suntrust how to get paid 2010

8/6/2019 Suntrust How to Get Paid 2010

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AIM Seminar 2010AIM Seminar 2010

How to Get Paid For and Finance YourHow to Get Paid For and Finance YourExport SalesExport Sales


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SunTrust InternationalSunTrust InternationalMarsha SompayracMarsha Sompayrac

(804) 782(804) [email protected]@suntrust.com

HaiHai--nah Ellison(nah Ellison(

(804) 782 7476(804) 782 [email protected]@suntrust.com

Richmond, VirginiaRichmond, Virginia


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3International Trade Banking

INTERNATIONALINTERNATIONAL

METHODS OF PAYMENTMETHODS OF PAYMENT

Exporter Risk

High

Importer Risk

Low

Trade Terms

Open Account

Documentary Collection(Time)

Documentary Collection (Sight)

Letters of Credit (Time)

Letters of Credit (Sight)

Payment in Advance


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Open account... are you really sure?Open account... are you really sure?(You ship the goods, they sell them and(You ship the goods, they sell them and

then pay you...maybe)then pay you...maybe)

How can we beHow can we be

sure hell pay?!sure hell pay?!


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Cash in Advance?Cash in Advance?

(They send you the money then you ship the goods!)(They send you the money then you ship the goods!)

Be careful! Dont ship before youBe careful! Dont ship before youare sure you are in receipt ofare sure you are in receipt ofcollected fundscollected funds

wire transfer: make sure they havewire transfer: make sure they havecomplete instructions & verifycomplete instructions & verifyreceiptreceipt

checkcheck -- determine that check hasdetermine that check hasbeen paid by drawee bankbeen paid by drawee bank

foreign checkforeign check -- may take up to 3may take up to 3weeks to clearweeks to clear


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Trade ServicesTrade Services

(TraditionalBank Products)(TraditionalBank Products)A.A. Letter of Credit (sight)Letter of Credit (sight)

The buyers bank promises to pay the seller if the seller presentsThe buyers bank promises to pay the seller if the seller presentsdocuments that comply with the conditions listed in the letter of credit.documents that comply with the conditions listed in the letter of credit.

Payment will be at sight (immediate) upon presentation of conformingPayment will be at sight (immediate) upon presentation of conformingdocuments.documents.

B.B. Letter of Credit (time)Letter of Credit (time)

The same as above except that payment will be at a designated time afterThe same as above except that payment will be at a designated time afterpresentation of compliant documents. Example: 30 days after bill of ladingpresentation of compliant documents. Example: 30 days after bill of lading

date. Provides terms for buyer but seller must wait for payment.date. Provides terms for buyer but seller must wait for payment.

C.C. LCDiscount & Acceptance (time)LCDiscount & Acceptance (time)

A simple form of trade finance, which gives the buyer time to pay but yourA simple form of trade finance, which gives the buyer time to pay but yourcompany receives cash following shipment. Build in the cost!!company receives cash following shipment. Build in the cost!!


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Trade ServicesTrade Services

(TraditionalBank Products) (continued)(TraditionalBank Products) (continued)

D.D. Collections (sight)Collections (sight)

Similar documents as in letter of credit but there is neither bankSimilar documents as in letter of credit but there is neither bankexamination nor promise of payment by bank. Should be usedexamination nor promise of payment by bank. Should be used

with strong or long established buyer as it carries risk of nonwith strong or long established buyer as it carries risk of non--payment by the buyer. .payment by the buyer. .

E.E. Collections (time)Collections (time)

Similar to sight, but gives buyer time to pay. Like open account butSimilar to sight, but gives buyer time to pay. Like open account but

carries a protest mechanism.carries a protest mechanism.


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Commercial Letter of

Credit

Commercial Letter of

Credit

arrangement by a bank to settlearrangement by a bank to settleinternational commercial transactioninternational commercial transaction

provides a measure of security for partiesprovides a measure of security for partiesinvolvedinvolved

creates contractual framework for tradecreates contractual framework for trade

transaction paymenttransaction payment


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Letters ofC

reditLetters ofC

redit L/Cs are a payment mechanism,L/Cs are a payment mechanism, not a quality assurancenot a quality assurance

devicedevice. To assure quality, product inspection must be. To assure quality, product inspection must be

made. (e.g.: SGS or other method)made. (e.g.: SGS or other method) Bank guarantee of payment. If the documents outlined inBank guarantee of payment. If the documents outlined in

the Letter of Credit are in complete compliance with thethe Letter of Credit are in complete compliance with theterms and conditions of the letter of credit, payment willterms and conditions of the letter of credit, payment willbe made.be made.

