Blog/News

TJ Maxx Stays Strong

Sadie Keljikian, Express Trade Capital

TJ Maxx seems to be resilient to the current blight on retail in the US.

Many brick and mortar retailers have been bleeding money for some time now, many of them unable to keep up with the demanded variety and advancing technology within the in-store format. Some fast-fashion retailers are managing to scrape by, but most mid-level and luxury brands are facing closures and even bankruptcy.

TJ Maxx, however, appears to be an exception to this trend. Experts attribute the chain’s success to its somewhat unique model, which is reminiscent of a different era in retail shopping. TJ Maxx has a rich network of buyers, all of whom seek out relatively small quantities of discounted items, which constantly change in each of its (approximately) 3,800 retail locations. The result is, as Wall Street Journal describes, “a constant treasure hunt.”

TJ Maxx continues to succeed, exceeding Nordstrom and J.C. Penney combined in sales and maintaining a market value almost seven times that of Macy’s.

Learn about Express Trade Capital’s trade finance solutions here.

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Benefits of a Letter of Credit

Sadie Keljikian, Express Trade Capital

If you import goods, your suppliers probably require that you provide a deposit when you place an order. Suppliers usually request this for two primary reasons: (a) by getting an upfront deposit, the buyer is less likely to default on the remainder of the balance owed because the buyer would lose their deposit; (b) cash flow – the supplier needs funds to produce the goods and deposits are essentially interest free cash. Unfortunately for importers and wholesalers, deposits tie up and divert cash from day to day operations and other revenue generating or expansion oriented uses.

There are a few ways to avoid leaving substantial deposits or tying up cash to start production. First, you can minimize the size of your orders to avoid depleting your cash flow, but that would inhibit your growth. Big-box retailers generally place very large orders and offer significant opportunities to growing import businesses, so unless you find a way to accommodate these larger orders, it will be hard for you to attract big buyers. You can stagger orders so you don’t have to pay for everything all at once, but at some point, if you want to make substantial sales, you will have to find a way to finance large orders.

Another option to mitigate the burden of tying up cash for production upfront is to negotiate better terms with your supplier. If your company is large or you have a good history and/or trusted relationship with your supplier, you may be able to obtain goods on credit.  If you can get this option, use it.

A third option, if you want to take on larger orders and cannot obtain terms without leaving a deposit, is to offer your supplier a commercial Letter of Credit (“LC”) instead of a deposit. This gives your supplier a bank guarantee, which is an asset they can often use to obtain funding directly from their bank.

How do Letters of Credit work?

A letter of credit is a conditional assurance of payment provided to the supplier’s bank when the importer places an order. The LC is issued by a bank or financial institution on behalf of the buyer/importer and eliminates the need for a deposit by ensuring that both sides respect the conditions of the transaction.

Both parties benefit from an LC. The supplier becomes the beneficiary of a financial instrument they can use as collateral to obtain funding. They also obtain a bank guarantee of payment in addition to the buyer’s promise to pay for goods if all obligations are fulfilled. The buyer avoids the risk of tying up funds overseas and gets better control over the transaction. If the buyer uses a third-party provider, they can even obtain an LC without typing up collateral or cash lines with their own bank or financial institution.[1]

A commercial LC gives buyers comprehensive control over their importing process. It covers the cost of the goods themselves as well as shipping costs, allowing purchasers to keep their money until the goods are approved and shipped. While an LC may add to transaction costs, it grants the purchaser more control and more capital flexibility while giving the supplier more cash flow and some assurance of full payment.

Letters of credit benefit both the buyer and the supplier.

A letter of credit also serves as a layer of protection to ensure that you don’t waste time and money on an order that may not reach you on time or as expected. While your agreement with the supplier provides some degree of assurance that you won’t be left without your goods or money, there are no guarantees. Depending on the supplier, you may find yourself with faulty, defective, incomplete or late orders. Untrustworthy vendors can compound the issue by keeping your deposit regardless of their errors or inability to complete the orders as agreed. Without an LC, buyers can still take legal action against their supplier, but justice is uncertain and costly, particularly if the supplier is in another country.

