The desire for success in any endeavor requires making choices. The reason is simple: not choosing means all alternatives are equally important. Therefore, all alternatives must be given equal resources and attention. Were we endowed with unlimited resources and unlimited time, this is not a problem. Reality is different.

But choosing is difficult for two reasons: first, choosing involves taking risks because the choice can be wrong. Second, choosing means knowing the alternatives from which to choose. Absent either one, no choice is possible. Hence, success is dependent entirely on luck. Yet, not choosing is a perennial problem among exporters. It is far simpler to do everything that comes along. Or choose a prescribed path, one that others have followed. At best, this means achieving no more than what your competitors have already achieved; at worst, achieving what you did not want in the first place. Like people, each business is different, with unique needs and desires.

To illustrate the point, lets start with the most important issue: having an objective. Consider that you may want to export for a quick profit, to rid yourself of surpluses, to counter a temporary lull in the domestic market, or even that your interest as an exporter is simply to get tax breaks for world travel. On the other hand, you may be considering export markets for the long term. Thus short-term gains are less important than permanent engagements, market-share is more important than immediate profits, and cash-flow stability is more important than a few quick deals. An objective is a matter of choice based upon the needs of the business or its proprietors. There is no wrong and right answer as long as appropriate needs are satisfied.

As with a seed that grows a tree, the objective grows all other actions. And, it is against the objective that one compares success or failure. Imagine yourself as an exporter whose primary interest is world travel. If you follow the standard path of hiring the services of an export management company who handles the entire export program, you will end up staying at home. Even if your sales increase in export markets, how will you measure your success or failure? For a more business-oriented example, consider that the intensity of competition at home means you must establish a stable customer base overseas. How will you measure success or failure if you make a one-time bonanza by unloading your warehouse to a trading company? In each case you are exporting and failing at the same time.

Assuming the case is made for setting objectives, how do we go about defining them and then selecting the right one? There are two categories of considerations: internal and external. Internal considerations are primarily vision, competency and resources; external considerations are competition, environment and institutions. Each of these will influence the objectives selected. Among these the two often misunderstood are vision and institutions. Vision is either deeply felt or clearly written for all to see. It is the highest aspiration of the organization. The export objectives must logically support this vision. If they do not, the export program is superfluous or eventually abandoned.

Institutions include the industry the company is in, the network of suppliers and customers, the governments, the protocols and rules of how business is conducted. If the environment is the terrain on which the game is played, institutions are the relationships of the players. The export objectives must account for these relationships, their strength or weakness and the relative importance of each to the export endeavor. For instance, the support from the government can be an important factor, as can the structure of the industry - whether or not it is global in nature. Exporting then can either be a matter of survival or simply easier as customers are already present overseas.

The other four considerations, competency, resources, competition and the environment (or the larger influences on business, both at home and abroad) are obvious. Each must be considered to define realistic objectives. Competency means the ability to engage in international markets, resources are the budgets and staff devoted to the export venture, the level of competition dictates the effort and sacrifices it will take to win customers, and the environment will either impede or support the export enterprise. When taken together, the right approach to serve the company for the present and the future will become apparent.

Finally, the export objectives must be holistic. They must be in harmony, or better, complementary, with other company objectives that concern the home market. Conflicts with these will hurt the company and, given the importance of bread and butter, the export program will be sacrificed before other programs.

It must be obvious, that setting of export objectives will require some thought and intelligence. That is how it should be. Export ventures are expensive and the effort demanding. Scarcity of thought given to it is akin to gambling. No entrepreneur or manager will do that if there is a way to minimize the risk while improving the opportunity for success. Like any other important project, exporting is serious business.

A self respecting banker with his eye perpetually on the bottom line, John Lau winces every time any representative of a high-tech start-up company walks into his office. It may be a good business; but it’s just not his type of business, and the result is almost always a waste of time for both Lau and the would-be borrower.

“I don’t know much about high-tech industries, explains Lau, senior vice president of international finance for the Pacific Bank, a San Francisco institution that primarily finances U.S.-Asian trade. “I don’t have an appreciation for the issues and factors that will determine whether a high-tech company will do well or not.”

Lau hammers home what should be obvious. “You have to find a bank whose lending expertise matches the type of loan you need. The prospective borrower has to do his homework. There are certain banks that are more likely to fund your venture. Go to them first, especially when you are in an industry where time to market is a matter of weeks or months. You shouldn’t be wasting time with a bank that is probably going to reject you.”

Elementary Errors. To help companies get to the right bank, make the right moves, ask for the right loan, Export Today has asked a cross section of bankers for their take on the typical mistakes an applicant — whether from a big or small company — makes when applying for a loan or line of credit.

The picture painted by the bankers doesn’t always flatter their customers. Much of the feedback from the bankers focused on such elementary errors as wasting time with a bank that will almost definitely reject you.

At first glance, some of the mistakes would almost seem to defy common sense, such as not having a business plan (mistake number one). But when it comes to finance, it seems apparent that many companies that are smart in every other aspect of their business can make very foolish moves when it comes to dealing with banks, especially when a business deal or venture is on the line.

