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Take advantage of your bank in pursuit of export happiness

Take advantage of your bank in pursuit of export happiness. 2013 Winter Legislative Conference February 11, 2013 . Need money, what for?. To fulfill export purchase order(s) - Project based To find a bridge financing between the trade cycle of A/R, inventory and A/P – asset based

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Take advantage of your bank in pursuit of export happiness

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  1. Take advantage of your bank in pursuit of export happiness 2013 Winter Legislative Conference February 11, 2013

  2. Need money, what for? • To fulfill export purchase order(s) - Project based • To find a bridge financing between the trade cycle of A/R, inventory and A/P – asset based • To buy capital (fixed) assets – long-term investment • To finance market development and other reasonable general working capital • Start-up costs (including R&D)

  3. Interview your banker • Comprehension of international trade • Bank’s international infrastructure • Does your bank look beyond the figures • Unspoken rules

  4. Organized in 1976 as First Women’s Bank of Los Angeles • Full service commercial bank that is known for customizing solution for clients • Specialize in EXPORT FINANCING and COMMERCIAL REAL ESTATE • Export: EXIM WCGP, Insured A/R Fin.; SBA EWCP, Export Express, ITL • Domestic: SBA CAPLine, 7A, Business Equity • CRE: SBA 504, Conventional lending as low as 3.98% for OCP • Nine branches/LPO throughout the West Coast • GBC International Bank was Named as Western Region Lender of the Year by EXIM Bank

  5. EXIM Bank and SBA • EXIM Bank Working Capital Guarantee Program • EXIM Bank Medium/Long-Term Financing Program • Insured A/R Line of Credit (with Enhanced Assignment) • SBA Export Working Capital Program • SBA ExportExpress Program • SBA International Trade Loan

  6. Benefit of government guaranteed loan programs -Fulfill export sales orders -Turn export-related inventory and accounts receivable into cash -Cost reduction -Finance Bid and/or Performance Bonds -Increase advance rate -Level the playing field -Due diligence from the bank may be the seal of approval your investor(s) needs to see

  7. Export Working Capital Program • Transaction Specific • To finance one-time identifiable transaction • Transaction Specific Revolving • To finance multiple identifiable transactions • Non-Transaction Specific Revolving • To finance general export-related A/R and export-related inventory

  8. Case Study (Transaction Specific) • A Mexican utility company placed order to install inlet air cooling system on gas turbine for $4 million • Cost to the US exporter is $2 million for the transaction, which includes $1.5 million raw material, $400K manufacturing costs $80K engineering & $20K installation. Production time is 8 month. • Due to competition, 10% down payment. You get a 60-day Term L/C for remaining 90% of payment. • Transaction requires 10% Standby L/C as performance bond

  9. GBC comes to the rescue Solution: L/C service • Advising and negotiation of $3.6 million commercial L/C • Issuance of $300K standby L/C Export Financing • $3,240,000 12-month EXIM LOC for both pre-shipment financing on the 75% of cost and post-shipment financing on 90% of L/C-proceed • $300,000 12-month EXIM LOC to finance the issuance of performance bond. Bank will require at least 25% of face value of the standby L/C in collateral (10% with EXIM approval)

  10. Case Study (Transaction Specific Revolving) • A scrap metal export trader has a buyer in China that consistently orders once a month for $500K supported by sight L/C issued by Bank of China • COGS is $440K/order. Shipment is once a month. Exporter buys the scrap metal from scrap yard with $40K due at the time of placing order, the remaining $400K is paid prior to loading • This exporter is also looking to buy a metal processing machine valued at $1 million, but only has $200K

  11. What if you don’t have $440K Solution: L/C service • Advising and negotiation of $500,000 commercial L/C on monthly basis Export Financing • $330,000 12-month SBA EWCP for pre-shipment financing on the 75% of cost • Bank will disburse $30K to pay the scrap yard at the time of placing order. Then advance another $300K prior to loading the container. Exporter just need to come up with $110K prior to shipment • Bank structures an SBA International Trade Loan for $800K

  12. Case Study (Non-Transaction Specific Revolving) • VOS Inc is a manufacturer of cosmetic products and exports 100% of its products to 20 foreign distributors, orders are placed each month, $10K per order (Total $200K) • The company consistently maintains $450K in inventory and $200K in A/R with 30-day term. Distributors demand 60-day term or will switch to another supplier, but will buy more with 60-day A/R term. • VOS estimates A/R will increase to $500K with 60-day term, and inventory level will also raise to $550K. But VOS is cash restrained from meeting the demand of distributors.

  13. Don’t panic, get financed Solution: Export Financing • As a 100% exporter, borrower gets the maximized borrowing capacity on it’s assets (eligible A/R and eligible inventory) • At maximum advance rate of 90% on eligible A/R (90% of $500K = $450K) and 75% on eligible inventory (75% of $550K = $412.5K), Bank can lend up to the combined borrowing base of $862.5K. • Monthly borrowing base will fluctuate. GBC may suggest a $1 million EXIM LOC, providing some cushion should additional loan advance is necessary.

  14. Contact Information (WWW.GBCIB.COM) • Kelly Chiou, AVP & Commercial Banking Officer(206) 219-0236 kchiou@gbcib.com • DouangNonthaveth, AVP & Commercial Banking Officer(206) 219-0263 dnonthaveth@gbcib.com) • Annie Pan, EVP & Chief Marketing Officer Edward Tang, VP & Trade Finance Officer (626) 243-1180 apan@gbcib.com(626) 243-1183 etang@gbcib.com

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