Global Trade Solutions

International Payment & Finance Methods

Marsha Sompayrac SunTrust Bank September 21, 2011 Norfolk, Virginia

Copyright 2005 SunTrust Banks, Inc.

Agenda

Products and Services for Importers/Exporters Risk Comparison International Methods of Payment Collections Letter of Credit Trade Financing SBA EXIM Bank Export Credit Insured Accounts Receivable

International Banking and Risk Mitigation

RISKS
Commercial
- Any event that prevents the buyer from paying or prevents the seller from delivering the product or service. - Problems with payment arrangements on behalf of the exporter and/or importer - Problems with the merchandise on behalf of the exporter and/or importer - Additional costs for financing, insurance, and shipping - Protracted default - Bankruptcy or insolvency by the buyer

Political
- Any event or unforeseen factor not necessarily within control of the buyer and/or exporter - Problems with currency exchange - Government or political intervention - Problems with the movement of merchandise - Natural Disasters A variety of financing options are available when negotiating payment terms

Products and Services

International Trade Products

Trade Services Commercial Letters of Credit - Import & Export Standby Letters of Credit Documentary Collections Export Credit Insurance International Correspondent Banking

Trade Finance Working Capital Loans for exports Foreign Receivable Financing Foreign Buyer Financing Overseas Investment Financing

Risk Comparison
INTERNATIONAL METHODS OF PAYMENT

INTERNATIONAL METHODS OF PAYMENT

Trade Terms
Importer Risk Open Account Documentary Collection(Time) Documentary Collection (Sight) Letters of Credit (Time) Letters of Credit (Sight) Cash in Advance Low

Exporter Risk High

International Methods of Payment

Getting Paid and Managing Risk

Copyright 2005 SunTrust Banks, Inc.

International Methods of Payment

Cash In Advance
Time of Payment: prior to shipment. Buyer Pays Wire Transfer Check Draft Credit Card Goods available to Buyer: upon delivery Risk to Seller: no risks Risks to Buyer: loses use of funds until goods arrive. Seller may not ship goods as ordered or at all. No Credit Approval Required

International Methods of Payment

Open Account
Time of Payment: upon payment of invoice. Goods available to Buyer: upon delivery. Risk to Seller: completely relies on Buyer to pay invoice when due. Risks to Buyer: no risks. Recommended for sales to long-standing customers with satisfactory payment history

International Methods of Payment

Documentary Collections
Draft or Documents Against Payment Or Acceptance
Time of Payment: SIGHT at time of presentation of the draft Time of Payment: TIME at a future date. Goods available to Buyer: after payment if ALL Ocean Bills of Lading are included with the documents and after the cargo has arrived. Risk to Seller: possible non-payment of the draft. Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. Not recommended for sales on extended terms

International Methods of Payment

Documentary Collections
Benefits
More secure than Open Account Goods available to Buyer: after payment if ALL Ocean Bills of Lading are included with the documents and after the cargo has arrived. Risk to Seller: possible non-payment of the draft. Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. Dont encumber Buyers line of credit Inexpensive

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International Methods of Payment

What is a Letter of Credit?

A payment instrument issued by a bank on behalf of its customer. The issuing bank substitutes its own credit standing for that of its customer. The issuing bank undertakes to pay for the goods or services provided by the beneficiary of the LC; the beneficiary looks to the bank for payment, instead of the buyer (applicant of the LC). The LC assures the beneficiary (exporter) of payment when the terms of the credit are met. The exporter is not obligated to perform if the terms of the LC are not acceptable. Commercial letter of credit can be paid at sight or at period in future Time Letter of Credit can be discounted if seller doesnt want to wait until LC maturity. Simple form of trade finance.