Documents are checked for discrepancies, orDocuments are checked for discrepancies, ordifferences between what is required and what isdifferences between what is required and what issubmitted. Discrepancies will usually delay payment.submitted. Discrepancies will usually delay payment.


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Payment under L/C

is effectedPayment under L/C

is effected

against receipt of documents only...notagainst receipt of documents only...notagainst shipment or examination ofagainst shipment or examination ofmerchandisemerchandise

if documents comply with credit termsif documents comply with credit terms


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ConfirmedConfirmed

Letter ofC

reditLetter ofC

redit A confirmed letter of credit carries the obligationA confirmed letter of credit carries the obligation

of both the issuing bank and the confirming bankof both the issuing bank and the confirming bank

to pay the exporter if the terms and conditions ofto pay the exporter if the terms and conditions ofthe credit are met.the credit are met.

Foreign country risk is eliminated, as the risk moves toForeign country risk is eliminated, as the risk moves tothe US bank.the US bank.

Cash flow may improve, as payments are from a US vs.Cash flow may improve, as payments are from a US vs.Overseas bank.Overseas bank.

Additional expense, as another bank (confirming) isAdditional expense, as another bank (confirming) isnow involved in the transaction.now involved in the transaction.


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If you want your L/C confirmed...If you want your L/C confirmed...

consult with SunTrustBank whether orconsult with SunTrustBank whether ornot L/C can be confirmed, if issuednot L/C can be confirmed, if issued

request confirmation when setting uprequest confirmation when setting upsales contract with buyersales contract with buyer

determine up front who will paydetermine up front who will payconfirmation commissionconfirmation commission


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Letters Of CreditLetters Of Credit

StandbyStandby

BidBonds

Guarantees

PerformanceBonds

Advance OrDown Payment

Guarantee

StandbyLetters

Of Credit


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International Trade Banking

DocumentaryCollectionsDocumentaryCollections

International Method of PaymentInternational Method of Payment

NoCredit Approval RequiredNoCredit Approval Required Collection processing handled in AtlantaCollection processing handled in Atlanta

SunTrust acts as collecting bank for paymentSunTrust acts as collecting bank for paymentagainst shipping documents pertaining toagainst shipping documents pertaining to

international transactioninternational transaction

Not recommended for sales on extended termsNot recommended for sales on extended terms


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One of the most common questions for people interested in international tradeOne of the most common questions for people interested in international tradeis What is the best method of payment for international shipments?is What is the best method of payment for international shipments?

Terms of Trade

Time ofPayment

GoodsAvailable to

BuyerRisk to Exporter

Risk toImporter

Cash InAdvance

Bef re s i entis e

After ent N ne Relies nexporter tos ip oods s ordered

Letter ofCredit

When shipmentis made

Afterpayment Very little, ornone,dependingon

terms

Ass red shipment ismade t relies on

exporter to shipgoodsas ordered

Collection Onpresentationofdraft to yer

Afterpayment Ifdraft is npaid,must disposeofgoods

ameas unlessallowed to inspectgoods

OpenAccount

As agreed Beforepayment

Relies on uyer topayas agreed

None


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One of the most common questions for people interested in international trade isOne of the most common questions for people interested in international trade isWhat is the best method of payment for international shipments? (continued)What is the best method of payment for international shipments? (continued)

Seven F t r t nsi er ef reSettling ent er s

CashLetter fCredit

CollectionOpen

Account

1. Customer relationship New New Established Established

2. Natureoforder Custom Custom Normal Normal

3. olitical situation Unstable Unstable Stable Stable

4. conomicsituation Unstable Unstable Stable Stable

5. Competitorsoffer terms No No Yes Yes

6. iskofpricechanges Yes Yes No No

7. Need tocontrol cash flow Yes Yes No No


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These methods are fineThese methods are fine but what if your customer wants extendedbut what if your customer wants extendedterms of payment or your competitors are offering better terms?terms of payment or your competitors are offering better terms?Trade Finance may be the solution to your customers needs and theTrade Finance may be the solution to your customers needs and the

way to make exports a manageable part of your growth strategy.way to make exports a manageable part of your growth strategy.

Trade FinanceTrade Finance

WhoCan Receive Financing?WhoCan Receive Financing?

