Accounts Receivable Financing: Exporting to Africa

Several agencies of the US government support departments that have mandates to help you increase your export sales and minimize risks with regard to the sales of products and services to Africa. These departments exist within US agencies such as the Export-Import Bank of the United States, the Department of Commerce, and the Overseas Private Investment Corporation. All are supported by a relatively recent law called: The African Growth and Opportunity Act. The African Growth and Opportunity Act (AGOA) was signed into law by President Bush on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.

The African Growth and Opportunity Act (AGOA) has been modified three times to increase exports to Africa. 

In the first modification, AGOA was changed in to substantially expand preferential access for imports from beneficiary Sub-Sarahan African countries in several ways: 1) The term “fabric” was previously interpreted by U.S. Customs as excluding components that are “knit-to-shape” (i.e. components that take their shape in the knitting process, rather than being cut from a bolt of cloth); now knit-to-shape apparel will qualify for AGOA benefits. 2) The definition of hybrid cutting was broadened to include cutting of fabric in the U.S. and/or AGOA countries. 3) The volume cap on duty-free treatment for apparel made from fabric made in AGOA regions or, for lesser developed beneficiary countries from fabric made anywhere was doubled. 4) Botswana and Nambia were specially designated as less developed countries.

In the second modification, AGOA’s periods for preferential treatment for African imports to the US were expanded. 

In the third modification, known as AGOA “1V” was expanded and liberalized again. In essence, US laws were created to increase US exports to Africa and imports from Africa to the US. 

Pursuant to AGOA the US organized a U.S.-Sub-Saharan Africa Trade and Economic Forum hosted by the Secretaries of State, Commerce, Treasury, and the U.S. Trade Representative. The Forum serves as the vehicle for regular dialogue between the United States and African countries on issues of economics, trade, and investment. This fosters a unique cooperation between US agencies, African countries, and US businesses that desire to increase export sales to Africa with minimal risk.

How does this work? It involves the Export Assistance Centers of the US Department of Commerce to assist you with your marketing and sales efforts to Africa and financial support from the Export-Import Bank of the United States to Banks that participate in and finance the export of goods and services to Africa in a variety of programs. 

The Export Assistance Centers are part of the U.S. Commercial Services which is the trade promotion of the International Trade Administration (a part of the US Department of Commerce). Their mission is to provide 1) market research in the form of country specific commercial guides; 2) industry sector analysis; and 3) internal market insight reports. They provide trade counsel and advocacy through every step of the export process. They sponsor trade events that promote your product or services to qualified African buyers. They provide introductions to qualified buyers and distributors. They will help settle disputes and negotiate tariff issues. Once described as “glorified matchmakers” they will go as far as possible to help you export safely to Africa- even to the US Ambassador to facilitate these objectives, if appropriate. 

And they help with the nuts and bolts of exporting to Africa such as setting up meetings for you with up to 5 prospective buyers per day, selecting drivers, translators and hotels. When you go to Africa to sell your goods or services you will not be making a cold call; you will be meeting with pre-qualified people when you participate in this program- all at a nominal cost to cover the agency’s expenses. 

It is necessary for you to actually travel to Africa and meet face to face to successfully export to Africa. This is a cultural necessity. African businesses do not operate like American businesses where we trust negotiations conducted over the telephone and internet, and often transact without ever meeting the buyer or seller.

What exports are needed in Africa? You can read the research reports to find out specifically what is in demand. At the top of the list you will see products that purify water. Africa has a huge water infrastructure need. There is also a great interest in security related devices such as high tech devices to prevent theft of vehicles and increase recovery of stolen vehicles. Textile manufacturing equipment and telecommunications equipment also head the lists. Certain medical devices are also in demand. 

What are some of the challenges regarding creating or increasing your export sales to Africa? It is difficult to qualify buyers; there are limited credit reporting facilities in Africa; African companies’ auditing and accounting systems are not “world class”. And it is difficult to ascertain who will actually pay as promised in you negotiations. To minimize these risks it is prudent to work with the Export-Import Bank and their correspondent banks and insurance brokers for international trade transactions to Africa. 

