.