Funds Still Exist for Exporters Who Want Pacific Rim Business
Want to do business around the Pacific Rim? Think the financial troubles in Asia and Latin America make it impossible?
Think again. You can still do business overseas if you play your cards right--and if you understand that the rules of the game have changed.
As detailed in this space last week, one of the new rules is that you must understand the impact of the financial troubles in Asia and Latin America on your overseas buyers. In plain English, your buyers still want your goods, but they don’t have the cash they had a year ago and they need help doing deals with you.
Another rule is that you, too, need help doing your deals.
The good news is that help is available--as Alvaro Villa, president of AVG Inc., a Chatsworth maker of animatronic figures, can attest.
Villa, an inventor and electronics engineer, founded AVG 20 years ago to make computer-controlled industrial robotics. Now he makes specialty animatronic items for theme parks, movies and special events such as the 70-foot dragon that snorts fire and smoke at the Excalibur hotel in Las Vegas.
Before turmoil struck the financial markets of the Pacific Rim, Villa drew as much as 90% of his business from Asia. He does far less than that now, but he expects to see an upturn in the coming months, and in the meantime he has business to do in Latin America.
Villa is a native of Colombia, and he recently contracted with the Colombian Coffee Growers Assn. to build animatronic orchids for a theme park under construction near the coffee-growing town of Armenia, Colombia.
“Normally, because of the uniqueness of what we do, our customers secure payment to us with letters of credit,” Villa says. “Sometimes customers send us payments timed to milestones in the manufacturing process--so much when we reach one point, more when we reach another.
“But in this case, because it’s hard to get letters of credit from banks in South America, we needed help with financing.”
Enter Bernd Hermann, president of World Trade Finance Inc., a lender headquartered in Los Angeles authorized by the Small Business Administration to fast-track applications for export financing.
In two months’ time--a nanosecond for the SBA, as any business owner who has dealt with the agency knows--Hermann approved export financing with an SBA guarantee to allow Villa to close his deal with the Colombian coffee growers.
“The important questions in this transaction,” Hermann says, “were: Could Alvaro make his goods and ship them? And would he get payment for them?
“We knew he could build and ship his goods because he’s been doing this for 20 years,” Hermann adds. “We checked out his buyers and satisfied ourselves that they would pay him for his goods, and we financed the sale even without insurance from the U.S. Export-Import Bank.”
The SBA guarantee was crucial to the deal, Hermann adds. Also crucial was the package Villa and Hermann put together describing the transaction.
In effect, the package offered Villa’s lender a detailed understanding of the ins and outs of the transaction, including the credit and non-credit risks that can make any deal go sour.
The result? Because Villa attended to his lender’s need for comfort in parlous times, he discovered that plenty of export financing is available even to exporters shipping to countries hit by the recent financial turmoil.
The availability of financing comes as a surprise to many exporters who, throwing up their hands in despair over the troubles in the Pacific Rim, have sought new markets for their goods elsewhere in the world, Hermann says.
In recent months, he adds, Southern California exporters have shifted their marketing efforts from the Pacific Rim to Europe and the Middle East, in large part because buyers in Asia and Latin America have no cash.
But the same buyers still want American goods, Hermann says.
“The trick is to get financing,” he says. “I think exporters should step up their marketing efforts, lower prices and prepare to hang on through the slump in the Pacific Rim.
“Alvaro Villa just signed a big contract with buyers in Taiwan--so there is business to be had out there. If exporters have solid contracts with good buyers, lenders will finance them.”
*
How to get financing will be one of the topics addressed at The Times’ Small Business Strategies Conference on Oct. 17-18 at the Los Angeles Convention Center. Columnist Juan Hovey will be featured. He can be reached at (805) 492-7909 or via e-mail at jhovey@gte.net.