Other common mistakes can be attributed to the unwritten rules and mores of a banking industry that has undergone significant restructuring over the last few years, such as automatically assuming a bank understands your industry or assuming your banking relationship will remain the same after a merger (mistakes number two and three). It’s not a question of poor organization, but the result is the same in the end — rejection. Missed opportunities, as to be expected, also show up on the list, such as overlooking unorthodox types of collateral (number six). So does the unexpected, which is not as much of a rarity as one might expect in the highly regulated and staunchly conservative banking industry (see numbers four and five).

To be sure, the responsibility for a good banking relationship should not lie entirely with the petitioner. “A bank has to communicate with its clients to find out what its needs are,” Lau says. If it doesn’t, he says, that bank may find that some other institution has offered its client a bigger and cheaper line of credit.

For borrowers, such a happy scenario is not completely unreasonable in today’s flush economy — unless that is, they make one of the following all-too-common mistakes.

1. Walk in With No Business Plan

As basic as this tip might seem (check out chapter 1 of any college freshman’s business 101 textbook) the fact is that an extraordinarily large percentage of companies simply do not have business plans. According to a PwC survey last year, roughly one-third of all rapid-growth firms fall into this category. “If there is any one mistake I could warn companies about, it would be this,” says Pacific Bank’s Lau.

Business plans must be in writing, Lau says. At a minimum, they must include a balance sheet and income statement. But the plan should also articulate company goals and objectives. At the very least, such a plan will give a banker confidence in your company. It will also avoid wasting time later, as he or she will want this information anyway.

Most fundamental, a good business plan is the basic prerequisite for a company to be able to clearly define its funding needs, Lau says. “Do not ask the banker how much money you can obtain based on your financial statements,” he says. Such a request, at best, suggests the borrower didn’t do his homework. At worst, it can ruin the borrower’s basic creditability. A good business plan will also prevent the borrower from guessing wildly about funding needs and asking for too much or too little money for the proposed venture.

All plans should include supporting statistics and projections, along with a realistic plan outlining how the money will be paid back. Not taking care of the latter, needless to say, is a sure-fire way to squelch any loan petition.

2. Assume it’s Business as Usual if your bank Merges or is Acquired

It is very common, after almost any M&A activity involving a bank for customers to find that their banker has been shifted to another department or has left the bank altogether. Worst of all, a merger may mean the new bank is no longer so enthusiastic about the same lines of business as it was before.

Reductions in staff are a common side-effect in most mergers in most industries. Companies usually lay people off to realize the synergies of the merger, and to eliminate duplicate functions. In the banking industry, other unsavory byproducts of a merger can include new more rigid lending requirements and new products designed to fit only a standardized mold. Clashing corporate cultures between the two sides in a deal can also end up letting even long-term customers fall through the cracks. Problems were reported, for instance, after the recent merger between Deutsche Bank, a European bank known for its conservatism and stability, and U.S. based Bankers Trust, whose hallmark has been innovation and risk-taking. A post-merger internal bank study released to the press revealed that cultural differences between the two banks had “led to insecurity and foot-dragging in some quarters.”

The key mistake borrowers make during such upheavals is not staying in touch with their banker, says Lawrence Frohnhoefer, first vice president of MTB Bank. “You should be aware of what is going on with your banker and make every effort to maintain continuity with him. Get a feel from him about what is going on and if you might get lost in the shuffle… It may be the case that the squeaky wheel gets the oil,” he says.

Not that all M&As are necessarily bad for customers, Frohnhoefer emphasizes. A company may well find that the enlarged institution actually offers more services than before. “Not to leverage these new capabilities just because they weren’t part of your old’ bank is also a mistake,” Frohnhoefer says.

3. Assume Your Bank Knows Your Industry

Banks have evolved dramatically over the last decade. No longer are they mostly community-oriented generic institutions serving a relatively small and rather amorphous customer base. The rapid consolidation within the industry has led to much bigger banks, able to offer much greater degrees of specialization. Even so, explains Rob West, senior vice president of CoBank, a Colorado-based lending institution that specializes in telecommunications, that doesn’t mean your bank understands your company’s needs as well as another might.

Few banks will turn away a good prospect with a healthy balance sheet. But West advises companies to shop further. “It is only prudent for a borrower to work with someone who understands their business and won’t get scared and pull the plug if something happens that they don’t understand.” As new industries such as e-commerce emerge ever more quickly, such a scenario is becoming ever less rare. In some cases, even a healthy balance sheet may not be enough for the more conservative institutions. “Only a handful of national banks will finance telecom ventures,” West says. Besides CoBank, he says these include BankAmerica, Toronto Dominion, CIBC, Fleet and First Union.

One upside to this more specialized focus is that finding the right bank to match your expertise is not a problem — if your company has any weight in your industry. “Actually they will usually find you,” West says. Another plus is that once a company finds the right bank, it will be able to count on a greater variety of vertical product lines geared to that industry, West says.

4. Assume Your Loan Officer is Senior Enough to Approve Your Line of Credit

This is another very basic mistake that many companies still make in their eagerness to fund a particular transaction or get a good deal underway. Basically, says Pacific Bank’s Lau, “the prospective borrower has to discern how senior the lending agent is. If he says yes,’ is there somebody above him that can say no’?” The consequences of an initial, but erroneous acceptance will likely prove very costly in mid-transaction.