In contrast, an LC requires collection of documents proving that the order is as expected and sent on time before the bank releases any payments to the supplier. The bank is basically acting as an escrow agent to ensure compliance by all interested parties. Thus, importers purchasing inventory overseas never need to worry about lost working capital due to failed or incomplete orders, and suppliers can still obtain the cash flow they need without burdening their customers.

Interested in discussing Letters of Credit or other trade financing and supply chain management solutions further?  Speak to one of our specialists.

One of the most important, often hard-won lessons is how to protect one’s self and one’s assets in transactional proceedings. Letters of credit are a safe, simple way to protect yourself and your purchase, especially in the case of international import/export agreements. You and your vendor are legally and financially protected, so you can even place orders from less-than-trustworthy vendors with confidence.

[1] Express Trade Capital specializes in issuing LCs on behalf of client without requiring cash collateral or deposits. We tie up and freeze our own lines on behalf of qualified clients undertaking verified commercial trade transactions.

July Fourth Holiday Hours

Valued clients and associates:

Please be advised that our offices will be closed on Monday, July 3rd and Tuesday, July 4th. We kindly ask that you plan accordingly.

Thank you and a Happy Independence Day to all!

Hidden Dangers of Loan-Stacking

Sadie Keljikian, Express Trade Capital

One of the most consistent difficulties one encounters in the process of expanding a wholesale business is the cash flow “crunch” that can occur when your customers want to order more of your products than you can afford to sell at once. Most customers don’t realize that wholesalers must pay their suppliers, shipping costs, and operational funds in the process of selling their goods to retailers. There are a few ways of handling this without having to turn down the sale. Many businesses choose to take out traditional-style loans as needed, but this can actually create more difficulty in managing your business’s finances.

It’s best to borrow conservatively.

If you receive multiple loans to boost your business’s cash flow, each one can hurt your credit, especially if you receive them in quick succession. When a business takes out multiple loans quickly, it implies that the business carries significant debt and very little collateral, which in turn, indicates high-risk to lenders. In addition, the more loans you take out, the harder they become to acquire, especially if the financial institution from which you borrow performs “hard” credit inquiries.

You may or may not be familiar with the concept of hard credit inquiries, but you’ve certainly been the subject of one at some point. Financial institutions perform hard credit inquiries (as opposed to soft inquiries) when a business or individual is actively seeking credit. This can be in the form of a credit card, credit line, loan, mortgage, and sometimes other financial commitments, like rental agreements. Hard inquiries reveal more details about your business’s credit and bill-paying habits, so a high credit score doesn’t necessarily guarantee approval.

When an institution performs a hard credit inquiry, your credit score will inevitably drop a few points, which isn’t typically a problem unless your credit is already compromised. Again, taking out multiple loans in a brief period will deplete your credit score more noticeably, so avoid it wherever possible.

Know your options and choose wisely.

A popular fix for mounting interest charges on multiple loans is debt consolidation, or “loan stacking.” Debt consolidation companies help you to pay off your debt fully and more quickly than you could on your own by decreasing your interest rates and combining your payments. Sounds perfect, right? But beware, there is more to your creditworthiness than simply your credit score.

The problem with loan stacking is that although it can help you get out of debt, it can also further deplete your credit (though not always noticeably) in the process. For this reason, it is vital to remain informed throughout the lending process, regardless of what method you choose to pay off your debt. Often, loan consolidation companies assist you by providing another loan to pay off your debts. Again, it sounds appealing, but you need to bear a few things in mind if you choose to do this.

Issues can arise when your hard credit inquiry reveals excessive borrowing or any loan stacking. Lenders often avoid taking on customers who have a history of loan stacking because it indicates a few unfavorable habits. As mentioned above, stacking one’s loans is usually a symptom of multiple unpaid debts that accrue overwhelming interest. Obviously, this indicates to a lender that you not only have poor bill-paying habits, but that they may not receive the interest they are owed if you struggle to pay and choose to consolidate again.

Alternative lending may be a better option.

Consolidation is a double-edged sword. Repaying your debts as quickly as possible is good for your credit score, but using consolidation services can still hurt your ability to borrow funds in the future. An excellent way to manage an ongoing need for working capital is to instead implement some form of trade finance, particularly factoring.

