With supply chains fortified, trade structures improved and additional incentives for businesses to expand overseas implemented, there has been a growing demand for export financing resources. Expected trends such as more digitization and the integration between financial institutions and fintech are set to continue driving international trade’s momentum.
“If I were a business, I would be looking to find ways to expand and diversify,” says Johnny Lee, senior managing director and head of international and commercial banking at East West Bank. Despite market uncertainty, the World Trade Organization remains optimistic for 2023’s trade outlook.
Seizing the opportunity, expanding overseas
Of course, expanding overseas come with risks that depend heavily on the country, industry and financial health of the business. Lee believes, that “if you’re able to find interested buyers from overseas, it could really alleviate some pressure, especially if you’re a business that has less capital resources in this high interest rate environment.
The EXIM WCGP facilitates the commerce of goods internationally by protecting financial institutions that allow businesses to sell products to another country and gain access to working capital before clients pay for the products purchased. The program helps lenders mitigate financial risk by providing extensive risk assessment and strategic execution.
“There are U.S. economic advantage products versus other countries,” says Jeffrey Yu, first vice president of trade finance relationship at East West Bank. “So we know there’s a market demand overseas for certain industry products and we help adopt that focus to support the U.S. export landscape.” Overseas demand for specific products should inform how a business decides to export. East West Bank supports businesses in targeting areas of demand for their products and services, while also helping them navigate the different regulatory environments and financial risks involved in expanding overseas.
“Our team applies international trade tools and operational approaches to mitigate the credit and financial risk for exports to countries like China, Vietnam and India,” says Li Zhang, senior vice president and manager of Southern California banking and credit at East West Bank. Each country has a different regulatory environment that also changes with market fluctuation. Having a reliable team help businesses navigate the regulatory and financial risks in exporting overseas is important.
There are also many resources available on the state and federal level for businesses looking to understand the different regulatory environments across countries. The EXIM bank’s website is a great place to start to collect information and learn more about the opportunities with export financing.
The current trade climate between the U.S. and Greater China
“We’ve conducted extensive analysis based on our first-hand banking experiences on trade development between the U.S. and Greater China,” says Zhang. “The landscape of U.S.-China trade has changed tremendously, especially in the U.S. export business. The biggest U.S. export (in terms of quantity) is diminishing and we must focus on new trends and potential industries such as energy, agriculture, lumber, recycled materials and manufacture equipment.”
There are several ways to finance imports in China, with two of the most common methods being letters of credit and documentary collections. U.S. exporters can work with financial institutions like East West Bank to reduce financial risk and increase competitiveness.
“Certain industry sectors in China are looking to import more U.S. products and services,” says Lee, “so if you can find that proper match between the U.S. and China and then leverage the WCGP to help mitigate risk.”
China’s biggest 10 imports account for more than three-quarters of the overall value of its product purchases from other countries, and given the population of 1.4 billion people, China’s 2021 import grew to $2.44 trillion in 2021 which is roughly a $1,700 yearly product demand from each person in China. In other words, China is an area of great opportunity for U.S. businesses looking for stronger product demand beyond domestic markets.
Finding a niche audience in a competitive environment
East West Bank honed in on export financing specifically for small to mid-size enterprises (SMEs) in the beginning of 2022 after identifying it as a niche opportunity. “If you look at the top 10 most active lenders in the country and the banks that are actively working with the Export Import Bank, you’ll see that the majority of them are larger financial institutions that are interested in larger deal sizes,” says Lee. “We saw that the export financing needs of SMEs were being underserved.”
“Small and mid-size businesses constitute a major part of the U.S, economy and they need a bank that can service them and not just larger corporations like Boeing that can close gigantic deals,” says Yu.
As an international bank, East West Bank focused on the U.S. Export Import Bank’s (EXIM) Export Working Capital Guarantee Program (WCGP) to support SMEs. By leveraging the EXIM WCGP, East West Bank has supported many SMEs venture overseas to increase liquidity and cash flow.
In recognition of this effort, the EXIM awarded East West Bank the 2022 Lender of the Year Award, distinguishing the Bank’s demonstrated commitment to deal flows and supporting U.S. businesses.
“The WCGP enables East West Bank to level the playing field and fill the gaps in supporting our customers’ export financing needs, from export related inventory procurement to foreign account receivables term,” says Zhang.
Lee, Zhang and Yu attribute the EXIM 2022 Lender of the Year recognition to the dedication and hard work of all associates at East West Bank. “We hope this award will serve as a milestone for East West Bank to further engage with our customers in supporting and expanding the U.S. export business,” says Zhang.
To learn more about export financing and whether expanding overseas is right for your business, please visit East West Bank's Business Trade Finance.
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