ExWorks Capital To Provide Funding To Fill Possible ExIm Bank Gap

ExWorks Capital – a privately funded export & trade finance companyis prepared to finance small to mid-size business as a bridge measure, or ongoing, should the ExIm Bank of the United States have its operations interrupted on June 30th.

ExIm Bank is important to ExWorks Capital under normal circumstances, but also has private capital for trade finance that is often used for companies and transactions which may not fit the usual ExIm Bank profiles.

Furthermore, ExWorks has a SBA export finance platform – World Trade Finance – that is unrelated to ExIm reauthorization issues and completely independent as it operates under the SBA’s authority.

ExWorks provides trade financing with private capital to support the purchase and shipment of U.S. manufactured products to overseas buyers, and to assist and support U.S. manufacturing by procuring and shipping to overseas buyers as a one-stop trading house.

“ExWorks stands ready to support ExIm Bank users and prospective borrowers to bridge this critical period of time should ExIm see interruption in ability to operate” says Randy Abrahams, Executive Chairman of ExWorks Capital. “We remain mystified that a debate even exists around the United States having an export credit agency that by every measure clearly supports small businesses across the country and provides for job creation and preservation in the United States.”

“Without a doubt, small companies will be the most dramatically affected as will be their respective employees by a shut down or interruption of ExIm” comments John McAdams, CEO of ExWorks. “We will be there in support of those companies as needed until the ExIm Bank Charter is reauthorized.”

ExWorks provides trade financing with private capital by buying goods like any domestic customer and taking the risk in selling overseas as well as advancing funds to complete manufacturing of viable export purchase orders.

ExWorks also provides Working Capital lines of Credit under SBA and ExIm Delegated Authority whereby transaction specific loans are provided to U.S. exporters permitting them to extend more aggressive terms to their overseas buyers.

As a result of its private funding, ExWorks Capital will be able to respond to requests as it continues to build its presence as the premier independent non bank lender in the Export Trade Finance space.

Exworks remains hopeful the ExIm Bank will not see interruption in the critical funding it provides for small business, but will plan to help keep these businesses from meltdown in case the much needed authorization for ExIm is not provided by June 30th.

About ExWorks Capital:
ExWorks Capital is an international trade finance company that offers export financing solutions through its export finance company that utilizes its own capital as well as ExIm Bank and SBA export authorities to support small to mid-size businesses. ExWorks Capital’s offerings include:
Working Capital Financing – International Trade Receivable and Inventory Revolvers, including advancing on Raw Materials, WIP and Finished Goods, between $1,000,000 and $25,000,000
Term Loan Financing – Term Loans between $10,000,000 and $100,000,000 to Foreign Customers
Export Trading – Negotiating the buy and/or sell side of a transaction and processing all of the associated documentation from the acquisition of the export to its shipment and delivery to an international customer thus eliminating trade risk to the supplier between $500,000 and $25,000,000

Yes Virginia, the Ham Is Chinese (Part 3)

Another concern is more xenophobic.  Many Americans are worried about lessened American competitiveness and the rise of China. There were similar concerns about the wave of Japanese cars and the purchase of iconic real estate by Japanese investors in the 1980’s and 1990’s.  In fact, the success of Japanese brands, like Toyota, Honda, and Nissan, was mostly positive for Americans, particularly for consumers, as it was accompanied by new capital, more sophisticated domestic manufacturing, new product ideas, and, eventually,  improved competitiveness of American car companies. Now individual states in the U.S. have learned to compete to attract manufacturing and services company investment in their communities. No reason not to expand such activities into the agricultural sector as well.

Of even more interest is the reverse flow, where international investments have a spillover effect on home country markets. Why not eat Hunan pork with Smithfield ham during a picnic at the Yangtze river? What pork other than Smithfield’s should be specified when planning the Chinese  government-subsidized opening of  restaurant chains in Africa ? The Smithfield acquisition opens new markets both for the Chinese investors as well as for American ham. Such is the path of true globalization.

The recent meeting between Presidents Obama and Xi Jinping demonstrated, that the United States and China have more to gain from a cooperative, albeit competitive, rather than a conflict based relationship.  Given President Xi’s experience as a student living in Iowa, we can hope that he is instinctively more likely to be drawn to the value of a asymptotic relationship with the United States, rather than one based on abrasive disagreement.

One of the principal motivators for the deal from Smithfield’s point-of-view, was the ability to more successfully sell its products to the huge Chinese market. That such an approach can work is seen in the acquisition of European car-maker Volvo by the Chinese company Zhejiang Geely Holding in 2010.  Not only is Zhejiang looking to profit from the existing global business of Volvo, but it is also expected to help the brand further penetrate the Chinese market, the largest and fastest growing automobile market in the world.

This article is a part of a series written by Michael Czinkota and Charles Skuba. Read part 2 here.  Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.

Expanding into Global Markets: Direct Investment

Some companies find that they cannot meet their global marketing objectives by continuing to export, so they make direct investments in international markets to gain access to manufacturing facilities, supplies, or labor, among other reasons. They become multinational corporations which the United Nations defines as “enterprises which own or control production or service facilities outside the country in which they are based.” While this definition makes all foreign direct investors “multinational corporations,” large corporations are the key players.