With trade finance solutions, you consistently receive funding against your purchase orders or receivables to avoid depleted operational funds. Since the funds are only provided against confirmed sales, they are typically in smaller amounts and often don’t require further action from you. In the case of factoring receivables, your financial institution buys your current receivables and collects from your customers. This means that your cash flow is sped up, you needn’t pay back any of what you receive (barring a chargeback), and you are no longer responsible for those collections.

The long and short of it is this: business loans are useful, but be aware of how much debt you carry and make a specific plan to pay your debts. Even with sometimes helpful solutions like debt consolidation, borrowing more than you can reasonably pay back on time is unwise in the long term. When making decisions about your business’s financial future, be as conservative as possible and consider how your decisions today might affect your ability to grow or recover if you need funding in the future.

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Collecting on Tough Accounts

Sadie Keljikian, Express Trade Capital

Selling goods or services on open terms is a mixed bag. On one hand, open terms can attract more volume and bigger customers with the potential to accelerate your growth and increase revenues. On the other hand, allowing customers to pay later diminishes your cash flow and creates the risk of payment default.

Here are a few ways to protect yourself against delayed payments and handle tough customers:

Structure your payment terms carefully upfront.

The best way to avoid payment default is to carefully structure the terms of your relationship. You should perform credit checks on new customers before offering terms. If you can’t, at least ask for credit references to get an idea of that customer’s bill-paying habits. Use the information you gather to determine proper payment terms. For example, if a customer tends to pay late, you may want to take a deposit upfront, or include late payment terms or early payment discounts to offer incentive for timely payment. If a customer has a history of stiffing vendors and engaging in unethical practices, perhaps you should not offer payment terms at all and instead demand payment upon delivery or only deliver small quantities. Conversely, if a customer has good credit, you can offer terms and rest assured that they’ll pay.

As a recap, if you’re concerned about poor payment habits, include provisions in your customer’s contract indicating that you will charge interest on past-due invoices and update their payment terms if their payments are habitually late. If a customer is particularly problematic, require cash on delivery, or “COD”, rather than open terms.  Follow through on these penalties diligently. Mistakes happen, but imposing and enforcing a financial penalty on late payments and controlling your customer’s access to open terms gives you more leverage to collect.

Invoice punctually and consistently.

When feasible, invoice your customer for each shipment. Some vendors choose to bundle multiple shipments and transactions into one invoice periodically (i.e. weekly or monthly) to avoid large quantities of small invoices. However, combining transactions can cause problems when you’re collecting.

One such problem arises if a customer doesn’t communicate or place a re-order after their initial purchase. Because they aren’t invoiced immediately, they may forget or be difficult to contact for collections. Unfortunately, customers will sometimes dispute charges that they may or may not remember, which will further slow up your processes and potentially cause legal difficulties.

For these reasons, it is good practice to consistently and immediately invoice your customers each time you fulfill a customer’s purchase order. Once the goods are delivered or the service is rendered, invoice your customer soon thereafter to ensure that your records are accurate and that you’re always paid.

Follow up regularly and without apologies.

Following up with customers on past-due bills is uncomfortable.  There’s no denying it. However, if you are polite, professional, and follow up as a matter of course, collecting can be just a part of the process, rather than a cause for confrontation.  Another way to avoid bad blood is to outsource your collections to companies like factors who specialize in collections. By having a third party collect your invoices, you can be the good guy while your factor or collections agency does the dirty work for you.

When managing your collections process yourself, you should automatically check in with your customers as soon as a payment becomes past due. Always approach the situation logically and professionally and be firm, but avoid a “bad cop” attitude. Mistakes happen and your customer may not be aware that their payment is past due or there may be other legitimate reasons why they haven’t paid yet.

Whether it’s you or a third party (e.g. factor) collecting your invoices, be ready to enforce the terms and press the issue without apology. Although you may feel like the bad guy, you are ultimately creating an environment in which you and your customer can build a healthy relationship. Enforcing obligations re-enforces expectations and even helps your customers avoid interest charges and bad credit.

Keep careful records of all interactions, invoices and amounts in question in case your customer is confused and/or attempts to dispute payment. For example, if your customer wants a proof of delivery, you should have it filed next to your invoice. Since it is their niche, professional third collectors and factors are particularly adept at keeping records at making sure documentation is in order.