5. Assume Your Loan Officer is Following Orders

There may be times when a lending agent takes on your business even though he or she is fully aware it doesn’t fit in with the bank’s lending philosophy. Most companies are not on their guard against such an event., CoBank’s West says “A loan officer deliberately pushing a mismatched loan through is not something most companies would expect.”

But it can happen. While most banks have a rigid hierarchy that will usually prevent a rogue lending agent from going on a spree, “sometimes you will find that an account officer might try to do something or create a niche for himself, but not have the backing of senior management,” West says. Lending agents, he adds, are essentially sales people, usually with quotas.

At face value this may be of negligible interest to borrowers (after all, it’s the loan officer’s career not theirs) but down the road it could have a suddenly disruptive affect on a line of credit. “A loan officer with a quota might push your loan through the approval committee,” says Pacific Bank’s Lau. “Yes, you might get the loan, but he might have misrepresented you to do so. Two years later, when he is gone that could come back to haunt you.”

Whether your bank contact is simply misguided or deliberately building a lending portfolio contrary to the bank’s lending mission, the best protection says West, is to insist on “introductions to senior management… You should expect the account officer you are working with to introduce you to his boss and even his boss’s boss, perhaps even the credit people.” Another step, he says, is to read the bank’s annual report. “It will describe where the bank’s strengths are, what areas they are developing, what they are targeting.”

6. Overlook Assets that Can be Used as Collateral

Most savvy businesspeople know that company assets are not limited to physical goods and real estate. A skilled labor force is an asset, as is a company’s trusted name. Neither of these are worth a dollar at a bank, however. But companies that automatically assume the only collateral are objects that can be seen or touched may be missing valuable funding opportunities, says Paul Weaver, global technology leader for PwC. Patents and other intellectual property can be used as collateral, as can income streams such as licensing fees, he says.

Not all banks will accept such forms of guarantees, of course. But the industry is slowly becoming accustomed to less orthodox collateralization, especially with the huge growth of high-tech (and low physical asset) firms. “Most of these firms don’t have hard assets,” Weaver says. “So they have learned to think creatively when it comes to collateral.”

7. Take ‘No’ for an Answer

Walt Trask, vice president of structured finance at Wells Fargo HSBC Trade Bank, tells of one client who kept shopping from bank to bank until he found one that was willing to structure the deal exactly as he wanted. “All the banks were proposing discounting” as a way for the borrower to design the loan, he explains. But the client wanted to have interest charged in arrears, an unusual design, but one that would meet the client’s requirement for as much cash up front as possible, Trask explains. Wells Fargo HSBC finally agreed to the client’s wishes, and the deal went through.

“Everything is negotiable,” Trask says. This fact, however, is often overlooked by would-be borrowers sitting hat in hand in a loan officer’s office. “There is so much money available today,” PwC’s Weaver says. “Companies make a mistake in not negotiating with their banks.” Even interest rates are on the table, he says. “Some banks will take an equity interest in lieu of some differential in interest rates. Cash is cash, and if you can save money giving out small amounts of equity, you may be better off,” Weaver says.

Another possibility is to negotiate a lower interest rate, in exchange for giving the bank a certain number of warrants to buy stock. “For most middle market companies holding on to cash is preferable to holding on to equity.”

Most important, Weaver advises, don’t underestimate your bargaining potential. “Companies are in the driver’s seat, as there is much less need for bank financing today.” Options for mid-market companies now often include everything from venture money to IPOs to angel lenders,’ though such sources can prove to be much more expensive.

8. Assume Your Bank offers all the Services you Need

Never assume a bank offers a full complement of services, no matter what their marketing materials may say. “A lot of banks tout they are international, but it means different things to different banks,” says Wells Fargo’s Trask. “The customer must satisfy himself that what is being offered on paper is deliverable in reality.” Trask advises prospect clients to “take a tour of the international offices. Speak with someone other than the sales person, perhaps a manager. Satisfy yourself that you will get what you were promised you’d get.”

A related point, says CoBank’s West, is to make sure your target bank actually has the capacity to meet your financing needs. “The amount you need to borrow may exceed the capacity of the bank,” he warns, especially if it is a smaller bank serving mid-market customers. In the telecom industry especially, this can quickly become an issue. Acquisitions, new licenses, digital switches and other technology can be very expensive, West says. For loans of $30 million or more, a syndication is usually the best answer, he says. But can your bank take you to the syndication market?

9. Fail to Take full advantage of the services a bank offers

When the euro falls or the real is devalued, some companies have less to lose, having engaged in sophisticated hedging techniques to protect their bottom line. Others, often feeling overwhelmed by the need for yet one more purchase decision, simply opt to ride the fluctuations with no protection. Usually, this is totally unnecessary, says Keith Cheveralls, a managing director of global foreign exchange at BankBoston. If there is any market that your bank is likely to understand, it is the foreign exchange market. After all, Cheveralls says, a bank’s business is money.

Too few companies, however, avail themselves of the expertise available in most banks, focusing instead on specific FX transactions. “It is our obligation to offer advice to customers to make intelligent decisions,” Cheveralls says. It is not, however, the obligation of the customer to listen.

