In these trying times a “Do It Yourself” approach to export financing is fraught with peril

Financing large complex export projects and transactions through Export Credit Agencies, such as the US Ex-Im Bank, is difficult at best and impossible at worst.  Hundreds of moving parts, byzantine structures, political considerations, legal quagmire, shipping and logistics challenges, along with financial considerations, extensive due diligence, host country laws, licensing and public relations are just a few of the factors involved in this year-plus long process. Add to that geopolitical risks a la Ukraine, Russia, or Iraq and the process can befuddle even the most sophisticated practitioners. Thus it is vital to have a highly experienced team of financiers, lawyers, shippers, technical specialists and ECA compliance folks to work with committed exporters and buyers in order to develop and nurture such transactions to success.

Yet oftentimes in their desire to either save money, or driven by false sense of familiarity with the process, the exporter clients prefer to undertake what I call a “home depot” do-it-yourself approach to ECA financing.  During times of relative geopolitical normalcy this approach primarily works for those companies that have extensive experience dealing with ECAs in structuring complex export transactions. During times of political instability such approach is certainly doomed for all novices .

Although there are multiple players in the export finance industry and they range from the largest global banks, law firms and shipping companies, to small brokerage firms and advisors of different stripes; the world of export finance is fairly small with all players of substance knowing each other well and for many years.  For a newcomer exporter venturing into this world, the complexity of the process and the capabilities of the players are not well-known and oftentimes they are misled and misguided.  Thus after taking a hard look in the mirror and forgoing a do-it-yourself approach to complex export financing, the next step any company should take is to really understand the workings of the export finance industry, capabilities of the players, and the importance of an integrated approach of putting together a complete finance, legal, compliance and logistics team early on.

Selection of the financial advisor should not be based on the name alone, but on that advisor’s experience in the target market to be served by the exporter, his or her experience in handling complex transactions and the ability to add value to the process. Good advisors will oftentimes save the exporter such large sums during the structuring and implementation of the process, that their fees pale in comparison.  Once the advisor is selected, the exporter should let him or her invite the other team players into the process. There is a big difference between the exporter being totally committed to the process and working very hard to assist the advisors by supplying the needed information in the timely manner, helping to obtain necessary licenses, interfacing with the buyer etc and having the exporter venture into the process on his/her own. The first approach will lead to the successful financing and the latter will certainly lead to a painful and expensive failure.