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Help with export financing: government and bank services available.

Help With Export Financing

Arkansas businesses seeking financing for their exporting efforts can look to government agencies and/or their local bank, though international departments of Arkansas banks range from small to non-existent.

The Small Business Administration offers two types of loans to exporters: The first is a short-term revolving line of credit, up to $750,000; the second is a long-term loan program, up to $250,000 for working capital and as much as $1 million for facilities and equipment. The loans are made through local banks and are guaranteed by SBA up to 85 percent.

The Arkansas Development Finance Authority has an Insured Export Program which they say helps exporters safely extend payment terms to foreign buyers.

As part of the ADFA program, exporters who purchase the insurance can also borrow up to 90 percent of the value of the transaction for a modest fee. This way, the local businessperson doesn't have to wait to collect his money.

In addition to government agencies, some larger local banks provide export services to their customers. However, their international staffs are small compared to banks in states like Texas and California, which may have hundreds of people.

Arkansas Banks Offer Some

Services, Connections

Some smaller banks that don't have international departments are still able to assist their export customers with the help of out-of-state "correspondent" banks. Twin City Bank, for instance, which has no large international department, offers export services through two correspondent banks, the Bank of Detroit and Boatmen's BAnk of St. Louis.

Even banks in less populated areas of the state have access to international finance advice; First National Bank of Osceola, for example, can call its corresponding bank in Memphis.

While Arkansas banks will make loans to companies to expand into exporting, most will not extend credit to the foreign buyer so he or she can purchase Arkansas goods.

The most common ways that a foreign buyer pays for his or her American purchases is by document draft or by letter of credit. While some of Little Rock's larger banks will collect on these instruments, exporters should expect to wait several weeks for their money.

The letter of credit is an agreement between a buyer and seller, overseen by an intermediary, usually a bank. It is drawn up at the buyer's request in favor of the seller, and promises to pay the agreed amount of money when certain conditions are met.

Banks charge about one quarter of one percent of the total transaction to handle a letter of credit.

The Arkansas Bankers Association actively promotes exporting and has sponsored trips to the Orient and Britain. Yet some banks with international departments admit they don't try to persuade Arkansas to export because it's a decision better left to the company.
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Title Annotation:How to Export in the 90's; Arkansas
Author:Gibson, Carolyn
Publication:Arkansas Business
Date:Dec 17, 1990
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