Key resources and tools to help your business prosper in global trade
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More than 400,000 U.S. business traded internationally in 2012 and more than 97 percent of them were small and medium sized enterprises . Falling trade barriers and support services that simplify international business allowed smaller businesses to take advantage of trade benefits.
Yet, doing business globally is more complex than trading domestically. Every country has its own cultural traits, government regulations and business conventions. Plus, when importing, companies need to comply with applicable laws and regulations to have goods admitted into the U.S. Using available resources and finding the right partners - both domestically and locally – is vital to success.
Tap into government resources
As you put plan your company’s global development, you will want to take advantage of third party resources such as the U.S. Department of Commerce and sourcing agents experienced in your industry. Experienced partners like these can often get you the intelligence you need about suppliers and costs to jump start you into the global economy affordably within a short time period.
The United States International Trade Commission (USTIC), a federal agency that can provide a host of information on Trade Shifts, Import Restraints, Trade Preference Programs as well as maintaining the Official Harmonized Tariff Schedule (HTSA) (www.usitc.gov).
The U.S. Customs and Border Protection agency offers in-depth information on how to avoid potential problems with the clearance of your imported goods including a comprehensive 200+ page guide for Commercial Importers (www.cbp.gov).
Practical financial tools
Businesses that are successfully engaged in global trade use a set of risk management tools to balance their ability to compete globally with their need to protect profits and maximize working capital.
Foreign Exchange Services (FX), also called Currency Risk Management, can provide importers with effective ways to reduce the risks of currency shifts on offshore revenues and profits. "Even when a company invoices or pays in U.S. dollars, there is still a conversion taking place on the other end of the transaction. This provides U.S. companies with an opportunity to control the conversion and gain pricing advantages,” Susanne Keough, Senior Vice President and head of the Global Trade Solutions division at SunTrust Bank, explains. "At SunTrust, we have had great success in helping companies implement a dual currency billing strategy where we can help importers understand the value of paying in either currency, possibly allowing them to lock in rates, and typically realizing a lower cost."
Secure payment solutions
Documentary collection is a process that assures prompt payment to your supplier's bank, once import documents arrive. The supplier presents a draft or bill of exchange to its bank, along with the shipping documentation. The documentation is sent to your company's bank, which then makes payment or provides assurance of payment at a specified future date. The documents then can be released to you, and your company can take possession of the merchandise. This arrangement gives more protection than open account terms and exposes your company to less risk than a clean payment in advance.
Letters of credit are a universally-accepted form of payment which commits a bank to honor drafts and documents that are presented in conformance with stated terms and conditions. The bank substitutes its creditworthiness and reputation for the importers. The bank is obliged to pay the supplier as long as the stipulated documents are presented within a prescribed period of time. This gives your supplier an additional degree of security over the documentary collection method. While a letter of credit can’t protect fully against the risk of fraud, it provides important benefits to both you and your supplier.
Supply chain finance
Supply Chain Finance is a process where financial institutions finance various imported goods as they move from country of origin to the U.S. As importers find it necessary to improve cash flow by extending payment terms to their suppliers, the financial burden is pushed onto the supplier, who in most cases have little or no access to competitive financing in their local market assistance. Supply chain finance can help lessen the burden by offering the supplier U.S.-based interest rates which are based on the creditworthiness of the importer, which is usually a very large corporate entity. a variety of solutions from Asset Based Lending to Inventory Finance to Payables Discounting. "The Global Supply Chain Finance product solution continues to evolve for small and mid-sized businesses. The biggest challenge," says Keough, "is the onboarding process with foreign suppliers. Many suppliers are not comfortable working with lenders. The use of Letters of Credit has been very prevalent, particularly in Asia, for a very long time. They are the norms of the banking system. Getting suppliers comfortable with a new process will be critical to expanding supply chain finance to the small and mid-sized market."
Expertise matters in trade
Building long-term partnerships with knowledgeable experts should be a primary goal when embarking - or expanding - your company's global business opportunities. The key to success is to find and work with partners who can simplify the complexity of global business and accelerate your progress by bringing years of trade experience and local market knowledge to your management team.
Keough explains SunTrust's outlook on global trade services as "consultative listening and understanding of clients' needs in order to help them avoid pitfalls while growing their international business. Our trade sales teammates are technically sales people," she goes on to detail, "however they have enormous background and experience in the foreign trade field. We provide the knowledge of international markets so that the client will understand how they can navigate the various risks found in selected markets in order to achieve their growth objectives."
Talk to your SunTrust relationship manager or global trade specialist about your global expansion plans. SunTrust’s deep expertise in working with businesses expanding global trade – both importing and exporting - and its solutions supporting international trade can help you move quickly to take advantage of opportunities in today’s markets.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Margaret Callihan, President and CEO of the South Florida Division for SunTrust Bank, discusses how businesses in her region are partnering with their bankers to finance growth, streamline financial operations and address their short-term cash needs
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