Take advantage of your bank in
pursuit of export happiness
2013 Winter Legislative Conference
February 11, 2013
Need money, what for? To fulfill export purchase order(s) - Project
based
To find a bridge financing between the trade cycle of A/R, inventory and A/P – asset based
To buy capital (fixed) assets – long-term investment
To finance market development and other reasonable general working capital
Start-up costs (including R&D)
Interview your banker Comprehension of international trade
Bank’s international infrastructure
Does your bank look beyond the figures
Unspoken rules
Organized in 1976 as First Women’s Bank of Los Angeles
Full service commercial bank that is known for customizing solution for clients
Specialize in EXPORT FINANCING and COMMERCIAL REAL ESTATE Export: EXIM WCGP, Insured A/R Fin.; SBA EWCP, Export
Express, ITL Domestic: SBA CAPLine, 7A, Business Equity CRE: SBA 504, Conventional lending as low as 3.98% for OCP
Nine branches/LPO throughout the West Coast
GBC International Bank was Named as Western Region Lender of the Year by EXIM Bank
EXIM Bank and SBA EXIM Bank Working Capital Guarantee Program
EXIM Bank Medium/Long-Term Financing Program
Insured A/R Line of Credit (with Enhanced Assignment)
SBA Export Working Capital Program
SBA ExportExpress Program
SBA International Trade Loan
Benefit of government guaranteed loan programs
-Fulfill export sales orders
-Turn export-related inventory and accounts receivable into cash -Cost reduction
-Finance Bid and/or Performance Bonds
-Increase advance rate
-Level the playing field
-Due diligence from the bank may be the seal of approval your investor(s) needs to see
Export Working Capital Program
Transaction Specific To finance one-time identifiable transaction
Transaction Specific Revolving To finance multiple identifiable transactions
Non-Transaction Specific Revolving To finance general export-related A/R and export-
related inventory
Case Study (Transaction Specific) A Mexican utility company placed order to install
inlet air cooling system on gas turbine for $4 million
Cost to the US exporter is $2 million for the transaction, which includes $1.5 million raw material, $400K manufacturing costs $80K engineering & $20K installation. Production time is 8 month.
Due to competition, 10% down payment. You get a 60-day Term L/C for remaining 90% of payment.
Transaction requires 10% Standby L/C as performance bond
GBC comes to the rescue Solution:L/C service Advising and negotiation of $3.6 million commercial L/C Issuance of $300K standby L/C
Export Financing $3,240,000 12-month EXIM LOC for both pre-shipment
financing on the 75% of cost and post-shipment financing on 90% of L/C-proceed
$300,000 12-month EXIM LOC to finance the issuance of
performance bond. Bank will require at least 25% of face value of the standby L/C in collateral (10% with EXIM approval)
Case Study (Transaction Specific Revolving)
A scrap metal export trader has a buyer in China that consistently orders once a month for $500K supported by sight L/C issued by Bank of China
COGS is $440K/order. Shipment is once a month. Exporter buys the scrap metal from scrap yard with $40K due at the time of placing order, the remaining $400K is paid prior to loading
This exporter is also looking to buy a metal processing machine valued at $1 million, but only has $200K
What if you don’t have $440K
Solution:L/C service Advising and negotiation of $500,000 commercial L/C on
monthly basis
Export Financing $330,000 12-month SBA EWCP for pre-shipment financing
on the 75% of cost Bank will disburse $30K to pay the scrap yard at the time of
placing order. Then advance another $300K prior to loading the container. Exporter just need to come up with $110K prior to shipment
Bank structures an SBA International Trade Loan for $800K
Case Study (Non-Transaction Specific Revolving)
VOS Inc is a manufacturer of cosmetic products and exports 100% of its products to 20 foreign distributors, orders are placed each month, $10K per order (Total $200K)
The company consistently maintains $450K in inventory and $200K in A/R with 30-day term. Distributors demand 60-day term or will switch to another supplier, but will buy more with 60-day A/R term.
VOS estimates A/R will increase to $500K with 60-day term, and inventory level will also raise to $550K. But VOS is cash restrained from meeting the demand of distributors.
Don’t panic, get financedSolution:
Export Financing As a 100% exporter, borrower gets the maximized
borrowing capacity on it’s assets (eligible A/R and eligible inventory)
At maximum advance rate of 90% on eligible A/R (90% of
$500K = $450K) and 75% on eligible inventory (75% of $550K = $412.5K), Bank can lend up to the combined borrowing base of $862.5K.
Monthly borrowing base will fluctuate. GBC may suggest a $1 million EXIM LOC, providing some cushion should additional loan advance is necessary.
Contact Information (WWW.GBCIB.COM)
Kelly Chiou, AVP & Commercial Banking Officer(206) 219-0236 [email protected]
Douang Nonthaveth, AVP & Commercial Banking Officer(206) 219-0263 [email protected])
Annie Pan, EVP & Chief Marketing Officer Edward Tang, VP & Trade Finance Officer(626) 243-1180 [email protected] (626) 243-1183 [email protected]