The Banks and Exporters
By JACK FRANCIS MANY businessmen who contemplate the possibilities of extending their export sales, or who have never previously attempted to enter the export market, are surprised to learn how helpful and varied are the services Offered by the banks in this country. They have been engaged for many years in the field of foreign business and as a result they are in possession of a fund of first-hand knowledge of overseas trade problems, such as economic and business conditions in other countries of the world, the names of buyers in overseas markets, and The relevant import and other regulations.
Some banks have branches throughout the country; others, particularly the merchant banks, have offices only in London; but all have an organisation available to assist exporters. The banks with numerous branches usually concen- trate the available information at their overseas or foreign branches in London, but it is readily available through any of their branch offices; indeed, in the case of at least one of the large banks, special arrangements exist whereby a senior official in London is available to travel to any part of the country to visit manufacturers and exporters at their own premises, upon re- quest, to discuss foreign business problems and to assist in finding markets abroad—one of many services available to customers or non-customers entirely free of cost.
Obviously a businessman who has never explored the possibility of exporting needs to determine what his prospects will be and whether his efforts. will be remunerative: the banks will help to ascertain whether his products are likely to be successful in overseas markets; and, should it be desired to conduct a complete market sur- vey, they can arrange to put the exporter in touch with a suitable organisation abroad for this purpose.
Protracted negotiations are usually necessary when launching a product on an overseas market and here the banks can be of considerable assis- tance in advising upon the proposed terms of payment. The most convenient and safest method of payment for an exporter is the, Irrevocable Letter of Credit confirmed by a British bank, which ensures that funds will be available once the exporter has completed his side of the trans- action, as it also provides an assurance that the regulations of the importing country have been complied with'. In its simplest form, the Banker's Confirmed Credit provides for settlement by the British bank paying the exporter, or accepting a Bill of Exchange,payable at a future date, against presentation of the appropriate shipping docu- ments. However, an exporter may have to accept terms of payment which are not entirely free from risk, as with the disappearance of a 'seller's market' he is by no means always able to insist upon his overseas buyer establishing a Letter of Credit, particularly when there is severe com- petition from other countries who are prepared to sell upon easier terms of payment.
In cases where it is not possible for the exporter to obtain a Banker's Confirmed Credit, however, there are alternative methods of 'obtaining pay- ment. One is for the exporter to dispatch the shipping documents for delivery to the buyer abroad against payment or acceptance of a Bill of Exchange. The bank will handle the collection on behalf of the exporter as a matter of routine. Or, the goods can be dispatched abroad on open account.
During recent years buyers abroad have come to expect extended credit terms, particularly for capital goods. The banks will be glad to consider problems and will give advice on the best course for an exporter to adopt, as well as the steps he can take to protect himself against possible loss. The question of granting medium-term finance to purchasers abroad in order to secure business in the face of foreign competition has continued to present problems to exporters in this country, as although many large companies can finance these commitments themselves or within the borowing limits arranged with their bankers, the medium and small firms may find it necessary to have recourse to other procedures. A common method is for a manufacturer to insure his exports under a comprehensive policy arranged with the Export Credits Guarantee Department, and when this is done he can usually expect to obtain finan- cial accommodation from his bank up to the amount covered by the Export Credits Guarantee Department.
The formalities associated with the export of goods are, of course, very well known to anY company which is already established in the export business; but to others who are not acquainted with exporting the difficulties can appear to be insuperable, and they may find it advisable to export not direct but through the intermediary of a reputable export merchanting house. Here again, a bank will advise upon the best method in particular circumstances and, ir desired, will arrange an introduction to suitable shipping agents, export merchants or confirming houses.
With increasing international competition, a° exporter often has to quote in the foreign buyer's own currency, and receive payment in that cur' iency, which faces him with a possible loss frorn changes in the rate of exchange between the tirne of his quotation and the receipt of the funds fronl abroad. For most of the important foreign cur- rencies, this risk can be eliminated by the exporter entering into a 'Forward Contract' with his bank at a fixed rate of exchange: the bank Will convert the foreign currency into sterling uP°° receipt, at the rate of exchange previously fixed, regardless of what, the current rate may be.
The United Kingdom Exchange Control Reg°- lations have been progressively simplified, tn.° some Problems of an exceptional nature arise from time to time. From their comprehensive knowledge of the regulations the banks are ahle to give guidance to their customers on, for example, applications by British companies t° establish subsidiaries abroad; the setting up °f, royalty agreements; the granting of extendeo terms of payment to foreign buyers; and requests for special allotments of foreign currency f°r travelling purposes. Inquiries about such matters are welcomed by the banks, anxious as they are to play their part in the drive to increase the country's exports.
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