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Letters of Credit
Benefits
More secure than Open Account Foreign Bank promises to pay exporter if documents are in compliance with letter of credit Goods available to Buyer: after payment if all Ocean Bills of Lading are included with the documents and after the cargo has arrived. Risk to Seller: LC void if seller docs are not in compliance, i.e. have discrepancies Risk to Buyer: has assurance of shipment, but Seller may not ship goods as ordered. Must pay to get title to goods. Versatile can build in terms for buyer and still have assurance of payment from overseas bank

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International Methods of Payment

Letter of Credit

Importer

Exporter

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International Methods of Payment

Letter of Credit
Importer
Exporter

Documents

Issuing Bank

Advising Bank

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International Trade Finance

TRADE FINANCE TOOLS

These traditional payment methods are fine, but what if your customer wants extended terms of payment or your competitors are offering better terms? Trade Finance may be the solution to your customers needs and the way to make exports a manageable part of your growth strategy. SBA Export Express SBA Export Working Capital Program EXIM Bank Working Capital Program

Insured Foreign Receivables Financing

Both SBA and EXIM assists US exporters to obtain loans to produce goods or services for export. They guarantee repayment to the lender, making it possible for banks to extend financing to the exporter. They do not compete with commercial lenders, but assumes the risks they cannot accept. SunTrust Bank is a delegated lender for both SBA and EXIM Bank Programs

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International Trade Finance

SBAs Export Express Working Capital Guarantee Program

The program supports single transactions or multiple sales under a revolving line Maximum loan amount limited to $500,000 Guarantees 90 percent of a commercial bank loan up to $350,000 and 75 percent from $350,000-$500,000 Program minimizes government mandated forms. Streamlines processing and costs of smaller SBA loans for exporters VERSATILE -- Can be used for working capital, issue standby letters of credit for advance payment guarantees, participation in foreign trade shows, or translation of product literature for use in foreign markets

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International Trade Finance

SBAs Export Working Capital Guarantee Program

The program supports single transactions or multiple sales under a revolving line Guarantees 90 percent of a commercial bank loan up to $5,000,000 Letter of credit or open account purchase orders with acceptable insurance or exceptionally strong buyer Can be used to purchase goods and services or pay for labor & materials to put together an export order At the minimum, loan must be collateralized by export- related AR and inventory No US content requirement or military sales restrictions

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International Trade Finance

FEES and RATES

Guarantee Fee: Maturities of 12 months or less = 1/4 percent Maturities greater than 12 months = 2-3% depending on loan size Interest Rates/Lender Fees are Negotiable

ELIGIBILITY
A business must meet SBAs industry size standards and have been in business for at least 12 continuous months SunTrust Bank is a delegated lender for SBAs Export Working Capital Guarantee Program One of few banks in country to be awarded this designation

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International Trade Finance

Export Import Bank of the US Export Working Capital Guarantee Program

The program covers 90% of the loans principal and accrued interest STB minimum loan request is negotiable there is no maximum amount At the minimum, loan must be collateralized by export-related AR and inventory Goods must have at least 50% US cost content to guarantee the entire transaction

Loans Can Be either Transaction Specific or Revolving

High Advance Rates on Inventory and Receivables, including work in Process . Some restrictions to the program (military exports and some countries are excluded) Financing Provided for Short, Medium, and Long Term

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International Trade Finance

Export Credit Insurance & Insured Foreign Receivables Financing

Insurance Available through EXIM Bank and Private Sector Insurers Enables US exporters to extend open account terms to international buyers Insured export receivables looked upon favorably by banks. Exporters may be able to borrow against insured foreign A/R. Insurance policies that protect US exporters against foreign buyer default Commercial risk insurance (buyer bankruptcy and insolvency)

Political risk (war, inconvertibility of currency)

Short Term and Medium Term Insurance Policies Multi Buyer or Single Buyer Policies

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Contact:
Marsha Sompayrac Director, Global Trade Solutions 919 E. Main Street, 2nd Floor SunTrust Bank Richmond, VA 30303 Tel: 804-782-5558 Marsha.Sompayrac @ Suntrust.com
Hai-nah Ellison Vice President, Global Trade Solutions 919 E. Main Street, 2nd Floor SunTrust Bank Richmond, VA Tel: 804-782-7476 Hai-nah.Ellison@ Suntrust.com

Copyright 2005 SunTrust Banks, Inc.