The road is paved, but watch out for the potholes

The residual effects of the Asian financial crisis and Europe’s economic downturn continue to reverberate through the global market. But, unlike the world’s more developed and stronger economies, many emerging market economies have taken a little longer to dust themselves off and get back on their feet. Countries such as Argentina, the Philippines, and the Czech Republic have remained committed to economic reforms, which have now begun to pay off. Trade and investment with these emerging market economies is on the rise. Yet, challenges exist in areas like infrastructure, non-tariff trade barriers, and customs procedures.

By Plane, Train, and Boat: The Situation is Improving, Generally

Freight volumes into Latin America, especially Argentina, Brazil, and Chile, are strong right now. So strong, in fact, that air carriers are going to be able to add a fuel surcharge onto cargo bound for Latin America. Eight of the major air carriers servicing the southbound Latin America trade lane are imposing the surcharge due to a price increase for fuel jet fuel was about 35 cents a gallon at the start of the year, but has risen to 57 cents a gallon. Despite the hike in air cargo rates, a recently concluded open-skies agreement between the US and Argentina will give shippers more flight and carrier options when moving goods between the two countries. The agreement is especially important because Argentina has historically maintained one of the most restrictive markets in Latin America.

Shippers now have more options for air cargo flights in and out of the Philippines, too. United Airlines has expanded its number of cargo flights to five per week. The carrier says it plans on expanding Manila cargo capacity about 60% by next year. Northwest Airlines resumed twice-weekly cargo flights last September, and Air Philippines, a four-year old domestic carrier, recently added international services to the US, Japan, South Korea, Hong Kong, and Taiwan. Additionally, the country’s financially stressed flagship carrier, Philippine Airlines, has signed an agreement with Lufthansa Airlines that gives the German carrier rights to operate cargo and passenger flights to major cities in the Philippines.

In the express consignment arena, FedEx’s domination of Subic Bay north of Manila, which serves as the company’s Asian hub, will be challenged by newcomer United Parcel Service (UPS). UPS, in an agreement with Globe Distribution Services, Inc., recently opened a branch on the former US naval base. Although UPS uses Taipei as its primary Asian hub, according to the company’s managing director, UPS chose to expand its operations on Subic Bay because of its strategic location in the Asian region and the significant role it plays in the growing Philippine economy.

The Philippine government aims to compound its economic growth with a planned 1,200-mile rail link between the country’s second biggest island of Mindanao and the country’s key ports. Located in the southern part of the Philippines archipelago, Mindanao is a principal food and natural resources producer. Both Dole Fresh Fruit Company and Del Monte Foods Inc. of the US maintain large operations on the island, which is also attractive because it’s relatively free of regular typhoons and other natural disruptions. The project, which is a top priority of President Joseph Estrada, could be completed within six years once financial backing is secured.

Ocean transportation is responsible for moving the vast majority of Argentina’s foreign trade, and Buenos Aires is the country’s largest container port Privatization of the port began in 1994, with millions of dollars thus far invested in port equipment, facilities, and the automation of cargo handling. The privatization process has unfortunately brought with it labor problems, though, due to the hundreds of dockworkers who have lost their jobs in the changeover. However, work stoppages and wildcat strikes at the Buenos Aires seaport are not as common as those in Brazil’s port of Santos, a neighboring port and major competitor. Meanwhile, pilferage at Buenos Aires can sometimes be a problem, especially for high-value shipments of chemicals, finished products, and electronics.

Unlike Argentina or the Philippines, transportation and infrastructure throughout the Czech Republic, while steadily improving since the fall of the Iron Curtain only ten years ago, is nonetheless poor by international standards. A report by European Union transportation officials states that a total of $90 billion is needed to upgrade highways, railroads, and ports in the former communist nations of Central and Eastern Europe. As part of the overall criteria for membership in the European Union, the Czech Republic, along with Poland, Hungary, Estonia, and Slovenia, must make significant improvements in their respective infrastructures. The costs for these improvements will be mostly borne by the individual countries, although about one-third of the tab will be paid by the European Union and international organizations.

Support for a new pan-European corridor that would run from Germany to Istanbul, passing through the Czech Republic’s capital city of Prague, is also gaining among European Union transportation officials. The proposed road, rail, and waterway linkÛcalled the Multimodal Pan-European Transport Corridor IVÛis needed to minimize the growing delays at border crossings. It will also help to expedite the movement of freight across Europe.

Pre-shipment Inspection: Becoming the Norm

Pre-shipment inspections, currently required in over 30 countries in Latin America, Asia, and Africa, are usually implemented to combat under-invoicing (which depletes a government’s import duty collections). It also enhances import duty collection by verifying the value of goods and the proper tariff code classification for customs purposes. Argentina requires pre-shipment inspections for all imports of consumer goods and vehicles valued at over US$800 FOB, with some exceptions. The major companies providing pre-shipment inspections include SGS Societe Generale de Surveillance, Bureau Veritas, Intertek Testing Services, Inspectorate PLC, Socorec International Inspection, C.U. Holding B.V. and Surveyseed Services.

Customs Clearance: Not so clear

Non-tariff barriers, whether in the form of pre-shipment inspections or quotas, for example, tend to proliferate in emerging markets.

Nevertheless, there are some encouraging signs in the Philippines, whose goal it is to improve the efficiency of the customs clearance process. In particular, the Philippine government has contracted the country’s first accredited value-added network provider, InterCommerce Network Services, Inc., to provide basic electronic data interchange (EDI) services to the Philippine Bureau of Customs for the past year. International shippers, who have become impatient with the Philippines’ outdated customs practices and procedures, still largely manual and paper intensive, have praised the development. Over a dozen companies are using the country’s EDI gateway, which is available to importers, brokers, freight forwarders, consolidators, shipping lines, and anyone else in the logistics chain.

