Women in Exporting, Part 2 Global Trade Finance
In episode two of our four part series on women in exporting we listen in on a conversation led by Jessica Gordon, the director of the U.S. Commercial Service office in Dallas-Fort Worth as she talks with Greg Chalkley, executive director, global trade services of Maximum Integrated and Chair of the North Texas District Export Council (DEC) about assisting U.S. exporters grow their business through exporting, she is also joined by Kathy Jiang, Vice President of Global Trade Finance at Regions Bank discussing export financing.
Evan Scritchfield: ES | Jessica Gordon: JG | Greg Chalkley: GC | Kathy Jiang: KJ
ES (0:02): Welcome to Export Nation. This is episode two of our four part series on women in exporting. On this episode we listen in on a conversation led by Jessica Gordon, the director of the U.S. Commercial Service office in Dallas-Fort Worth. She’s joined by Greg Chalkley, the executive director, global trade services of Maximum Integrated, a semi-conductor solutions company and Kathy Jiang, Vice President of Global Trade Finance at Regions Bank.
The views and opinions expressed by the guests of Export Nation are those of the individual themselves, they do not necessarily reflect official policies or positions of the United States Government, U.S. Department of Commerce or any sub agency.
JG (0:52): And greetings from Dallas, Texas. I’m Jessica Gordon your host for today and I’d just like to thank our listeners for joining us for today’s women in exporting episode to highlight trade finance. I am joined by two very special guests today, Kathy Jiang and Greg Chalkley who I’ve had the pleasure to work closely with over the past years. Welcome Greg and Kathy. Greg and Kathy are both members of the North Texas District Export Council and are collaborators for the U.S. Commercial Services’ inaugural Women’s Global Trade Empowerment Forum. Which will take place over six online sessions starting July 28th through September 22nd. We’ll be hearing from Greg in a minute about the North Texas District Export Council and the roles that DECs play in local international trade ecosystems. The North Texas DEC is a founding diamond level sponsor for the forum, so we’d like to thank them for their support of this very unique and inaugural event.
So Greg, please tell us about the North Texas DEC and the roles that DECs play in local international trade ecosystems.
GC (2:04): Thanks so much Jessica for this opportunity to talk about the North Texas DEC. The North Texas District Export Council is one of sixty plus DECs around the nation and we make significant contributions to American international competitiveness. And we do that through bringing together a diverse group of volunteers that are international trade professionals in various regions in North Texas in particular. We contribute to the expertise and compliment the U.S. Commercial Services’ export promotion efforts. We do that through counseling businesses, conducting trade education and doing community outreach. Our primary objectives of the North Texas DEC is to educate the community about free trade and the benefits of free trade, to include education and mostly just to promote exports by companies in our area. We focus on the small medium sized businesses and in particular with this forum we’re concentrating on women owned businesses, which is an area we hope we can increase and promote increased trade and exports from the United States.
JG (3:45): I was going to say that DECs are really important in engaging with companies in the international trade ecosystem and certainly counseling businesses, I think that DEC members work very closely with international trade specialist and certainly trade specialist are able to advise companies on how to develop market entry strategies and how to leverage government resources. I think that DEC members really bring valuable experiences and their expertise to the table, and they can actually counsel and share with companies how they have overcome challenges in certain markets. As many of them either own their own business or they are working for corporations that are very active in international business.
So you mention that in some DECs they focus on specific segments of the export community. How has the North Texas DEC focused on different segments of the export community and particularly women owned businesses in providing support and assistance with international business development and export expansion?
GC (4:52): The North Texas DEC is pleased to sponsor this Women’s Global Trade Empowerment Forum. That’s one of the ways we’re doing it, currently. But we work with any number of export companies or companies that would like to export, and help them in various ways. For example, my company is a manufacturer that does exports and so I can help them with the mechanics of doing the actual exports from a company perspective. But we have people within our DEC that, such as Kathy, who are experts in the financial side of it. We have some that are experts in the logistical side of it, we have some in the marketing and promotion side of it, so we can bring those individuals together to help advise and coach people and companies especially the women owned businesses to get into exporting and maybe if they’re doing it for the first time, giving them a little more assurances of what they can expect and how to do it.
JG (6:15): Absolutely, and DEC members are certainly advisors and coaches for those that have quite a bit of experience when it comes to different subject matters, from trade finance. We’re going to be talking about trade finance today, to maybe international marketing or protecting a company’s intellectual property rights. There are so many different topics.