Stay involved and keep tabs on past due payments.

Some customers are tricky. They may tell you there’s a check in the mail or that they’re sending it today, when in fact, they are perpetually late with payments and often lying. These kinds of customers require a particularly shrewd approach. If they are local to you, offer to send a courier to pick up payment rather than have the customer send it in the mail. If not, consider selling to them exclusively on COD terms or requiring them to pay you via credit card to avoid delays. Get creative. There’s no limit to how you can structure transactions, communicate with your customers, and otherwise effect collections.

Third Party Outsourcing.

As described above, using a third party to provide collections has many advantages. Collection agencies are resourceful when it comes to particularly slippery customers, but their services can be expensive. Many wholesalers prefer to use factoring, since the “bang for your buck” is more substantial. Factors typically buy invoices from you at 80% of their face value, collect from your customers, and then pay you the remainder of your invoices’ value, less factoring fees (typically 1-3% of the full amount). So, for a relatively low cost, you receive your funds immediately and your factor takes full responsibility for your collections process.

If you’re new to this, it may take you some time to find your own approach. Always remember to be friendly, but firm. As mentioned, these interactions can be uncomfortable, but you can make the best of it in how you choose to frame and approach it. The more you systemize your collections process, the easier future interactions will be for you and your customers.

Click to learn how Express Trade Capital can streamline your sales and collections process.

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Asset Class Break-Down

Sadie Keljikian and David Estrakh, Express Trade Capital

What are asset classes?

Assets are valuable properties owned by a business. There is a wide variety of assets across different industries and business structures, each of which affords different financial risks and opportunities. Assets can include stocks, bonds, real estate, fixed income, invoices / receivables, commodities, cash equivalents and personal investments.

Beyond the security of possessing a diverse portfolio, holding a variety of assets allows businesses to leverage their assets as collateral to in exchange for financial assistance from a bank or other financial institution. As a rule, the wider the variety and greater the number of assets, the more potential options there are to finance the business.

Here is a collection of the most commonly used assets and how they can best be used to finance a business:

Stocks as Collateral

Stocks are shares of ownership in publicly held companies. Since the value of a business can fluctuate quite dramatically with little or no warning at any given time, stocks can be more volatile in the short term. In other words, the value of stock assets can fluctuate significantly. Therefore, if stocks are used as collateral, banks and other lenders will offer significantly less funds relative to the current value of the portfolio. Advances of 50% are common, but it depends on the lender’s level of confidence that the current value of the portfolio will not decrease beyond the amount borrowed (or the interest due on principle).

Stock Raises and Equity Financing

Equity financing is a practice typically reserved for businesses that would like to raise funds to finance growth, but do not otherwise have sufficient assets or credit to obtain traditional lending facilities to finance their growth. The most popular variety of equity finance is venture capital, which is typically a high-risk, potentially high-return investment. Equity financing requires building business proposals and selling investors on business model that they believe can be executed with sufficient certainty.  After all, why invest in a company unless you believe it’s going to grow, become more valuable and therefore give you a good return on your investment?

Fixed Income

Fixed income securities, or bonds, are investments that provide returns in the form of scheduled payments over time and eventually provide full return at maturity. The payments may, however, vary in amount over time. Depending on the credit debtor of the bonds, the value is of such assets does not fluctuate as compared to stocks. The note will be at face value and fluctuates only with inflation and the creditworthiness of the debtor. US government bonds, for example, are considered extremely secure when used as collateral.

Fixed income securities can be leveraged as collateral better than stocks because the lender can better rely on the asset maintaining its value from the time the loan is given until it is repaid. This allows lenders to give higher advances relative to the value of the asset. For example, while a lender might only provide 40-50% against the value of stocks, they might advance 60-90% to the same borrower against their bonds. So, while stocks have much more potential to increase in value, the reliability of such fixed income assets allows this asset class significantly greater collateral leverage.   Therefore, when used as collateral, fixed income assets should unlock more cash flow vis a vis stocks used in the same way.

Real Estate/Commodities

Real estate, which is also a form of equity, is extremely useful in financing. The most commonly known varieties of real estate financing are mortgage loans. However, in business finance, there are other ways to use real estate and commodities to fund day to day operations. Commodities can include precious metals like gold, agricultural land, and oil.