There are specific Export-Import Bank standards for short-term and medium term credit; these may be located on their website at exim.gov. Financing guarantees and insurance are available for short term financing in 44 Sub-Sarahan African countries. They facilitate more competitive terms for African buyers. After the US correspondent bank has reviewed and approved you for financing, you can use these guarantees and insurance to minimize your accounts receivable financing risk when extending credit to African buyers. This applies to transactions wherein you have successfully delivered your products or services to African purchasers. 

Unfortunately, there presently is no way to insure against contract frustration, also known as transactional risk. In other words, you take the risk of default if a prospective African buyer cancels the transaction before it is completed. You are at risk regarding disputes such as delivery or product specifications until they are resolved. And you cannot avoid devaluation of currency as a political risk either. 

On the other hand, commercial risks such as insolvency, bankruptcy and protracted default are covered risks utilizing these programs; also covered are political risks such as war, revolution and insurrection.

The bottom line: you can use accounts receivable financing to export to Africa to increase your sales, minimize risks, and increase your working capital when you work with the appropriate US agencies, their correspondent banks and insurance brokers.

Copyright © 2007 Gregg Financial Services

Sell Your Home in a Slow Real Estate Market

Inventories of homes for sale are up and sales have slowed. Selling a home in today's market requires effective strategies.

Below are several strategies that can make help to differentiate your property from others on the market and make the difference between having a property 'For Sale' and getting it 'SOLD.'

Price Your Property to Sell - Pricing your property realistically is crucial. The current market and market conditions determine the value. In a slow market, buyers are reluctant to even take a look at properties that are overpriced. A property attracts the most attention, excitement and interest from potential buyers when it is first listed on the market. Overpricing at the initial listing misses out on this peak period and may result on your property 'sitting' on the market.

Offer Incentives to the Buyer - Follow the lead of home builders by offering incentives to the buyer. Make the offer appealing to the buyer - '$10,000 Design Credit at Closing,' or 'We'll make your first four mortgage payments' are two examples of incentives that will catch the eye of prospective buyers.

Consider Owner Financing - Many home owners have built up considerable equity in their homes over the past several years. Offering attractive owner-financing may entice investors and other buyers to consider a property that they may not otherwise consider.

Cultivate Curb Appeal - Some of the best buyers in a slow market are the most impatient because they need to make a decision fast. Your home has only one chance to make a great impression with a potential buyer. If the view from the front of the house turns them off, they might not look any further.

Cleanliness - One of the most important factors is cleanliness. The idea is to present a clean, clutter-free environment. Make you property sparkle with cleanliness to avoid being instantly eliminated by buyers.

Hire a Full-Time Realtor® With A Strong Internet Presence - A slow market requires an aggressive, full-time Realtor®. Find an agent that specializes in your area and has a track record of getting properties SOLD. Make sure your Realtor® has a detailed marketing plan for the property and has a strong Internet presence. Eighty percent of today's home buyers begin their search on the Internet. A quick search of GOOGLE, YAHOO or MSN for 'your area or neighborhood' + 'real estate or homes' will reveal those agents in your area that have the most Internet exposure.

About the Author

John Allen a Realtor and broker of Allen Real Estate Services, Inc. He specializes in fine Sarasota real estateincluding luxury homes and condominiums.

Accounts Receivable Financing- Bueno!

According to Wordreference.com English to Spanish dictionary, the Spanish word “bueno” has about seven meanings: good, kind, well, nice, considerable as in a considerable amount of money, gorgeous and real. As used in this article bueno is used to suggest that if you are in the import or export business, Mexico is a good country to consider with special opportunities for U.S. traders and financing available in the form of accounts receivable financing. Your business can make a considerable amount of money in Mexico.