Now I want to kind of transition to talk a little bit more about trade finance. And Kathy thanks so much for joining us today. I’ve had a chance to work quite closely with Kathy. She’s the Vice President of Global Trade Finance at Regions Bank. She advises her clients on global trade payment methods, risk mitigation and pre-shipment, post-shipment export working capital financing. She also provides customized supply chain financing solutions. Kathy has worked major money center banks for over 20 years in global trade finance.
So Kathy, given the current economic stress, domestically and around the world, what are the most concerns women-owned and women led companies have as it relates to trade finance.
KJ (7:24): Thank you, Jessica. I think because of the pandemic global trade supply chain is not stable. First foreign buyers are delaying orders and U.S. exporters are stacking up inventory. Second, payment risk, no matter if it’s real or perceived is elevated for U.S. exporters. Third, foreign buyers need a longer repayment terms, which strains U.S. exporters working capital. Fourth, U.S. exporters may not have sufficient borrowing base capacity to finance new sales due the recent lack of activity.
JG (8:09): So you mentioned that it’s a really challenging time that companies are operating in. Foreign buyers are delaying their orders, they need longer repayment terms in some cases. With so much that’s taking place what would you recommend to help combat some of those challenges?
KJ (8:29): Sure, I think it’s time to explore the resources available, such as talking to U.S. Commercial Service in your city and your state. They can help companies connect with potential buyers in different countries. As Greg just mentioned, DEC organization has the expertise and lots of the members are specialized in global trade finance or global trade services. So just take advantage of the resources available to you and also talk to your banks global finance professionals, the consultation is free. And here at Regions for instance we utilize EXIM Bank and SBA export working capital offerings to increase working capital supported by export bound inventory such as raw materials, working process and finished goods. Banks can also help companies mitigate risk of non-payment by foreign buyers through trade letters of credit, documented collections and trade credit insurance. If foreign buyers want a longer payment term and you don’t want to walk away from your deal but at the same time you don’t want to strain your working capital, please consider using deferred payment LLCs and credit insurance to extend terms. You can leverage both to create working capital as needed through LC discounting or insured accounts receivable financing at your bank. If your company does not have sufficient borrowing base capacity to finance new sales due to recent lack of activity, while sales start to ramp up you can also consider SBA and EXIM Bank export working capital programs, which allow for the financing of purchasing orders for export sales.
JG (10:32): Wow, that’s some really good information, Kathy. So I heard you talk about, it’s really paramount that companies explore resources that are available to them. So that might be the Commercial Service, or SBA or Export Import Bank of the United States. So as we think about these resources, I’ll mention for the U.S. Commercial Service, you’re right we counsel companies on market entry development and export strategies for companies that are interested in pursuing international sales opportunities or expanding into new markets. And so we have offices in over one hundred cities across the United States. I know that Regions and other banks have worked very closely with the Commercial Service, we also work very closely with the Export Import Bank of the United States, as well as the Small Business Administration. So when we work thorough our domestic offices our international trade specialist they work very closely with exporters on a daily basis and I can tell you that when companies are pursing international sales opportunities or are considering to pursue international sales opportunities or a partnership in a foreign market one of the first questions they as is “How am I going to get paid?”. You mentioned some interesting programs. I heard you talk about the export working capital guarantee program and I think you also mentioned a few other programs that either EXIM Bank or SBA provides. I do understand that both EXIM Bank and SBA offer export working capital guarantee programs. What’s the difference between the two programs?
KJ (12:14): Both programs provide 90 percent guarantee to lenders to support export sales, both programs support bitbond and performance bond, export related AR and inventory. But the program does not protect the borrower against non-payment from buyers so please pay attention to EXIM and SBA country limitations to see which countries and which public private entities they don’t support. In terms of restrictions the SBA has a limit of maximum loan amount of five million and of course SBA is designed to support and help small business. And EXIM Bank has a 50 percent U.S. content requirement and does not support military related sales. Other than that both are great tools to support working capital needs.
JG (13:08): Ok Kathy, so it sounds like there are some key distinctions between those two programs. So if I think about now, and you mentioned how important it is for exporters to try and mitigate risk when it comes to perhaps working with a new partner in a foreign market. Export credit insurance comes to mind. What is export credit insurance and what is it used for?
KJ (13:38): Export credit insurance covers account receivables from foreign buyers due unexpected political events or commercial default. It helps U.S. exporters mitigate export sales risk. So each companies risk tolerance is different, export country, sales cycle, size of transaction is different. If you sell to high risk countries or if you sell to a new customer and the sales size is significant or if you want to beat your competitor and offer a longer payment term, you might want to consider purchasing insurance. Another advantage of having the insurance is you can ask your bank to increase your foreign AR in your borrowing base which is typically excluded in your conventional loan. The insurance premium is based on the country and the coverage. Even if it is a domestic sell you can still purchase credit insurance if you want to sleep well at night. Just like fire insurance we purchase for our house, we never wish our house is on fire.