Personal Property Assets

Property assets are quite unique. They are often items of value that will depreciate, or even lose their value entirely over time, including things like cars, art, construction equipment, computers, and even race horses. Such assets can also be sold or leveraged as collateral. However, since they are not as easily bought and sold as stocks and bonds, their value is less liquid and thus, lenders price the extra risk into the cost of borrowing funds. This also impacts how large a percentage of the value of the asset lenders are willing to provide.

Due to liquidity concerns and depreciating value, borrowers should expect higher interest rates and lower advance rates. Lenders giving only up to 30-50% of the value of collateral is not uncommon. There are lenders who specialize in certain assets (e.g. art) and are better able to protect themselves against the risk. These specialized lenders can therefore provide higher advance rates and more accurately price the asset and any secured loans against it.

Common Business Assets

Invoices, equipment, machinery, and inventory are typical business property assets and are very appealing to lenders as a form of collateral.

Although these are all business assets, they are not created equal. For example, the value of an invoice depends on the creditworthiness of the customer who must pay that invoice and the likelihood that they will pay the full amount. In contrast, equipment and machinery loans are typically given by banks or specialized lenders who know how to price and sell machines if the loans default.  Inventory also fluctuates in value depending on the nature of the inventory, how easily it is sold, how much its price fluctuates, the business owners’ track record for selling similar inventory, and other potential factors.

Other Types of Assets and Getting Creative

While an asset usually has a fixed value and can be readily bought and sold, some transactions require more creative tools. For example, many wholesalers obtain purchase orders from their customers in advance of production but don’t have enough funds or credit lines to pay for their goods. Certain lenders specialize in outlaying funds to pay for production in exchange for either interest or a share in the profits of the underlying transaction.  This is called purchase order fund or “P.O. funding” and it is unique because it is neither a regular unsecured loan to a company based on financials, nor is it a secured loan against assets. Such lending is basically a hybrid of an inventory loan (since the funds are being used to pay for pre-sold inventory and the inventory purchased is used as collateral to secure the loan) and regular business line of credit.

Technically, a purchase order (or “P.O.”) is not an asset because it has no inherent value; it is simply a customer’s order to produce goods or services at an agreed upon price. While the PO funder is secured by the inventory that they finance and they often take a security interest against other assets of the business, the PO itself does not have any value until the goods are delivered as per the instructions of the customer. However, once the PO is complete and the customer is invoiced, many lenders are happy to take the resulting assets (i.e. receivables – invoices with payment due on a later date) and advance cash against them. This is called factoring. Unlike PO funding, which has what we might call “soft assets” or no assets, a factor advances funds against the value of a receivable, which is a common, bankable asset.

The point is that certain situations require creative solutions to accommodate the business and the transaction. Knowing how to leverage your assets (and sometimes even your non-assets) can be the difference between growth and stagnation or success and failure.

The bottom line is that in each of these instances, a business can leverage assets it already has and requires in its normal course of operations. By leveraging its assets as collateral, a business can access funds that are otherwise locked or frozen in value of those assets usually while still controlling, possessing, and deriving the full benefits of the assets. So, you can run your machines while using funds advanced to you by giving the lender a security interest (or “lien”) in the machine.

If a business intends to grow, it is, in the vast majority of instances, preferable to finance as much as possible through unsecured credit lines and credit lines secured by assets because interest will almost always cost less in the long run than selling equity (and often control) in your business for much less than it would be worth once you’ve had a chance to increase revenues through traditional financing vehicles.

The Shipping Obstacle Course

Sadie Keljikian, Express Trade Capital

Importing into the US requires considerable coordination. When you import goods, your shipment is often relayed among several other parties before you receive it: the supplier/exporter (or the person who ships the goods to you), the warehouse, carrier, freight forwarder, and customs. All throughout the supply chain, your goods need to be physically and documentarily prepared for each stage of transport and inspection to avoid delays.

Below are some of the most common troubleshooting issues importers encounter and how to address them:

Rolled Shipments

A “rolled shipment” is a shipment that has been intentionally delayed by the carrier. This can happen if necessary documentation is missing from the shipment, or if the carrier experiences a decrease in capacity, an increase in demand, or both simultaneously.