Mexico has a population of over 103 million people. In January, 2007 U.S. exports to Mexico were over $10.7 billion dollars and imports from Mexico to the U.S. were over $15.3 billion dollars. Products traded included food, beverages, tobacco, lubricants, manufactured goods and machinery. Many U.S. companies have production and assembly operation in Mexico to meet the challenges of global competition with Mexico’s lower labor, utility and overhead costs. Compared to China, Mexico presents less geographic logistical problems with our common border and relative proximity. Mexico has a highly skilled and hard working labor force. The Mexican legal system, however, is quite different from U.S. law where we have a Uniform Commercial Code which has been adopted by all of the U.S. States to regulate commercial finance transactions. Enforcing agreements in Mexico can be problematic. Litigation can drag on for years and judgments are difficult to enforce. 

Mexico has a highly evolved and organized legal system. It was originally based on Greek, Roman and French legal systems; today it more resembles a Latin American country’s legal system than the U.S. legal system. Mexico has vast layers of administrative law and a limited body of case law, or “jurisprudencia definida”. Mexican law now recognizes a variety of security devices which allows commercial finance lenders to offer accounts receivable financing with reasonable certainty. To participate in Mexico’s marketplace, it is wise to have a Mexican legal counsel as a part of your team.

One unique Mexican program is the Maquiladora concept and its privileged status. Maquila operations involve the importation of foreign merchandise into Mexico on a temporary basis, where it is assembled, manufactured or repaired and then exported back to the U.S. or to other countries. The advantages of maquila operations are savings in operational costs, waiver of import duties, opportunities to sell goods in Mexico and other legal and tax advantages that are beyond the scope of this article. Mexico’s maquila industry is a multi-billion dollar industry in the U.S. - Mexican border. These laws are business friendly and many small and medium sized firms have increased their profit margins by manufacturing in U.S.-Mexico border cities.

One example is a fine furniture and wrought iron fabricator based in California that was having financial difficulties because of high labor costs and increasing worker’s compensation premiums. These costs were cut in half by moving production to a maquiladora. Their exponential growth from 30 to 100 employees more than tripled their production and profits. Their sales contracts specified net 60-day credit terms but actual payments collections were closer to 90 days. Accounts receivable financing facilitated the company’s rapid growth by providing liquidity from the purchase of the receivables by a commercial finance company at a discounted rate. Without this cash flow, the company could not have taken advantage of their sales opportunities or produced their products fast enough. 

The Mexico factoring financing process is similar to accounts receivable financing in the U.S. A finance company advances about 80% of the face value of the receivable to business owner. This cash is used to pay for materials, labor and overhead. When the invoice is paid to the commercial finance company, their fees are deducted and the balance is returned to the business. In general, a 25% profit on the merchandise is necessary for the financing to make sense.

The bottom line: for U.S. importers and exporters Mexico offers many opportunities for successful business operations. Accounts receivable financing and maquiladoras may enhance their profits. Bueno! Business in Mexico is good. 

Copyright © Gregg Financial Services
www.greggfinancialservices.com 

7 Ways to Get Financing For Your Home Business

Thinking about starting a home business? Do you already own a home business but need cash? Perhaps you can qualify for a small business loan. 

However, before you attempt to borrow any money, you first have to figure out how much money you need. The easiest way to do this is by putting together a business plan. A good business plan is critical to your business success. 

It can be a simple one page outline or it can be many pages, but it should spell out exactly how much money is needed and what it will be used for; your potential market and customers and potential for growth; what makes your business unique from others; and a rational and conservative projection of your business's cash flow. 

Your plan will also help you set business goals and define the steps necessary to help you reach those goals. It is a guide for you to refer to on a regular basis to help evaluate your business progress and help keep you focused on your priorities. 

