City National Bank Export Finance Overview

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2009 California-China Trade and Investment
Conference
Developing a Bank-Friendly Export Finance
Strategy
Thomas Burr International Trade Consultant May
21, 2009
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2009 California-China Trade and Investment
Conference

• Table of Contents
• Learn to think finance before you go
• Learn what customers to spend time with and which
  to see next year
• Ways to Help me help you
• Some Notes on Ex-Im Bank in Asia
• Exporters Resources

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2009 California-China Trade and Investment
Conference
Think Finance Before You Go! An Introduction to
Export Finance
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2009 California-China Trade and Investment
Conference

• What Exactly is Export Finance?
• Financing support needed to assist exporters in
  pursuing the expansion of their overseas markets
• Designed to help the exporter in two main areas
• Short-term Working Capital Financing
• Medium/Long Term Financing
• Can involve foreign political and commercial risk
• Trade Finance vs. Structured Project Finance

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2009 California-China Trade and Investment
Conference

• Why is there a need for Export Finance?
• Most lenders are not willing to take credit risk
  for
• Foreign Accounts Receivable
• Inventory related to overseas orders
• Foreign Buyers and Importers
• This reluctance is accentuated when the repayment
  terms associated with foreign buyers extends out
  beyond one year.

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2009 California-China Trade and Investment
Conference

• How Banks Mitigate the Risk of Export Financing
• Banks look to guarantees or insurance from other
  entities to mitigate their risk including
• Export-Import Bank of the United States (Ex-Im)
• Sovereign and Sub Sovereign Entities
• Corporate Guarantees
• Private Insurance Companies including
• AIG, Lloyds of London, Zurich, Atradius, FCIA,
  Unistrat
• Structured Finance Techniques

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2009 California-China Trade and Investment
Conference

• Export Finance Products
• Short Term Finance Consumable Goods
• Export Working Capital Loan Program
• Purchase Order Financing
• Factoring
• Medium/Long Term Finance Capital Goods
• Forfaiting
• International Buyer Credit
• Structured and Project Finance

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2009 California-China Trade and Investment
Conference

• What your bank can do for you
• Short-Term Sales Consumable Items
• Working Capital what qualifies for financing
• Confirm Letters of Credit reduce transactional
  risk
• Transfer Letters of Credit how to structure
  properly

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2009 California-China Trade and Investment
Conference

• What your bank can do for you
• Medium Term Sales Capital Good Services
• Financing Proposals (ECA/Clean)
• Foreign Exchange Needs
• Fixed Interest Rate Options
• Underwriting Standards and Documentation
• Documentation/Application Needs

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2009 California-China Trade and Investment
Conference
What Customers Should I Spend Time With and Who
Should I See Next Year?
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2009 California-China Trade and Investment
Conference

• What Customers Should I Spend Time with?
• Of course, you have got to click with them!
• What is their history? Stick with established
  companies. Start ups are a challenge!
• Who do they bank with? The bigger the better!
• Have they been underwritten by credit insurers?
• Credit reports and financial statements

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2009 California-China Trade and Investment
Conference
Ways to Help Me Help You
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2009 California-China Trade and Investment
Conference

• Help Me Help You!
• A good potential customer has needs and so do you
  usually it involves finance.
• Talk to your bank! Find out how they can help
  you in China.
• Strive for terms of sale that will work for you
  AND your bank
• Dont vomit all your cards! Explore their needs
  and concerns
• Financing is tight and interest rates are high.
  Liquidity from the USA is a great sales tool!
  UNDERSTAND THAT!
• Be prepared to offer a cash price and a price
  including financing work with your banker
  before you go!

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2009 California-China Trade and Investment
Conference

• Two Common Scenarios
• Scenario I You are a distributor. You want to
  sell into China. You do not have adequate (maybe
  any) working capital from your bank to purchase
  from your supplier. You have a solid company in
  China that wants to buy from you under a letter
  of credit. You talk. They like. They say yes, I
  want to buy!
• Now what?

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2009 California-China Trade and Investment
Conference

• Two Common Scenarios
• Scenario II You are a manufacturer. You want
  to sell into China. You have adequate working
  capital from your bank to manufacture your
  product. You have a good company in China that
  wants to buy from you. They bank with Bank of
  China. They need 45 day terms and you learn they
  will issue an LC to you.
• You talk. They like. They say yes, I want to
  buy!
• Now what?

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2009 California-China Trade and Investment
Conference
Some Notes on Ex-Im Bank in Asia and China
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2009 California-China Trade and Investment
Conference

• No export finance limitations are in place for
  these countries in Asia Brunei, Hong Kong,
  India, Japan, South Korea, Macau, Singapore,
  Taiwan, Thailand
• Some export finance limitations are in place for
  these countries in Asia Indonesia, Malaysia,
  Mongolia, Philippines, Vietnam.
• Export finance restrictions are in place for
  these countries in Asia Burma, Cambodia, Laos
  North Korea

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2009 California-China Trade and Investment
Conference

• Case Study China
• Coverage under the WCGP requires that the
  transaction be supported by an irrevocable Letter
  of Credit issued by a bank pre-approved by Ex-Im
  Bank.
• Exceptions may be made for private sector
  transactions that are insured for comprehensive
  political and economic risk.

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2009 California-China Trade and Investment
Conference

• China Banks Approved By Ex-Im Bank
• Bank of China
• China Development Bank
• China Construction Bank
• Industrial and Commercial Bank of China
• Bank of Communications

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2009 California-China Trade and Investment
Conference
Exporters Resources
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2009 California-China Trade and Investment
Conference

• Most Utilized Resources Available to Exporters
• US Export Assistance Centers (USEAC)
• SCORE
• Commercial Bank International Departments
• Export Credit Insurance Brokers
• Export Credit Agencies
• Multilateral and Development Banks
• Overseas Private Investment Corporation