The best way to avoid this is to either develop a relationship with several carriers over time, or use a freight forwarder, since they will have relationships with carriers already. Confidence in any carrier’s reliability can only be achieved over a long-term business relationship, so if you don’t have the time for trial and error, it is wise to take advantage of a freight forwarder who’s already done it. Freight forwarders are also very helpful in auditing your shipping documents and making sure that nothing is missing, so you are unlikely to experience a rolled shipment delay in the company of an experienced forwarder.

Transshipment Ports

“Transshipment” means your goods will travel on more than one vessel to get to you. If your goods go from the original sender to a transshipment port before they reach you, you may find your goods delayed in transshipment. This can happen if the port accidentally misses a transfer of goods from one freight carrier to another or, worst case scenario, accidentally sends your goods to the wrong location. The simplest way to avoid this is obviously to send direct shipments from point A to point B without the need for transshipment. Depending on the point of origin, however, this may be a challenge.

The best way to avoid issues if you absolutely must transship your goods is to triple check all your paperwork and make sure your goods are properly labeled, declared, and any permissions obtained prior to shipment. You may want to outsource this task to a freight forwarder, particularly if you and your staff aren’t fully comfortable navigating logistical complexities.

Trade Route Delays/Port Congestion

Often, freight vessels make several stops in transit to accommodate goods bound for multiple destinations. Although this is not unusual, the more stops a vessel makes, the greater the possibility of delays at various points along the way. This may be due to port congestion or insufficient paperwork attached to the shipment.

Unfortunately, these kinds of delays are sometimes unavoidable especially when they relate to issues like heavy traffic at ports or malfunctioning equipment. Again, an experienced freight forwarder can set you up with carriers who know how best to prepare and prevent issues that occur in transit from delaying your goods.

Inspections

Holds in the inspection process are some of the most common reasons for delays in shipping processes. The specific reasons behind these delays can vary, but most of them are related to the United States Customs and Border Patrol, or CBP regulations.

The foremost purpose of CBP regulations is to ensure that any incoming materials are safe to enter the country. If any of the goods you ship are deemed dangerous (weapons, chemicals, pharmaceuticals, etc.) or environmentally hazardous (plant matter that may host foreign pests, etc.), you must arrange all necessary permissions and declare your goods in detail to avoid holds. Otherwise, there is a chance your goods will be held indefinitely. Although there is no way to avoid inspection altogether, since inspections are often performed at random, having your paperwork in order gives you a greater chance of having a quick inspection or bypassing inspection altogether. If the goods are made to fulfill customer orders, make sure you communicate with your customer to keep them apprised of delays and coordinate expectations accordingly. This can prevent cancelled orders and potential returns and chargebacks down the line.

External Factors

Occasionally, your shipment will be held up for reasons that are out of anyone’s control. Inclement weather at sea, damaged vessels, or random flagging at ports can push back the projected arrival date of your goods by days, sometimes weeks. If you’ve taken care of all documents and permissions ahead of time, your shipments probably won’t be held for long, but the best way to avoid missed deadlines is to book your orders a minimum of 2 weeks ahead of the date by which you need them. You will be grateful for the leeway if anything unexpected happens in transit. As for unprecedented disasters like bad weather or sinking ships, make sure that you or your supplier obtain sufficient insurance coverage to offset any damages that might occur while the goods are being transported by the carrier.

Researching documentary requirements and carriers can help you avoid most of the issues that can cause delays in shipment, but hiring a freight forwarder simplifies the process significantly. Their experience and knowledge allows them to advise you in customs compliance and insurance, as well as direct your goods to reliable carriers and well-equipped ports, making delays in shipment as unlikely as possible.

Good luck and happy shipping!

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CBP Regulations 101: The Basics

Sadie Keljikian, Express Trade Capital

US-bound importing/exporting is one of the most complex and vast international industries in existence. Importers have numerous factors to consider in every transaction, including sourcing within their supply chains, warehousing, transportation, customs regulations, and more. Although importing is appealing as a potentially lucrative business, it requires an enormous amount of preparation and organization and should not be taken lightly.

