With the Right Financial Tools, Your Business Can Expand Overseas
By David Clark
While carving ski turns in the Argentine powder of Las Leñas, pro skier-turned-entrepreneur Stephan Drake was inspired to create a new type of ski. Armed with conventional/heavy traditional skis — the most advanced gear at the time in 1997 —he realized there had to be a better way to ski deep powder.
Working with engineers from Utah’s aerospace industry, Drake and Engineer Peter Turner developed the only pure pre-preg carbon fiber sandwich construction skis in the world and launched DPS Skis.
Because its products are unique to international markets and the ski world as a whole, DPS has made global exporting a key component of its business plan. Today, the company ships skis to 13 countries on four continents worldwide.
Utah’s DPS Skis exports to 13 countries on four continents.
Export Markets Provide Opportunity
Exporting to global markets would have been considered a challenge for a small business just 10 years ago. But thanks to a variety of factors, including technology, almost any business like DPS can export today.
If you’re looking to enter the export arena, first consider these factors:
- How will I pay for start-up costs to begin exporting?
- How will I pay for raw materials and manufacturing costs?
- How will I get paid?
Fortunately, we can help with answers to all of these questions.
SBA Support for Exports
Whether a company is new to export or a seasoned veteran, the U.S. Small Business Administration (SBA) has programs that help banks finance exports.
SBA Export Express guaranteed loan. This type of loan — up to $500,000 — can be used for any export purpose, including market development, attending trade shows or trade missions, securing export licenses and building export inventory.
SBA Export Working Capital guaranteed loan. This program offers financing for production activities up to $5 million. These loans can be secured before finalizing an export sale or contract to ensure that financing is in place after the order is won.
International Trade guarantee loan. This financing is available up to $5 million. For amounts exceeding $5 million, Zions Bank can use its designated authority with the Export-Import Bank of the United States. Funds can be used for acquisition, construction, renovation or expansion.
Idaho’s High Country Fusion was named 2013 Small Business Exporter of the Year for the SBA’s Region 10. HCF has grown its export business with support from SBA-backed financing through Zions Bank.
There are a number of methods by which to get paid on your international sales.
Payment in advance. Ideally, you would receive payment in advance from the buyer prior to shipment, but that typically does not happen, especially if you are competing against other suppliers.
Letters of credit. Under this arrangement, your buyer’s bank will issue a letter of credit in your favor, essentially guaranteeing payment to you if all conditions of the letter of credit are met.
Your bank can help with this process in a number of ways:
- Structuring the letter of credit to get the most protection possible.
- Acting as a collection agent to secure payment from the buyer’s bank.
- Confirming the letter of credit and taking on the risk of repayment from the buyer’s bank.
Letters of credit can enhance your ability to obtain financing, as most banks will not lend against foreign receivables. Securing insurance against non-payment of foreign receivables is another way to mitigate risk.
Hedging. Another key consideration when exporting is whether to price your product in U.S. dollars or local currency. Pricing in local currency will often make the transaction easier for your buyers, making you more competitive and, in some cases, actually increasing your margins. Hedging tools are also available to remove the foreign exchange risks.
Lean on Local Resources
Whether you are a beginner or a seasoned exporter, it’s important to draw on the vast resources available in Utah. World Trade Center Utah is a great source for export assistance.
In addition to providing a full menu of international financing and payment services, Zions Bank’s local international banking team works closely with these entities to help clients achieve success with their international trade endeavors.
|David Clark is Zions Bank’s senior vice president and International Banking manager. A 37-year banking industry veteran, Clark oversees Zions Bank’s trade finance and resources for businesses involved in exporting and importing. He also works with government partners to support trade education and sponsor trade missions.|
Sources: International Trade Administration, World Trade Center Utah.