For its part, Argentina is leading an effort to harmonize customs clearance procedures among the 34 countries negotiating the Free Trade Area of the Americas (FTAA) the hemispheric free-trade zone planned for 2005. Customs harmonization was at the top of the agenda during last month’s FTAA trade ministers meeting in Toronto, Canada. In particular, trade negotiators want to simplify and streamline procedures for low-value shipments, express shipments, and shipments of promotional or sales materials.

Delays in the customs clearance process throughout Central and Eastern Europe remain a problem, despite results from a recent report, which seems to indicate a slight improvement. The report, commissioned by the global express delivery company DHL, says six out of ten multinationals still encounter barriers in the region, with one-third having lost revenue because of delays. On a positive note, though, the Czech Republic was found to have one of the better customs clearance procedures. Frequent changes in customs rules and regulations were cited as the main cause of delays in the clearance process.

Unfortunately, more changes in the customs clearance process may be ahead, due to pending legislation aimed at fighting misuse of Europe’s in-transit system. The in-transit system is essentially a deferred customs clearance procedure, which allows goods to travel from the port of entry to the port of final destination, where the duties are finally collected. However, some shipments are being illegally diverted, with the goods ending up on the market at cut-rate prices.

The European Commission, the European Union’s executive body, has devised a reform program called Common Transit to crack down on fraud related to the in-transit system. The tougher rules are likely to be in place by the end of the year.

As one would expect, the inherent complexities of shipping goods across international borders are often times compounded when emerging market countries are involved. Frequent changes in customs rules, corruption, language barriers, and weak infrastructures must be identified and addressed in order to avoid serious problems. However, with proper planning, shippers can effectively navigate the peculiarities of countries such as Argentina, the Philippines, and the Czech Republic, to take advantage of the best these emerging markets have to offer.

The viable financing alternative.

As the global economy has become increasingly competitive, companies are finding that they must be more flexible with customers to maintain and grow sales. Being able to offer international customers better financing terms is now an important part of any sales package. Since payment from companies in other countries involves elements of uncertainty that are unlike those faced with domestic companies, credit risk becomes more of an obstacle. Selling on open account, which may be best from a marketing and sales standpoint, is fraught with danger. In particular, you may not be able to discover or understand the customer’s financial situation and the economic situation of the country in which the customer is located. Also, collecting from foreign accounts is every bit as difficult as you imagine it to be. Cash-in-advance terms are more often placing you at a competitive disadvantage, as open account terms with extended dating are becoming more common despite the dangers.

Other challenges emerge as customers prefer to trade in local currencies. In addition, most domestic banks will not provide the necessary financing on export receivables. This remains a critical issue as these receivables are now utilized as a financing tool in international trade programs.

However, there is an attractive alternative: international factoring. Many exporters have added factoring companies to their list of financial partners in an attempt to incorporate international sales and financing into their objectives.

International Factoring Comes Into Its Own

International factoring may be defined as the sale of assignments of short-term (generally 120 days or less) accounts receivable arising from an international sale of goods or services. There are four parties involved in a transaction: the exporter (seller), the US factor (export factor), the foreign factor (import factor) and the customer (buyer). Transactions are somewhat more complex than traditional domestic factoring since there are a number of parties, depending on how many countries there are in which the seller conducts business.

Although international factoring has become more visible in recent years, it is not new. Factoring has been used in one form or another since the fifteenth century when merchandiseÛsuch as fish, fur and timberÛwas exported to England with agents from London making loans and advances to these sellers to help provide working capital.

The nineteenth century was a period of resurgence for factoring, but it was centered more in the US rather than Europe. Beginning in the 1970s, a number of countries began enacting legislation to open the doors to opportunity for cross-border trade activities, and once again the factoring industry was revived as an alternative financing tool. In 1995, $23 billion in international trade was covered by factors, up 17 percent from a year earlier. Two of the top US factors with specialty units for international factoring are Bank of America Commercial Finance/Factoring and CIT Group/Commercial Services. Some of the major factors are making export business a priority. As only one example, Bank of America Commercial Finance/Factoring was awarded the President’s ÏEÓ Award in 1994 for its excellence in export service, and it continues to expand internationally by opening offices in Hong Kong and London.

A Worldwide Factoring Network

The international factoring business involves networks similar to the use of correspondents in the banking industry. Factors Chain International is the largest of these global networks of factoring organizations. About half the worldwide factoring transactions are through the member companies.

Global networks enable the export factor to give the seller a working financial partner to engage in factoring in another country. The member companies in each country speak the local language, keep current on who is creditworthy, and are ready to act with the export factor as the seller’s overseas financial representative. This means that the seller can do business abroad as if it were next door to the customer.

The export factor will work directly with the import factor to represent the seller. Under the supervision of the export factor, the import factor will manage the seller’s collections and cover the credit risk.

