Board Topic: Financing latin american invoices
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Financing latin american invoices

Posted by: Mario Dec 26 2003, 05:22 PM
My company based in Houston sells product in the united states, mexico and south america. The bank gave us a $200k line to finance our invoices, but now that we are selling a lot more to south americe they dont want to lend us anymore money.

My account rep told me that they do not finance invoices to south america. do you know a bank in Houston that does finance latin american invoices?



Posted by: loanuniverse Dec 27 2003, 08:54 AM

Your situation seems like a perfect fit for "Trade financing", specifically Eximbank guaranteed credit.

Normally, A business gets its working capital financing in the form of a "short-term working capital line of credit". These types of facilities are secured by a lien on all the assets of the borrower and can be setup with different types of structures and terms. The most familiar structures are:

The revolving line of credit: where the borrower can draw on the funds as needed, and can then repay them when they have excess funds freeing up more availability.

The revolving Asset Based Lending line of credit: Similar to the above, but offers a higher degree of control for the lender since the amount of money available is subject to a formula that allows for advance rates on accounts receivable and inventory.

Your post indicates that your lender has you on an ABL line, but the problem is that the percentage of your business from overseas is increasing and the lender will not advance on the foreign receivables. First, I have to agree with the lender that lending on foreign receivables is inherently riskier, and that it should be avoided whenever possible. In fact, it is usually written in Bank's credit policies that loans secured by these assets should be avoided.

Having said that, the US Government created an institution dedicated to helping the American Businessman get credit when the object is to export. The Export-Import Bank of The United States . Off the top of my head, there are two programs that could help you get financing for those "Latin American invoices".

1- Multi-Buyer insurance policy This is a policy that the business gets from Eximbank that covers defaults by customers. Once you get the policy, it can be assigned to a lending institution. The fact that those receivables are now insured mitigates the fact that they are foreign.

2- Working Capital Guarantee This is an even more comprehensive product that guarantees the lender that in case your company defaults, the US Government will pay.

The programs are great for business such as yours where a good portion of sales are done to foreign customers. The drawbacks are few, and they include a slightly higher cost in the form of premiums for the insurance and a 1.5% fee for the Working capital Guarantee. In addition, there are some countries to whom the US will not guarantee. Nevertheless, they are a good way to increase businesses access to loans.

Talk to your lender and ask for Ex-Im Bank insured or working capital guarantee facilities. Personally, I think that the borrower benefits from developing a long-time relationship with a single lender. It could be that your lending officer is not familiar with the products, or it could be that the bank does not do these types of facilities. If that is the case, you should consider going to the Ex-Im Bank site learn more about the products and look for lenders in your area.

Hope this helps.


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