One of the most complex among these factors are the regulations under United States Customs and Border Protection, or CBP. Familiarity with these regulations is essential in the importing business because if a shipment is in violation of CBP’s regulations, it will be delayed at port and potentially taken to a detention warehouse, where it may not be released and distributed for months, if at all. Since most of these regulations are generally focused on national security and health, it is vital that you learn the requirements and do everything you can to adhere to them.

Intellectual Property Rights Violations

This is one of the easiest regulations to accidentally violate because if you haven’t licensed your goods, you may be in violation of another business’s intellectual property without even realizing it. In order to prevent delaying your goods and ensure that any product designs you own aren’t plagiarized, you must register them at the United States Patent and Trademark Office. This will alert you to any existing violations and make sure you never become a victim.

If you find that your goods are, in fact, in violation of another company’s licensing or intellectual property, you won’t be able to sell them in the US in any event. So, it is wise to investigate as thoroughly as possible prior to production to avoid spending money on goods you won’t be able to sell.

Agricultural Products and Food

If you import fruits, vegetables, meat or plants, it is wise to prepare for a number of possible delays. First, it is vitally important that you declare these items on your CBP declaration forms. Next, you should ask permission to transport these goods in advance and obtain any necessary permits. For example, if you are importing any seeds or cuttings intended for propagative purposes (meaning they will be planted or replanted when they reach their destination), you need a foreign phytosanitary certificate before the order arrives.

Due to the potentially disastrous environmental effects of certain pests and soil from foreign ground, all plant matter is inspected upon arrival at US ports. Provided that they are declared and found to be free of pests/soil and as described, most dead plant matter (meaning not intended to be propagated) will be permitted entry without incident.

Meat-based imports are equally, if not more, highly regulated than plant-based ones due to legal requirements from the Food and Drug Administration, or FDA. The primary concerns surrounding these products involve diseases like hand-foot-and-mouth disease (HFMD) or bovine spongiform encephalopathy (BSE, also known as mad cow disease), which are still prevalent in certain parts of Europe and worldwide. Goods containing meat products (i.e. prepared foods) from restricted countries are usually prohibited from entering the US, so be aware of the origins of all of your meat-based products to avoid losing your goods at customs.

Read part 2 here!

For more information on CBP regulations, read our next blog or contact us.

Take a look at our website to learn how we can help your business flourish with our trade finance and logistics solutions!

What to Know Before Signing a Factoring Agreement

Sadie Keljikian, Express Trade Capital

If you plan to work with a factor to fund your business, it is vital that you do thorough research prior to signing anything. Obviously, it is important to be educated before signing any legally binding document, but the ongoing nature of trade financing solutions makes them the perfect trap for hidden fees and requirements.

Before you sign on the dotted line, here are some important questions you should ask your prospective factor:

What percentage of my invoice values will I receive in advance (i.e. what’s my advance rate)?

The percentage that you receive as an advance on your invoices is called an “advance rate.” Typically, factoring companies provide up to 80% of the total value when they receive an assignment. It is important to know your advance rate up front so you can predict available cash flow based on receivables.

What is the minimum sales volume required by the factor?

This is one of the primary points in determining whether the factor will accept your application or not. Most factors have a minimum sales volume for clients to ensure that each relationship will be profitable.

You should know that unfortunately, if your sales volume is low, your rates will be higher than that of a comparable business with higher sales volumes, even if it doesn’t keep you from successfully signing a factoring contract. Factoring is still a labor-intensive industry with high overhead so each client has to have enough volume or high enough rates to justify the cost of acquiring a new client.

What fees (beyond the standard rate charged on each factored invoice) will I incur during my contract?

Most factors include fine print in their agreements, which often contain the dreaded “hidden” fees that many have come to expect from banks and financial institutions. These can include termination fees if you end the agreement before the contract is up, annual minimums charged on a monthly basis, credit check fees, misdirected payment fees, invoice modification fees, and a myriad of other miscellaneous charges.

Occasional fees are to be expected, but if they seem excessive or confusing to you, there’s a chance that the factor is unopposed to taking advantage of less informed clients.

Does the factor perform credit checks in house? Is there a fee for credit checks?