Services Offered

There are basically three elements of service offered by international factoring companies:

1. Managing the receivable, where an accounts receivable manager handles collections and provides reporting and bookkeeping services. Typically, the seller “assigns” orders to the factor and the buyer pays the import factor. The export factor guarantees the payment for the order (minus charge-backs, defects, and other things that may go wrong that are beyond the factor’s control).
2. Furnishing credit protection on the receivable and establishing credit lines. Usually, if the order is not approved for factoring, the seller can still sell to the buyer, but collection is no longer guaranteed by the export factor. For approved orders, the factor collects the payment for the order and then pays the seller, minus the factor’s fees, which can include an annual fee plus a commission on each sale.
3. Lending against receivables. Interest rates vary and the most common loan is no greater than 90% of the value of the receivables. The seller must usually have a minimum of working capital and other qualifying criteria.

How It Works

The seller will sign a factoring agreement with the US factor (export factor). Under this agreement, the seller’s accounts receivable are assigned to the US factor and the seller is covered against credit losses, up to 100 percent of the approved credit. The export factor selects an appropriate import factor to act on the seller’s behalf overseas with the export factor’s supervision. In the meantime, the import factor overseas investigates the credit standing of any local customer to whom the seller wishes to sell goods.

When approved, credit lines are established so the seller’s foreign customer can place orders for goods on open account trading terms. Once authorized sales take place, the seller becomes eligible for funding. The import factor handles the local collection and payment of the accounts receivable.

During all stages of the transaction, records are kept for the seller and reports are made to give the seller important, timely information on such details as delayed deliveries, the wrong merchandise sent to the wrong place, or any other discrepancy causing delays in payment.

Seller profile

Typical US sellers who factor are manufacturers, distributors, wholesalers or service companies with sales ranging from $5 million to $200 million. Usually the export sales minimum is $5 million. International factoring is also becoming a financing tool for larger corporations, such as Fortune 1000 companies, who utilize factoring to manage their balance sheets.

International factoring is coming of age among US exporters and there are enormous opportunities to capitalize on the economic changes. This alternative financial tool allows the exporter to compete and increase global sales without increasing global risk.

Pereira is the International Factoring Manager for Bank of America Commercial Finance in Atlanta, and can be reached via e-mail at ray.pereira@bankofamerica.com

Are they even there?

Hiring for any job is difficult, but hiring for expatriate postings can be one of the most complicated and risky of all human resource decisions, even for larger and experienced companies.

Anyone who has worked overseas knows the person selected to oversee a particular operation can often be the single most important factor in the making or breaking of that venture.

Yet finding the right person is usually a much more difficult challenge than is the case with a position at the home office. In part, this is because employees are becoming increasingly aware that overseas postings can also make or break careers, marriages and the basic ways in which the employees view themselves.

The good news is that there is no shortage of business lore about the sorts of characteristics or personality traits a company should watch for in a potential expatriate employee, or in an employee early in his or her assignment. In some cases, certain factors can disqualify even top, trusted home office staffers from positions abroad.

Growing Reluctance.

Concerns about misfires when making an expatriate hire or posting an employee abroad topped a recent survey by PwC on the international relocation responses of 270 European and U.S. firms.

Though overseas staffing has been a challenge for decades, the difficulty has been exacerbated in recent years by the growing reluctance of many workers to take overseas assignments. Nearly half the companies surveyed by PwC reported problems in filling at least some long-term international assignments.

Some 64% of the U.K. firms contacted, for instance, reported that at least some of their overseas operations are managed directly from the home office, with high-level executives juggling regular telecom link-ups with frequent business trips to oversee local operations.

The reasons cited for the staffing problems vary considerably. But the PwC survey showed that family issues and problems in accommodating a spouse’s career were the two most common, according to the report, “International Assignments, European Policy and Practice.” Unhappiness with the location of the assignment or fear about how an assignment will affect the employee’s career were the third and fourth top concerns.

This growing reluctance to take positions abroad is taking a bite out of the expansion plans of many companies at a time of unprecedented overseas activity. U.S. manufacturers last year invested an estimated $46 billion in foreign operations, according to a Deloitte Research report.

As a result, companies are taking a variety of tacts to lure some of their more talented employees to accept overseas assignments, global workforce experts say.

To avoid the costs of keeping spouses happy, for instance, many firms are turning more to unmarried candidates for international assignments. Singles accounted for 36% of all international assignees in 1999, up from 27% in 1997, says Cendant International Assignment Services, of Danbury, Conn.

Companies meanwhile are also scrambling to develop and introduce more flexible pay and benefits packages for expatriates. These can range from extra accommodation reimbursements to special spouse allowances to bigger bonuses.

Ultimately, however, most companies are reticent to devote too much money to try to overcome any particular candidate’s reticence about an overseas posting. At bottom, many employers feel it is better to hire a local manager or to oversee an operation directly from the home office than it is to send over the wrong person.

This article first appeared in Trading News, an Argentinian bilingual publication (Spanish-English) dedicated to the analysis of the present reality and the future prospects of transport, logistics and international trade in their different forms.

According to Lesther Thurow, Management and Economics teacher of the Massachussets Institute of Technology (MIT) states affirms that the present era is revolutionary. It will change businesses, governments, philosophy and religion.

