International Business No Longer the Domain of Multinationals
Financing Available for Medium and Small Businesses Looking for Global Growth
By Christer Andresen and Gregory Carlisle, HSBC Bank USA, N.A.
Not too long ago, being a global brand was reserved for large Fortune 500 companies. With the world more connected than ever, international business is now no longer the realm of big corporations. According to the US Commerce Department, 95 percent of potential customers for US goods and services live outside of the US. Additionally, US exports will increasingly find their way to rapidly growing consumer markets in developing economies as growth prospects for industrialized nations remain subdued, according to research from HSBC. Driven by advancements in technology and expanding reliance on the internet, the doors to global opportunities are now open to US businesses of all sizes and there are a variety of financing options to help them grow.
Making it Happen
Financing and financial risks can often make or break international trade deals. In fact, some companies even pass up profitable overseas business because of concerns over these issues. Today, however, Philadelphia medium and small businesses seeking to expand abroad have a number of financing options and partners to help them.
For example, last year, HSBC announced an international loan program for medium and small US businesses looking to export or expand internationally. The HSBC international loan program – available to businesses with at least $3 million to $500 million in annual revenue and who are focused on international exports or expansion – is part of a broader global effort by the bank to help businesses develop and capitalize on international opportunities. HSBC’s goal is to help companies who may be struggling in a slower-growing US economy to tap other markets that are growing faster overseas. With HSBC, these companies have access to the products, services and information to efficiently execute cross-border transactions while minimizing potential risks.
Building new or expanded revenue streams via new or more diversified markets and customers, internationally-focused companies can harness the growth trajectories of faster growing markets, as well as potentially better withstand domestic downturns. In fact, HSBC research shows that US companies have benefitted from global expansion and export trends. HSBC’s Spotlight on US Trade, a series of reports analyzing publicly-traded companies in key regions around the US, showed that companies with higher levels of global sales and operations dramatically outperformed their more domestic peers in the six years between 2007 to 2012. More specifically, highly international Northeast companies, including those based in Philadelphia, had an average profit margin of eight percent, while less international companies in the region were unprofitable, over the course of the recession and through 2012.
Another source of help for medium and small business exporters is the independent federal agency, the US Export-Import Bank. The US Ex-Im Bank assists in financing the export of US goods and services, including purchases of US capital equipment and services, purchases of refurbished equipment, software, certain banking and legal fees, and certain local costs and expenses, to international markets through direct loans, loan guarantees, and other credit enhancements. For example, the US Ex-Im Bank will guarantee medium and long term loans to international creditworthy buyers. It does not compete with private-sector lenders but provides export financing to fill gaps.
Additionally, the Bankers Association for Foreign Trade, a non-profit association of approximately 450 banks, matches exporters in need of trade financing with interested banks.
The US International Trade Administration’s most recent data shows that Philadelphia’s top international export partners are Canada (22 percent), UK (13 percent) and Mexico (eight percent). However, the right market will vary by your industry. Some markets may be oversaturated with competitors, while others could have too many regulatory obstacles to make your time there worthwhile. Engaging the right partners, including a bank, lawyer, and accountant with international experience, early on in your decision-making process will help iron out your execution and propel you to maximize your success.
Christer Andresen is Vice President and Middle Market Relationship Manager for Commercial Banking in Pennsylvania and New Jersey, and Gregory Carlisle is the Market Manager for Business Banking in Pennsylvania and New Jersey, both with HSBC Bank USA, N.A.