JG (14:49): Yes, that’s right. We all want to sleep well at night for sure. Kathy I’m just thinking about some of the work we’ve done with exporters and you know we have some exporters who are new to exporting and we work with exporters who are called seasoned exporters who have been exporting for years. I’m just thinking about a scenario where what if I’m a medical device company. I manufacture medical devices and I’ve been selling into, let’s just say the Latin America region for several years, is it necessary to purchase the insurance even though I’ve never experienced non-payment from any of the foreign buyers or partners that I’ve worked with. Is it necessary to purchase the insurance?
KJ (15:36): Actually, according to market practice a lot of the Latin America companies offer an open account which is high risk. In other words, you ship goods first, you get paid after. So you are at the mercy of the buyer to pay you whenever they want to pay you. Even if you offer a term say 30 days or 60 days and chances are those days can be extended longer because you are at the mercy of them paying you. And purchasing insurance definitely give you a comfort level and many of our clients selling to Latin American countries are purchasing insurance to cover their receivables. It’s interesting there are different market practices. If you sell to Asia Pacific you tend to use a letter of credit, when you sell to Latin America you insure AR under an open account.
JG (16:42): Thank you, that’s really helpful. As you think about the various methods of payment, you mentioned LCs, we talked about cash in advance and there are many others. As an exporter, what’s the most secure payment method to get paid while expanding growth?
KJ (17:02): Of course, see if you can ask for cash up front, that’s the most secure way. But it may limit your growth especially when you expand to a new country dealing with an unknown customer or if your sales size is pretty significant buyers don’t feel comfortable giving you cash up front. So the next most secure payment method is a Trade Letter of Credit, also called a documentary letter of credit. It disciplines all the parties to perform and pay in a timely fashion. It helps to mitigate the country and commercial risk concerns and it provides immediate payment for goods while offering attractive credit terms to your buyers.
JG (17:50): That’s very helpful. I think that it’s important for companies to understand what are the various methods of payment available to them and to really take some time to assess what might be most appropriate considering the market they are exporting to and also considering their partner. If it’s a new relationship, if they have worked with this particular partner for quite some time. So it’s important to think about those various considerations.
This is kind of the golden question, Kathy. You have been in the international finance and banking industry for so many years. So the golden question is, what are some nuggets of wisdom that you’d like to share with women entrepreneurs who engage in international business from your years of experience?
AH (18:43): I would just say, lean into trade partners. Like the U.S. Commercial Service and the DEC members like the banks, the lawyers and the freight forwarders. We women tend to be more effective in building teams around us. I would say there are certain markets where it might culturally be more difficult to do business as a woman, be willing to deputize folks to get business done in those markets but at the same time don’t be intimidated.
JG (19:20): Absolutely, I think with so many resources available that helps to kind of limit that intimidation. This has been so helpful. I do want to highlight that Kathy is going to be moderating one of the women’s forum sessions on export finance, financing the deal and getting paid. So if trade finance is not incorporated into your export strategy, as Kathy mentioned you could be missing out on potential sales or expose your company to unnecessary risk. We invite all of our listeners to join the August 11th session at 12 o’clock eastern time to learn about strategies to increase sales and reduce risk and explore case studies on how to offer competitive financing to your perspective customers. I want to thank bot Greg and Kathy for their support of the Women’s Forum and want to invite all of our listeners to learn more about the Forum. It the U.S. Commercial Services’ Women Global Trade Empowerment Forum which will take place on July 28th and the sessions will run through September 22nd. Thanks for joining us today.
ES (20:39): For more information on the upcoming Women’s Global Trade Empowerment Forum, please visit www.trade.gov/womensglobaltradempowermentforum to register your interest and receive event updates.
The International Trade Administration and U.S. & Foreign Commercial Service are temporarily reducing or eliminating the costs of several of their export services, providing relief to U.S. businesses affected by COVID-19. These efforts are intended to encourage the export of non-COVID-19-treatment-related “Made in the USA” products around the world in this moment of economic transition and recovery. For U.S. companies that produce goods or services for export, the USFCS is authorized to reduce user fees and services by up to 100 percent for U.S. small and medium-sized enterprises and economic development organizations, and by up to 50 percent for large U.S. companies. Reduced fees will be provided until September 30, 2020. For more information, please contact your local USEAC or visit us at www.trade.gov
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