Wealth depends on one only factor: capacity to educate men. Show me a well-educated country and I’ll show you a group of people who will probably be successful in the 21st century. Show me an uneducated country and I assure failure. We are living revolutionary times. In the 20s we improved the industrial combustion engine, on the basis that an internal combustion engine had not been invented before. The answer was “it is not difficult”. We all would have slow cars, steam cars, electric ones, we would use the train more frequently but modern life would be similar to our current lives. On the other hand it is impossible to imagine modern life without electricity. We would not be able to describe our lives.

That is why historians declare that electrification was a revolution, and the combustion engine was an important invention.

I will try to convince you that we are living revolutionary times, everything will change. Business, government, war, philosophy, religion.

Business: e-commerce

A historian could announce that, in 50 years, with the third industrial revolution, 5000 years of commercial retail sale came to an end. In ancient Egypt, people went shopping to the store in the corner to buy their daily goods. That shop was like a modern one, with shelves full of goods and employees, they paid the salesman for the goods they would take home. Nothing changed in 5000 years, until now.

I could live in Buenos Aires for the rest of my life and would never have the necessity of going shopping to a store again.

I can buy a car or a house through the Internet, I do not need a store. The question is “Will e-commerce be a revolution of 10% or 90%? That is to say, in thirty years, are we going to buy 10 or 90% of products by this electronic means? Let’s think it is 90%, what is the city going to be like with no stores? What kind of routes will we need? Besides, if this is a 10% revolution, it would be important but it will not change things completely. The problem is that we will get to know that in 20 years time. We will not know if it is a 10 or 90% revolution. Sociology always rules technology, though sociology changes.

A few months ago my car was stolen so I began to see new cars. I did what every American is used to doing in these days: I entered Internet and decided what kind of car I wanted. Then I came to a store like any American and once there I wondered “why did I come? Why didn’t I buy it electronically?” I came to the conclusion that the answer was because when I was 7 years old I went to buy a car with my father for the first time. He told me “Lesther, you should not buy a car unless you slam its door, you kick the wheels and drive it for a while.” In fact, I never learned much in this way. I drive so slowly when I am testing a car that it is not useful. Moreover, my children are used to downloading racing games from the Internet. They download a Ford simulator, they drive a Jaguar electronically, they crush and they learn more about that car than what I learned going to the store. I am sure they feel perfectly all right when they buy a car through e- commerce.

Of course, auto companies cannot wait to find out what will happen. It is almost impossible to lower the cost of a car by improving the company’s performance. Even in the global supply chain you can see that every component is made in the country that gets the lowest cost. Maybe it can be improved a little bit, but not much. However, if a completely electronically supply chain can be obtained, the cost of a car can be reduced around $1000. With direct electronic sale, without the need of a middleman, $1000 more can be lowered; if inventories are avoided and if work to order is achieved, the final cost will go down $1,500 more. So it would be $3,500 less.

Governments

In this revolution, relationships between companies and governments will change. We are used to a world where governments end up paying companies. For example, Israel paid 600 million dollars to Intel for installing some plants in its country. Brazil is paying Ford so that it establishes its plant there.

Governments will have to change the way they behave. They are used to considering themselves as air traffic controllers and governing the flows of their economy. They cannot continue doing so in a global economy. Governments have to think as landing strip and building constructors. Once companies compete they cannot be controlled.

30 years ago governments did not meet to analyze this problem, cause in order to use a fiscal oasis you had to live in it. Now things have changed. Nowadays you can use a tax oasis in an electronic way, without living in it. An example of this can be observed in the financial center rankings of the world: 1st New York, 2nd Tokyo, 3rd London, 4th France, and 5th the Caiman Islands (fiscal oasis), in Latin America.

The fiscal issue will be very important in the new economy. If I do not want to pay to my government, I will find a way out so as not to do it.

Destroy to create

Let’s suppose we are in USA in 1920. There are 100 auto companies. In 1950 there will be just three: Ford, General Motors and Chrysler. If you had bought those three in 1920, you would have had a very lucrative deal. But if you had purchased one of the others you would have lost money. In any kind of industry, 97 out of 100 lose money, but there is a possibility of becoming extremely rich if you choose the three big.

Let’s suppose I am Moses and I am talking to God. We are in 1981 when computer revolution starts. And he tells me: “Lesther, in 1999, 140 million computers will be sold in the world, (exactly what is being sold).” What would you have done? Would you have run to buy Comodore, leader in 1981? But 13 years later it was out of the market. The winner was Microsoft that did not exist as a company in 1981.

At the beginning it is impossible to know who the winners will be. But there will be one. One characteristic of this revolution is that it occurs in almost all companies. Enterprises have two alternatives: they merge to become a global player, or they are a niche player, the best in the world to do any small thing. But there is no space for medium sized companies, they will be driven out of the market. For example in the auto industry, everybody thinks that in fifteen years there will be from six to eight companies in the whole world. We already know the name of four of them: Ford, General Motors, Volkswagen and Toyota. Which are the others? Nobody knows yet. That is the reason why Renault purchases Nissan, or Fiat is sold to General Motors. Fiat produces 2 million cars; nevertheless it is not big enough to compete in its industry.

The medium-sized bank will have to close down. In the 50s, 60s and 70s there was convergence. Poor countries tried to reach richer countries. In the 90s there is divergence. The difference between the richest country and the poorest one in the year 2000 will be larger than in 1990. For example the Americans were always richer than Canadians, but nowadays the gap is even larger than 10 years ago.