Building and managing operations outside the domestic market requires skills and resources beyond those used for exporting. Multinational firms with subsidiaries and other investments in other countries also deal with issues ranging from local versus headquarters control, to product or service standardization versus customization for individual market needs. At the highest level of marketing globalization, companies integrate thie international and domestic operations into relatively seamless enterprises that have portfolios of nations that they market to with unified strategies.

Putting products into the hands of customers overseas involves some degree of direct financial investment, whether it is done by acquiring assets in other countries or gaining access to another company’s assets through contracts. International marketers invest directly via full ownership, strategic alliances, or joint ventures to create or expand a permanent interest in an enterprise. It typically requires substantial capital and an ability to absorb risk, so the most visible players in this arena are large multinational corporations who invest either to enter new markets or to ensure reliable supply sources.

Foreign direct investment is defined by the United Nations as “enterprises which own or control production or service facilities out of the country in which they are based.” U.S. firms have significant investments in the developed world as well as in some developing countries. It is a major avenue for global market entry and expansion.

The top multinational companies come from a wide range of countries and depend heavily on their international sales, with their original home market accounting for only a fraction of total sales. Some have revenues larger than the domestic output of some countries. Many operate in more than 100 countries and do not even reference “global” and “domestic” anymore. Through their direct investment, these companies bring economic vitality and jobs to their host countries, often paying higher wages than the average domestically owned firms. At the same time, though, trade follows investment, and companies that invest in other nations often bring with them imports that could weaken a nation’s international trade balance.

Are You Prepared For A New Surge of Countertrade?

International exchanges of goods and services are typically conducted with currencies, the value of which is settled by the four legs of trust, demand, supply, and risk. If any of these legs are weakening, substitute exchange methods emerge, based on precious metals, commodities or even cigarettes. In light of economic and financial volatility in the U.S., Europe and parts of Asia, we may again be heading for such substitutions in the global market.

Interest rates now underprice the true cost of capital. Global financial shifts around the world are frequent, easy, and large scale. Government debt repayment is uncertain. Currency blocs such as the Euro are exposed to significant stress. The choice of the U.S. dollar as reserve currencies may be shifting. Financial debt and exposure are increasingly imbalanced. As a result of all these instabilities, barter, buybacks, offsets and other forms of countertrade re-appear in the global market, offering new efficiencies in the conduct of trade. Companies need to understand how such international shifts will affect them, and learn to adjust their marketing and financing approaches to these new opportunities.

Countertrade is the use of goods, services, and other non-monetary resources as payment. Recent discussions with the Global Offset and Countertrade Association indicate that countertrade is on the rise due to government and company requirements.

Governments are concerned about the influence of large transactions on their country’s balance of payments. They increasingly demand ‘offsets’ which are designed to reduce such influence. For example, in order to help pay for the acquisition of military airplanes, a country may demand that the seller of the planes encourages tourism to the country – as done by Egypt. Concern is also growing about structural trade deficits. Governments and companies make countertrade a condition for importers. For example, Zaire and Italy exchanged scrap iron for 12 locomotives. China traded Russia 212 railway trucks full of mango juice in exchange for a passenger jet.

We like to think that only the free market sets prices. However, government influence and international necessity often build result in significant barriers to international exchanges. Countertrade agreements have shown that an exchange of goods for goods can overcome currency problems. Historically, countertrade was used by soft currency countries, particularly in times of the Soviet Union. It has begun to rise again since the 2008-2009 financial crisis, bridging currency gaps and helping to reduce vast inventories. On a global scale, countertrade capability provides firms with a competitive edge. It keeps transactions alive and reduces the fear of high currency volatility. Many firms just want to carry on their business, rather than become currency speculators.

Companies know that an acceptance of non-cash payments can affect product values negatively. But as an alternative to no trade at all, countertrade looks better every day. Take the realities of a recent countertrade deal between Argentina and South Korea. Argentina reported a trade deficit of $6 billion in 2010, driven in part by high automotive imports. Argentinean imports from the South Korean car company Hyundai alone amounted to $91 million with consumer demand for cars growing. Historically, the government handled such situations by simply refusing more imports. But international agreements and negotiations have sharply reduced this option.

The Financial Times reports that Argentinean Hyundai distributors will utilize countertrade to compensate for the negative effects of car imports from Korea. They will stimulate the Argentinean sales of agricultural goods, specifically peanuts, wine, and soy flour to South Korea. Economic hardship is not the only incentive to countertrade. Bilateralism plays a large role in the acceptance of a countertrade offer. A country may encourage its companies to accede to barter requests from foreign trade partners and allies. The link between business and politics encourages such accommodation, even though doing so may be inconvenient. In the future, trading partners may reciprocate.

After decades of dormancy, countertrade is on track to again become a vital part of the global market. In a world of economic hardship, parsimony, and growing currency uncertainty, countertrade emerges as a viable solution for market and political shortcomings. Companies are well advised to re-cast their strategy to reflect countertrade expectations and requirements. On the outreach side, new marketing and financing packages need to be prepared in order to remain ahead of the competition. Internally, personnel needs to be hired and trained, to initiate such transactions, supervise them and see them through to long term completion. Banks need to prepare for countertrade based financing and get ready to help clients use countertrade.

In sum, we all need to get out of the headlight of currency weaknesses and changes, and prepare for the resulting shifts in the conduct of international business.