Equipment Loans to Foreign Buyers
Richard International secures loans for creditworthy companies in emerging foreign markets who are buying capital equipment from U.S. exporters. Repayment terms up to five years are available at competitive interest rates.
WHY YOU NEED TO OFFER EXPORT FINANCING?
Cash in advance and letters of credit are no longer competitive terms in the international marketplace. Your customers in emerging foreign markets face scarce local capital and high interest rates, making it difficult or impossible to order your equipment without export finance terms being extended from the U.S.
Richard International offers equipment loans for creditworthy buyers located in emerging foreign markets. Your company gets paid in the Europe upon presentation of your invoice and shipping documents, while your customer has up to five years to repay the loan at competitive interest rates and with terms more favorable than those available in their own country.
WHAT SIZES OF CONTRACTS CAN BE FINANCED?
Foreign buyer financing is normally available for export transactions of at least $500,000, although we are prepared to consider smaller deals on a case-by-case basis.
Richard International’s eventual objective is to make this kind of international trade finance available for all sizes of export transactions. In the meantime, for your smaller sales, you can always use Export Credit Insurance to extend shorter (30-180 days) payment terms. There is no minimum transaction size and all kinds of exports are eligible, including capital equipment, spare parts, raw materials, services, etc.
Richard International has no maximum transaction size limit, although export finance for deals larger than $10,000,000 may involve syndications with multiple lenders. Some larger transactions may be eligible for repayment terms longer than five years.
Large corporations, middle-market companies, and small business foreign buyers are all eligible for international trade finance, as long as their credit history and financial ratios satisfy our underwriters’ criteria.
HOW DOES THE FINANCING PROCESS WORK?
STEP 1: Underwriting a deal begins when Richard International receives complete information on your customer and the transaction. Your company will usually be in the best position to obtain this information because of your relationship with your customer, but let us know if we can help.
STEP 2: The export finance underwriting process involves analysis of your customer’s financial statements, review of the credit bureau report and other information provided, evaluation of your customer’s industry and the local economy, and arranging credit and political risk insurance if required. Smaller deals and simple credits may get approved within a few weeks. Other trade finance deals may take longer, depending upon the size and complexity of the transaction.
STEP 3: Once the financing has been approved, the promissory note and other loan documents will be prepared and sent directly to your customer for signature.
STEP 4: As soon as your customer signs and returns all the paperwork, the shipment can take place and your company will get paid in the Europe upon presentation of your invoice, bill of lading, and other required export documents.
Please note that the above steps describe a typical financing process only. Actual transactions may proceed differently from this example.
WHAT KINDS OF BUYER INFORMATION ARE REQUIRED?
FINANCIAL STATEMENTS: Annual reports or financial statements are required for the past 3 fiscal years. Statements must be in accordance with generally accepted accounting principles. Audited statements are required for deals over $1 million. Interim statements are required if the last fiscal year ended more than 6 months ago. The key financial information that will be analyzed includes net income, operating profit, cash flow, liquidity, leverage, and the ratio between the foreign buyer’s tangible net worth and the transaction size.
CREDIT BUREAU REPORT: A report may be supplied by the exporter or the foreign buyer, or it can be purchased through Richard International if not available elsewhere. The report should show that the foreign buyer has been in business for at least 3 years, provide favorable bank and supplier credit ratings, and reflect no significant derogatory information.
BANK REFERENCE: The reference letter must be on bank letterhead and signed. It should briefly describe the history of the bank’s relationship with the foreign buyer and include complete details of any borrowing facilities and credit experience.
PERSONAL GUARANTEE: The personal guarantee of the foreign buyer’s principal shareholders is required for companies with annual revenues less than $50 million, unless the foreign buyer is a publicly-traded company. Personal financial statements are generally not required.
ADDITIONAL INFORMATION: It is always helpful to include a brief explanation of why the foreign buyer is acquiring the equipment. All parties are encouraged to provide any information which will enhance the underwriters’ review of the foreign buyer’s creditworthiness. If a foreign buyer offers a cross-corporate guarantee from a (related or unrelated) foreign company, the guarantor will need to satisfy the same credit standards as those applied to buyers. Credit and financial information are generally not required for top foreign banks or sovereign government buyers/guarantors.
Please note that the above list of information requirements applies to a typical buyer financing application only. Actual applications may require more or less information on the buyer, the exporter, the equipment, and/or the transaction.
OUTLINE OF A TYPICAL BUYER FINANCIAL QUOTATION
Exporters, importers, and investors can insure against cancellation of import or export licenses, as well as embargos, boycotts, sanctions, or decrees which could result in business interruption, non-payment of invoices, or other losses.
WRONGFUL CALLING OF GUARANTEES
(1) WHAT CAN BE INCLUDED IN YOUR INVOICE? Your total invoice amount can include the price of the capital equipment, shipping costs incurred by your company, charges for services performed by your employees, and some other types of costs. Import duties, local taxes, and other costs originating in your customer’s country cannot be financed in most cases.
(2) COLLECTING CASH DOWNPAYMENTS: The net amount financed will equal your total invoice amount minus any cash downpayment you have received from your customer. Some deals may not be eligible for 100% financing. For example, Ex-Im Bank’s maximum is 85% so for most Ex-Im Bank deals your customer will need to remit a 15% cash downpayment to your company prior to shipment.
(3) EXPORT CREDIT & POLITICAL RISK INSURANCE: Financing will be extended to some foreign buyers or countries only if the deal is underwritten with export credit insurance, political risk insurance, and/or other guarantees or credit enhancements (which will be arranged by Richard International if required). Premium rates vary from deal to deal. The premium cost is typically added into the total amount financed so it can be amortized over the repayment period.
(4) REPAYMENT PERIODS: The maximum repayment period is usually five years for new equipment, three years for used equipment, and two years for foreign buyers who are resellers and not the end-users of the equipment (with written evidence of comparable terms being extended by the reseller to the end-user). Payments are typically semi-annual, in arrears, with the first one due six months after delivery. Somewhat longer “grace periods” may be available for turn-key installations and similar projects.
(5) INTEREST RATES: Interest rates are typically calculated as a fixed spread over the 6-month London Inter-Bank Offered Rate (LIBOR), adjusted semi-annually during the repayment period. Fixed rates (for example, based on like-term or average-life U.S. Treasury Note rates) may be available in some cases.
(6) LOAN FEE: A loan fee covers the costs of arranging and administering the loan. It is payable by your customer via wire transfer prior to shipment and funding. If your customer prefers not to pay the loan fee in advance, it may be possible to add the amount of the loan fee into the total amount financed so the fee can be amortized over the repayment period.
Please note that the above quotation outline is a non-binding indication of financing parameters only. Complete terms and conditions are set forth in financing documents.