If the countries want to be one of the most successful ones, they want to have big firms and they do not want unbalanced salaries, first they have to focus on education, but that costs money.

Developed countries have a problem called China: 1,300 million well educated people. In Latin America, the best-educated nation is Castro’s Cuba. Continental China has an education strategy, which means a big competitor, with a high education level and very low pay level. They can have secondary school graduates for $28 a month, working 30 days, twelve hours per day. That is competence. Of course, nobody wants to play the game so the only way to compete is by being better educated.

On the other hand, in Brazil, people between the age of 16 and 18 do not go to school. Many human beings in the world will not belong to the global economy. If they live in an uneducated and without infrastructure country, they will remain outside. Sub-Sahara Africa is making for that way. They will not be marginalized, but they will be ignored.

After education comes infrastructure. Does this nation have a system of telecommunications, transportation, electricity to give first level infrastructure to companies in the whole world? They have another place to go. There is no company in the world that needs the United States and there is no one that needs Argentina.

And are investments being made in research and development? In an industrial revolution there are important characteristics, the social ones. The first one is to be able to shut down the old company, which is very difficult in every country. They are “destructive creation” processes because in general, destruction comes before creation. For example, AT&T had a million employees in 1988 at the time of the antitrust trial. Three years later, successful enterprises had half a million, so 500,000 people had been dismissed. But that gave rise to new telecommunication companies that by now take on more than half a million persons. The total employment is above a million. That cannot be done in Germany. Deutche Telefone cannot be privatized and deregulated because half the workers would have to be fired, and new telecommunication companies cannot be opened. In the Î90s, income-producing American companies fired from 600,000 to 800,000 people per year. Nine out of ten new firms will fail within five years. What happens with those who started working in those nine companies that closed? In the United States, everybody will say “he is a working and enterprising person, he has experience, let’s hire him.” In France, it is different. If I start a business and it goes bankrupt, they will put a label on my forehead saying “failure,” and it will be even harder to work again. It is much more risky to start an enterprise in France than in the United States. In the USA there is a good phrase, “falling forward.” I start working, nine out of ten close, I fall, but as I got such experience I will be employed for a better work. Still, the psychological failure is difficult.

It is not impossible that an old company becomes a leader, but it is not common.

Creativity, a key to success

Let’s suppose that fifteen years ago I came to Argentina and said: in the year 2000 the most important manufacturer of cellular phones will come from Finland. You would have laughed. You would have asked “those citizens of the North Pole? That can’t be true. However Nokia has the major market share.

One of the vital requirements is creativity. Some engineers had a meeting and concluded: “Finland is not very good at cultivating trees, we are far in the North. We chop down trees to obtain wood and paper but still we are not the best. Maybe we are good at communications,” and so they got down to business. If Finland could do it, who couldn’t? It is difficult but not impossible.

Globalization, good or bad?

Were the nineties a good or bad decade for the third world? If you were in China at that time (half the population of the third world) the nineties was the best decade, the Chinese grew between 8 and 10% a year. Though, the same period was a disaster for Sub-Sahara Africa. The per capita income decreased and a lot of human beings died of AIDS.

Globalization was positive or negative depending where you stand or where you look at. China took advantage of it because they learned they can create components to be assembled somewhere else.

The richness gap between Canada and the USA is becoming larger. In spite of being a rich country, Canada should wonder, why aren’t we rich in this new world?

There is quite a rejection to globalization in France. It is interesting for when McDonalds wanted to establish there, nobody thought that someone would eat a hamburger in France. All the licenses in the world were granted to one person and at a bargain. But the French loved McDonalds and the problem was how to withdraw the license from such person.

How many people think that McDonalds makes the best hamburgers in the world? (Nobody) Hamburgers were not its forte, fast food is. French people wanted to have a fast lunch and take advantage of lunchtime. The globalization symbol in France is something that the French like to buy.

Another example: Last year, nine out of the ten most successful movies were American and one was Italian. As far as I know there is no law prohibiting French citizens from watching French movies. Americans are best at making movies for the French taste than the French themselves. It is what the French call a “dangerous invasion of the American culture,” and the problem is they cannot stop it. It is not an American culture invasion but a group of French who want to participate in McDonalds’ culture and in films.

Success does not depend on God

Some years ago cultivatable land was the means. But now we live in an era where everything has to do with the human aspect, no one could say that Nokia was in Finland, a cold and small country in the North. It did not have any natural advantage to sell telephones, it had a group of persons who made up their minds and said “let’s try to create a competitive advantage to sell telephones.” The same occurred in Sillicon Valley. One of the problems is that it is not easy to say what should or shouldn’t be done. It is very easy to know why Pittsburgh produced steel, you can see the rivers, the raw material. But Sillicon Valley accounts for no explanation, it was made by the human being, not by God.

Finally, biotechnology will be the revolution of this era. Human beings with a very high I.Q. will be created soon, they will have the body of a model, the character of parents, the height of a basketball player.

A further example: Jews do not eat pork for considering it a dirty animal. Within twelve months, heart transplants will be performed from pigs to human beings. Last year there were twelve hearts available for 1000 patients waiting for a heart. There are people who think that pigs are dirty and so they do not eat them. How will they reject what saves their lives? This is a revolution, a change in religion.