1 / 20

Export Payment Methods and Financing Webinar

Export Payment Methods and Financing Webinar . Tekle Sebhatu , Ph.D . November 18, 2011 http://www.stcinternational.us stcintL@q.com. Import Payment Methods and Risks Agenda. The different payment methods Questions you should consider before selecting payment method

joshwa
Download Presentation

Export Payment Methods and Financing Webinar

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Export Payment Methods and Financing Webinar TekleSebhatu, Ph.D. November 18, 2011 http://www.stcinternational.us stcintL@q.com

  2. ImportPayment Methods and Risks Agenda • The different payment methods • Questions you should consider before selecting payment method • Risk associated with each payment method • Letter of credit and discrepancies • Financing options • Q & A

  3. Consider the Following Questions Before Selecting Payment Method • Do you have a good relationship with your buyer? • Can you extend credit? • What payment method are you asking? Why? • Do you need financing to make the purchase from your supplier (middleman)? • What are your options if buyerrefuse to accept the product? What will you do? • Can you afford to loss it all and your business survives?

  4. Payment In Advance 1. Importer Pays for Goods American Exporter Brazilian Importer 2.Exporter Ships Goods After Being Paid

  5. Open Account 1. Exporter Ships the Goods Brazilian Importer American Exporter 2. Importer pays after the Goods are Received

  6. Consignment 1. Exporter Ships the Goods Brazilian Importer American Exporter 2. Importer pays after the Goods are Resold

  7. Consignment • Buyer receives goods before payment • Buyer pays on agreed terms of payment after goods are resold. • Goods available to buyer upon delivery • Buyer: No risk • Seller: High risk (relies on buyer to sell and pay) • Seller often extends credit to buyer to remain competitive

  8. Documentary Collection 2. Exporter ships Goods American Exporter Brazilian Importer 1. Negotiation 3.Exporter Delivers Docs. 8.Exporter’s Bank Pays Exporter 5. Importer Pays 6.Bank Provides Docs 7. Bank Pays American Bank Brazilian Bank Figure 15-3 4. Bank Delivers Docs.

  9. Documentary CollectionDocument Against Payment(D/P) or Sight Draft • Buyer pays to receive documents (Presentation of the draft) • Goods available to buyer after payment is made • Buyer risk: might receive wrong goods • Seller risk: buyer not paying for the goods • Not used for extended terms.

  10. Principal Parties to a Letter of Credit Transaction • The Applicant: Buyer (importer) requesting LC to be issued. • The Beneficiary: Seller (exporter) in whose favor the LC is issued. • The Issuing Bank:Buyer’s bank issues the LC. • The Advising Bank: Seller’s bank Authenticate LC and advise seller • The Negotiating Bank: Seller’s Bank, reviews documents (LC) documents, forwards to the Issuing Bank (Importer bank). • The Confirming Bank:Seller’s Bank, guarantees payment to seller if the Issuing Bank fails to pay (Optional).

  11. Types of Letters of Credit • Revocable or Irrevocable • Transferable • Back-to-back • Usance • Red clause • Revolving • Standby

  12. Letters of Credit 5 American Exporter Brazilian Importer 1 11 10 4 6 9 2 3 American Advising Bank Brazilian Issuing Bank Figure 15-3 7 8

  13. Letter of Credit Expired Late Presentation of Documents Late Shipment Short Shipment Shipment - Incorrect Ports Incorrect Insurance Inconsistent Documents Description Differ on L/C and Invoice Partial shipment not allowed Documents Not Signed Common Discrepancies

  14. Benefits of Using LC to Buyer • Timely delivery of goods • Buyer in a better position to ask better prices and faster deliveries. • May attract large number of suppliers who believe in LC • Power to refuse payment if there are any mistakes in the documents • Risk of loosing money is minimized if the seller fails to provide all shipping documents

  15. What Lenders Look! The 5 “C” Lenders Look When Evaluating Loans Collateral Character Cash flow Capital Conditions

  16. Private Sector Financing Opportunities Commercial Banks Private trade finance companies Export intermediaries Private Sector Export Financing Factoring Buyers and suppliers Forfaiting

  17. U.S. Small Business Administration Ex-Im Bank Programs

  18. SBA Export Express Loan • Participate in foreign trade show • Translation of product brochure/catalog • General lines of credit for export purposes • Transaction specific/complete export orders • SBA Guaranty • 85% of loan up to $150K • 75% of loan $150K - $250K (maximum) • Terms (negotiate fixed or variable with lender) • 6.5% over prime for <$50K OR 4.5% loan > $50K • Loan maturity – 5-10 years (working Capital) or 10-15 years (machinery and equipment) • Qualify- 12 months in business

  19. Free Powerpoint template from www.brainybetty.com

  20. Thank You for participating! For additional information please visit http://www.stcinternational.us Email: stcintL@q.com

More Related