** Seller (Exporter)** Seller (Exporter)

** Buyer (Importer)** Buyer (Importer)

** BuyersBank (If buyers credit is poor)** BuyersBank (If buyers credit is poor)

** ForeignCountry or Agency** ForeignCountry or Agency


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Trade Finance ToolsTrade Finance Tools

Export-ImportBank of the U.S.

Pre Export Working Capital ProgramPre Export Working Capital Program Insurance and Guarantees for short, medium andInsurance and Guarantees for short, medium and

long term financinglong term financing

Private Insurance covering commercial andpolitical risk


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EXIMB

ank ProgramsEXIMB

ank Programs1.1. EXIMBank ProgramsEXIMBank Programs

US Government Agency that supports US exporters whose productsUS Government Agency that supports US exporters whose productscontain at least 50 percent US content. EXcontain at least 50 percent US content. EX--IMBank does notIMBank does notcompete with commercial lenders, but assumes the risks theycompete with commercial lenders, but assumes the risks theycannot accept.cannot accept.

Short term, medium term, and long term financing programsShort term, medium term, and long term financing programs

Coverage in over 150 countriesCoverage in over 150 countries

Some restrictions to the program (military exports and someSome restrictions to the program (military exports and somecountries are excluded)countries are excluded)


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EXIM WorkingC

apital GnteeEXIM WorkingC

apital Gntee..

PrePre--ExportExport FinancingFinancing

**Assists US exporters to obtain loans to produce goods or services**Assists US exporters to obtain loans to produce goods or servicesfor export. Exim guarantee repayment to the lender, making itfor export. Exim guarantee repayment to the lender, making itpossible for banks to extend financing to the exporter.possible for banks to extend financing to the exporter.

** Loans Can Be either Transaction Specific or Revolving** Loans Can Be either Transaction Specific or Revolving

** High Advance Rates on Inventory and Receivables, including** High Advance Rates on Inventory and Receivables, including

Work in ProcessWork in Process


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EXIM Medium Term ProgramEXIM Medium Term Programb.b. Guarantee or InsuranceGuarantee or Insurance

Post Export FinancingPost Export Financing ForeignBuyer FinancingForeignBuyer Financing

**1**1--5 year repayment, exceptionally 7 years and


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EXIM Long Term ProgramEXIM Long Term Program Long Term Guarantee/LoanLong Term Guarantee/Loan

Amounts over $10 million and > 7 yearsAmounts over $10 million and > 7 years

15 percent down payment, 85 percent financed15 percent down payment, 85 percent financedamountamount

Buyer financing of very large items (aircraft) andBuyer financing of very large items (aircraft) andproject financeproject finance

EXIM will consider making loan directly to theEXIM will consider making loan directly to theforeign buyer. No US commercial bank exposure.foreign buyer. No US commercial bank exposure.


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ExportC

redit InsuranceExportC

redit InsuranceAvailable through EXIM BankAvailable through EXIM Bank andand Private Sector InsurersPrivate Sector Insurers

**Enables US exporters to extend open account credit terms to**Enables US exporters to extend open account credit terms to

international buyers.. Insured export receivables looked uponinternational buyers.. Insured export receivables looked uponfavorably by banksfavorably by banks..

**Provides policies that protect US exporters against foreign**Provides policies that protect US exporters against foreignbuyer defaultbuyer default

Commercial risk insurance (buyer bankruptcy and insolvency)Commercial risk insurance (buyer bankruptcy and insolvency)Political risk (war, inconvertibility of currency)Political risk (war, inconvertibility of currency)

**** ShortShort TermTerm andand MediumMedium TermTerm InsuranceInsurance PoliciesPolicies

**** MultiMultiBuyerBuyer oror SingleSingleBuyerBuyer PoliciesPolicies


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Avoid Quoting Price without knowing the financing detailsAvoid Quoting Price without knowing the financing details!!

Train your sales team to build your portion of financing costsTrain your sales team to build your portion of financing costsinto the sale. This minimizes eroded margin and is exactlyinto the sale. This minimizes eroded margin and is exactlywhat your foreign competition is doingwhat your foreign competition is doing


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InternationalB

anking at SunTrustInternationalB

anking at SunTrustOffering a full range of international financial solutions to

meet our clients needs including:

International Methods of Payment and Currency RiskManagement to facilitate trade and mitigate

financial risks

Financing vehicles for importers and exporters Established global network of correspondent banks

Focus on high quality service and finding customizedsolutions
