“I would like to sell your products in my country but I need net90 in order to do it.”
The number one question we get above everything else, all of the terms, codes, shipping details, etc. The number one reason most companies will not export is the fact that they think they cannot get paid, or at least guaranteed payment before they send their product overseas.
“I don’t sell overseas unless it’s cash upfront” That reason can now be debunked:
*If you have a PO in hand for an international client, and you make the product, or the product is made in the US.*
We are here to tell you that not only can you get paid but we can make sure that you get paid upfront guaranteed, signed sealed delivered. Here are three ways of how you do it! Hint: it has a lot to do with who you bank with
Banking Letters of Credit
Possibly the easiest way to make sure money changes hands effectively and efficiently, the letter of credit is the standard by which a lot of non cash-up-front deals are done. Walk into your bank and talk about letters of credit, it will cost you little bit of money but will make sure that your customer does not control the process. The Letter of Credit is a Bank to Bank transaction where the local party does not have control in the process. The Letter of Credit has terms attached to it that will lay out what needs to be done and when, so if any party does not follow through the deal can be canceled (to an extent). Think of it as a first level of safety, you produce the product (50% goes to you), you ship (25% is collected by your bank), they receive the product (25% is collected). So the next step if you bank will not do a letter of credit, immediately walk in and switch all of your accounts to another bank.
SBA Financing
If you bank at a reputable bank in the United States (or in a foreign country you will need to go your local government authority), walk into the branch and ask to speak with the person who handles SBA Loans and Financing. If your banker does not know what that is or does not know who the person is, or cannot produce a name in 24 hours immediately close all of your companies accounts there and go to a bank that has this.
We are serious, if you want to export and export effectively then your banker needs to be a key person in charge of all of the transactions and handling that will go on. They need to have corresponding bank access in foreign markets (another great question to ask by the way) and a way to talk to banks around the world. We really don’t want to harp on banks but you get the picture. The SBA financing through a few programs but we will lean on the SBA Global Credit Express program, basically says that if you have a PO from another country, they can guarantee up to 90% of the PO for you as the company and provide 180 pre-working capital and 180 days post-working capital which means that you can provide (through the pre-working capital) terms to your client of up to net90 to be safe. The program has some simple fees to it but simply saying to a client “if you would like net90 we need to start at 3% higher price (to cover the cost of starting the loan. Again this is the easiest of easy ways to sell. More information here
“If you are selling overseas and not first consulting with the SBA Global Credit Express Program you are starting off 2 steps behind”
Ex-Im Bank (or in a foreign country could be your export credit agency)
Right you hear about this all of the time how bad this is for business doesn’t put everyone on the same playing field, and they couldn’t be more wrong. Ex-Im bank is a larger guarantee program that charges a little more but is also for larger sale values (think anything over $1 million USD and up), you can guarantee sales through this organization and think of it as a protection from the government, if the company will not pay you would they think about stiffing the US government…not really. This program might be out of scope for some smaller companies but worth looking into. More information here
Last thing and keeping this brief…. check the country risk schedule for the country you are dealing with (COFAS) is a great tool to make sure you can actually get insurance and guarantees, markets that have a C- rating or worse you might not be able to get any support so:
BEFORE YOU SELL OVERSEAS MAKE SURE YOU HAVE ALL OF THIS INFORMATION READY TO GO AND THEN SIT DOWN AT THE TABLE TO NEGOTIATE THE CONTRACT.
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