Besides, a business plan is almost always required when applying for a bank loan. If you need assistance in writing a business plan, your local library should have several 
books on the subject. You can also try Amazon.com. In addition, you should be able to get help on writing a business plan from one or more of the sources listed below: 

1. The Small Business Administration (SBA) offers numerous loan programs to assist small businesses. It is important to note, however, that the SBA is primarily a guarantor of loans made by private and other institutions. 

http://www.sba.gov  


2. The Service Corps of Retired Executives (SCORE) is a volunteer management assistance program of the SBA that provides one-on-one counseling, workshops, and seminars. SCORE has chapters throughout the country. Many work in conjunction with local Chambers of Commerce. SCORE and Visa have also joined forces to help home-based and small business owners. Contact your SBA office, local Chamber of commerce, or the following websites for more information: 

http://www.score.org  

http://www.visa.com/smallbiz  


3. Talk to your local bank. Find out what they require for a business loan application and also if they are participants in the SBA loan programs. Be diligent and shop around for the best loan packages, and make sure you fully understand the terms. 

4. You may be able to borrow from insurance policies, IRAs, 401k, stocks and securities, etc. Check with your insurance agent. Also, investigate what the policies are regarding borrowing from your mutual funds or retirement account. Before borrowing, make sure you fully understand the pay-back terms and any potential penalties. 

5. Apply for a home equity loan. Borrowing against the equity on your home is permitted in all states except Texas. Just make sure you're diligent about paying back the loan or you could end up losing your home. 

6. If you're a woman, you may be eligible for a Specialty Loan. These types of loans are now being offered by local banks. Who knows? Filling out a one-page application just might get you an unsecured credit line or loan ranging from $2500 to $50,000. 

7. Try borrowing from family members and/or relatives. If you have a good relationship with your family, perhaps you can make a persuasive argument for them to loan you money for your home business. Just remember, borrowing from family or relatives shouldn't be treated any differently than borrowing from a bank. It's just as important to pay them back on time as well.

Accounts Receivable Financing- Secrets

The Merriam-Webster Online Dictionary defines “secret” as:

“1 a: kept from knowledge or view : hidden b: marked by the habit of discretion : closemouthed c: working with hidden aims or methods : undercover d: not acknowledged : unavowed e: conducted in secret 2: remote from human frequentation or notice : 3: revealed only to the initiated : esoteric 4: designed to elude observation or detection 5: containing information whose unauthorized disclosure could endanger national security".

As used in this article, secret means: revealed only to the initiated; kept from knowledge or view; and designed to elude observation or detection. 

The first secret- “revealed only to the initiated” relates to the fact that most schools, even business schools, do not teach the subject of factoring or purchase order financing; most banks do not offer these financing facilities as products. Therefore, it is not surprising that many businesses are unaware of the cash potential that lays dormant in their business invoices.

Let’s suppose you own a small to medium business and you depend on customers paying invoices within a 45-60 day period for your working capital. In essence, you are extending credit like a bank to your customers. For that period of time your cash is tied up in your invoices- your accounts receivable. This limits growth and may create problems regarding meeting payroll and paying your suppliers. Accounts receivable financing is the process of selling your invoices for cash as soon as they are issued which allows you to make more effective use of your assets. Purchase order financing is the process of obtaining a third party commitment to pay your suppliers as soon as products are received by your clients (in advance of payment by you or your client), based on the surety of an accounts receivable financing arrangement.

All businesses are limited in their growth and profits by the amount of capital and cash flow available to take advantage of business opportunities. The availability of virtually unlimited cash creates a powerful paradigm for potential growth. It also can expand your thinking about what business is possible and how you might go out and develop new business.

The second secret- “kept from knowledge or view” relates to the practice of non-notification factoring. Some business people are concerned that working with a factor, an accounts receivable financing company, may not be viewed favorably by their customers. In many cases it is possible to structure a transaction legally so that the accounts receivable financing is transparent to the ultimate customer. 

