As the second quarter of 2008 nears its end, some of the best opportunities for businesses of all sizes are in foreign markets. While the U.S. economy has faced headwinds, the international economy expanded at a healthy 7 percent growth rate in 2007 – a trend that is expected to continue. For an increasing number of Tucson businesses, buying materials and selling products and services outside the United States could be timely and an effective growth strategy.

A big step to go international is getting a handle on the types of financial services necessary to do business overseas. To do it well requires access to the right financial solutions and support from a knowledgeable team at your financial services provider. You’ve got both covered when you find a provider experienced in two key areas.

International payments

The process of sending, receiving and managing international payments – in U.S. dollars or foreign currency – is one of the greatest concerns of business owners as they get started. If you sell overseas, how do you make sure that you get paid after you ship the goods? If you are a buyer, you may need to pay before the goods arrive, which creates risk if the goods aren’t shipped, and timing and currency need to be specified. Several options are available to manage the uncertainties associated with international transactions:

• Letter of Credit (LC) – A common form of international payment that provides protection for both buyer and seller in a global transaction. Issued by the buyer’s bank, an LC guarantees payment for a purchase as long as the seller meets specific terms. With an LC, the bank promises to pay you even if your customer does not. LCs also provide liquidity for the seller who might be able to discount the LC with their bank.

• International wires and ACH (automated clearinghouse) – These are electronic transfer payment methods that can reduce the cost of moving funds, increase cash flow control and integrate your domestic and international systems.

• Multi-currency accounts – This solution enables your business to deposit foreign receivables without having to convert them to U.S. dollars. It also gives you the ability to accumulate foreign funds for payables requirements, and to transfer funds from U.S. dollar accounts or foreign bank accounts by check or wire.

• Foreign cash letters – A cost-effective and quick solution for clearing checks you receive drawn on foreign banks. In many cases, you can view your foreign cash letter deposits to your account using the same online system you use for domestic account information.

International financing

Larger international deals may be too big or complex to conduct through one of the payment options listed above. In those cases, you need a provider with a wide-range of international financing options.

• Term financing – Exporters can arrange for their bank to provide loans that enable buyers to fund the purchases. Banks with international trade services can arrange a medium-term loan (one to five years) or a long-term loan (five years or more). In either case, the U.S. exporter is paid in full immediately, and the bank is responsible for collecting the loan payments from the buyer.

• Receivables financing – This is another trade finance strategy that gives an exporter immediate payment for a foreign sale. With the help of their financial services provider, exporters can arrange to sell foreign account receivables at a discount in the international market.

While opportunities abound overseas, seizing those opportunities requires support from a team that knows international trade and finance. If you are in or about to enter the global commerce arena, make sure you are working with a financial services company with solid international capabilities and that is committed to understanding your business and helping you succeed.

Contact Clyde Gossert, loan team leader for Wells Fargo Commercial Banking in Tucson, at gossertc@wellsfargo.com or (520) 792-5417.