The third secret- “designed to elude observation or detection” has to do with your business plan and how the way you think about the world can affect your success. In 2006 Prime Time Productions produced a film and a book called “The Secret”. The film dramatically describes the “Law of Attraction” which asserts that people’s feelings and thoughts attract real events in the world into their lives. Can your feelings and thoughts attract more business and success? Is the visualization of what you want an aid for manifesting your business goals? Is The Secret “just a new spin on the very old (and decidedly not secret” The Power of Positive Thinking (a book by Norman Vincent Peal written in 1952) wedded to ‘ask and you shall receive’ -as opined by Karin Klein, editorial writer for the Los Angeles Times? Did The Secret fail to discover the real roots of powerful thinking?

In the book, “The Diamond Cutter”, Geshe Michael Roach examines The Budda on Managing your Business and your Life. Roach graduated from Princeton University with honors, studied the ancient wisdom of Tibet and traveled to the Tibetan Lamas at the seat of His Holiness, the Dalai Lama. In 1983 he took the vows of a Buddhist monk.

His teacher encouraged him to enter the world of business. Mr. Roach choose the diamond business. He hid the fact that he was a monk and maintained a façade of a normal American businessman on the outside. The business developed from nothing to a one hundred million dollar per year business. 

The original book, “The Diamond Cutter” is the “oldest dated book in the world that was printed rather than being written out by hand. The British Museum holds a copy that is dated A.D 868.” It is a written record of Buddha teachings from over 2,500 years ago. In brief, the central principles are: 1) business should be successful and make money in a clean and honest way; 2) you should enjoy the money and stay in good health; and 3) you should be able to look back ay your business and say your years of doing business had some meaning leaving some good marks in the world. I highly recommend “The Diamond Cutter” vs. “The Secret”. 

The bottom line: accounts receivable financing and purchase order financing may be the secrets to your business’ financial success. If you read and follow the principles of “The Diamond Cutter” you can expand your opportunities for exponential growth based on the 2500 year old teachings of Buddha, as explained by Mr. Roach.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com  

Accounts Receivable Financing- The India Connection

India is one of the oldest civilizations in the world. Their history goes back over 10,000 years. India is the largest democracy in the world. As of July, 2007, the Central Intelligence Agency for the United States Government estimated that the population of India is over one billion, one hundred twenty nine million people. In contrast, the population of the United States is estimated to be a little over three hundred two million people. That’s 129,000,000 versus 302,000,000 people; India has over four times the population of the U.S. in a geographic area lightly more than one-third the size of the U.S. 

India has the third largest economy and the second fastest growing economy in Asia. It has a vast pool of professional talent and an enormous reservoir of intellectual capital with a growing middle class. 

India’s dense population creates economic opportunities and pressing internal social problems such as overcrowding, environmental degradation, poverty and social unrest. The economy and society are in a state of rapid transition. There are pressing environmental issues because of overpopulation such as air pollution from industrial effluents and vehicle emissions, water pollution from poor sanitary conditions and soil erosion. 

According to the World Bank, about 380 million people in India live in poverty on less than $1 a day; this is about one-third of the population. Nevertheless, middle and upper class Indians have created immense wealth in an economy bursting with opportunities. India’s business climate is changing rapidly. 

This social paradox is in some ways similar to the controversy in the U.S. over big box stores and their effect on smaller retailers. The same issue is debated in India regarding Western style supermarkets versus mom and pop stores. India has a child labor problem; the U.S. has a problem with illegal immigrants who tend to take the lowest paid jobs in the U.S., performing jobs that most legal Americans do not want to do. We live in a world of conflict, change and opportunities.

There are 14 official languages in India. Hindi is the national language. English is a secondary language used for national, political and commercial communication. India is the largest English speaking nation in the world. India’s legal system is based on English common law. 

India’s economy is growing over 10% per year with a labor force of more than 500 million people. The Indian retail sector is growing at a rate of 47% per year. Manufacturing is expanding. There are large numbers of well educated people skilled in the English language. Today India is a major exporter of software services and software workers. Other major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining and machinery. 

In 2006 India exported over $123 billion dollars of textile goods, gems and jewelry, engineering goods, chemicals, leather items; only 17% were exported to U.S. partners. Imports the same year were $184 billion dollars; less than 6% of this import business originated with U.S. partners. 

What does this all have to do with accounts receivable financing? The expertise of a commercial finance company can be invaluable with regard to helping you succeed in India’s enormous marketplace. If you want to export goods to India, a commercial finance company will check the credit of the business in India that you are selling to; this can facilitate capital for exponential growth to creditworthy customers. If you want to import goods from India, purchase order financing combined with accounts receivable financing can help you to achieve the same goal of increasing cash flow to grow your business.

Albert Einstein said: “We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific discovery could have been made”. Mark Twain said: “India is the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grand mother of tradition. Our most valuable and most instructive materials in the history of man are treasured up in India only”.

The bottom line: India is a land of great problems and great opportunities. Accounts receivable financing combined with purchase order financing can help you succeed in this vast democratic, English speaking marketplace.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com  

Factoring Government Receivables- Checkmate

In the game of chess, the term checkmate, according to MS Encarta means:

1) winning chess position: in chess, a condition or position in which a player’s king cannot escape check and the other player wins the game.
2) Chess move that ends game: in chess, a move that produces checkmate, or a game that ends in checkmate.
3) Complete defeat: a situation of defeat or deadlock.

As used in this article the analogy of the game of chess is meant to convey two different ideas: A) the idea that the government, and the government contract you are competing for, is the king. You and your competitors are in a real life game to win the contract. A checkmate is a complete defeat of your competitors; and B) the word “mate” is commonly used to refer to a skilled person’s worker, friend, as a term to address somebody. The idea is if you want to win the government contract it is wise to check (mate) and recheck (mate) the government specifications, and last but not least, have the financing in place pay for the labor and material required to deliver the product or services required. 

Here is a real life example: The owner of a factory manufactured plastic and cloth protection cups for construction workers that were designed to protect elbows and knees from harm. The Federal Government announced a Request for Proposals for the manufacture of protective elbow pads and knee pads for the armed forces that were very similar to the owner’s product. With minor modifications to the design specifications for the pads the factory was capable of making the military products. 

There were two major problems. The quantity of pads required to meet the performance specifications would require the factory to triple production and run three shifts twenty four hours a day. Since the government would not pay for the product for 30 to 60 days after receipt and inspection, how could the owner have sufficient cash flow to pay for labor and materials immediately at a level three times above the current cash flow?

The solution was to factor the government receivables to a commercial finance company. Pursuant to the Assignment of Claims Act of 1986 companies can have access to unlimited capital by selling individual invoices based on the credit of the U.S. government. Factoring government invoices allowed the company to be paid in days rather than to wait months. The contract to factor government receivables to a commercial finance company helps your company win a government Request for Proposal because it substantiates the functional specification that the work will be performed on a timely basis. In other words, a commercial financing contract helps to prove that the manufacturer has the financial wherewithal to perform on a timely basis. This is the financial part of how to checkmate your competitors.

A typical finance company contract should state: ABC finance company agrees to purchase obligations of which are of the United States of America, including without limitation the General Services Administration, the Departments of Education, and the Obligor: is (a) the United States of America or an executive, legislative, judicial, regulatory or administrative agency, authority or instrumentality, Health and Human Services, Housing and Urban Development, and Transportation, or (b) a State, or (c) local government entity. 

Here are a few tips on how to check “mate” and make sure you get paid after you have won the contract. Pay close attention to administrative and billing instructions. Always submit your invoice to the stated paying government office and invoice promptly. If there are modifications, work with the commercial finance company for funding increases if necessary or if there are changes in payment instructions. Keep a log of all communications. Maintain complete records of the entire project. Use the governments order number for tracking for all parties, your company, the finance company and the ordering government agency. Be aware that the US government fiscal year is from October 1st through the end of September. 

The bottom line: if you want your business to grow exponentially and win in he game of government contracting it may be wise to factor government receivables to checkmate your competition.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com