All non-recourse factoring companies require a credit check of all customers whose invoices are factored. Since a non-recourse factor provides credit protection on their client’s receivables, the factor needs to know the payment habits and financial soundness of the end customer (i.e. the debtor on any assigned invoice). Credit worthy customers receive credit protection and are therefore considered non-recourse receivables. Non-approved accounts are not insured and therefore they are called “with recourse” because the factor has recourse to their client if the receivables fail.

Ask your factor if they insure your receivables (i.e. are they recourse or non-recourse factors) and, if so, whether they charge a fee for providing credit checks on your customers.

What varieties of factoring does the company offer?

It is very useful to know what types of factoring the company in question offers for a number of reasons. First, it is important to find out if your factor offers recourse factoring, non-recourse factoring, or both. This will determine whether you will be responsible should any of your customers declare bankruptcy without paying all of their factored invoices.

Once you’ve established recourse vs. non-recourse, you want to find out if your factor can adapt services to suit your needs. Practices like spot factoring or selective factoring are helpful if you find that you only want to factor a handful of your receivables. Bottom line, it helps to know if those options are available from the onset.

Does this factor have experience with businesses in my industry?

While it isn’t necessarily crucial to your relationship with your factor, you might be surprised what a difference it can make if your factor has experience in your industry. Each industry has its own unique structure and potential difficulties to consider and when you bring a financial institution into the equation, so it helps if they’ve dealt with the difficulties specific to your industry. Some factors specialize in certain industries. Where possible, try to work with a factor who specializes in and knows your industry.

What is the maximum credit line that will be available to me?

Depending on the factor, there may or may not be a flexible limit on the credit line they can offer you. Typically, a factor is either a department at a bank, or has a close relationship with one or more banks. This allows them to offer substantial credit lines, provided that your customers have good credit. Some smaller factors, however, can only offer limited hard caps on cash lines due to limited access to funds. Ask before you sign to determine if the factor is suited to meet your financial needs.

In general, it is important to research the business with whom you are working, particularly when your sensitive information is involved. The best practice is to familiarize yourself with the factoring industry in general, that should inform any questions you might need to ask in order to be prepared to sign anything. Also ask for references to ensure that other clients have been satisfied with their experience. Use your instincts and do your homework. Your diligence will be rewarded.

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Boosting Sales – Tips to Grow Your Wholesale Business

Sadie Keljikian, Express Trade Capital

For wholesalers, selling to retail customers can be a complex and strenuous process. Unlike consumers, retailers need to be convinced not only of quality and usefulness, but of the uniqueness and longevity of a product in order to feel compelled to devote precious floor or shelf space to it.

Here are some tips to help you boost sales and grow your business.

Monitor your business practices.

Before you can think about adopting dynamic sales practices, you need to make sure that your
business and its reputation doesn’t raise any red flags for potential customers.

  • Create a solid web presence.

When you initiate contact with a retailer, they will usually search for your business online immediately and go from there. Make sure your website looks professional. If you are unable to afford upscale web design, keep things simple and straightforward. Offer as much exciting information about your business as possible (without giving up trade secrets of course). If you are honest and don’t oversell yourself or your product, you will engender confidence and trust right off the bat. Solicit feedback on your site from employees and clients, and constantly strive to produce and publish good, relevant content on your site while continuing to adapt and improve it.

If there are any poor reviews or scandalous details (i.e. a lawsuit) to be found in searching for your company online, be honest with your prospects when it comes up. By controlling how you choose to frame the story and admitting places where you may have erred and have now improved, you can enhance your credibility with prospective client. Discussing how you previously confronted a difficult situation with a client offers an opportunity to demonstrate the character and integrity of your company.

  • Update and Monitor Social Media

If you choose to use social media as a marketing platform, be very careful. Social media is a rich resource, but must be handled carefully so that it doesn’t become more of a hindrance than a help. To the extent possible (and practical), do not allow access to your company’s social media accounts to anyone untrustworthy and be sure that the content remains consistently professional and relevant to your business. You should limit or completely avoid silly or irrelevant photos and shared links and monitor copy frequently for any potentially offensive or inappropriate phrasing.

  • Manage all interactions with prospective clients.

Everything that applies to your business’s web presence can be applied to any in-person contact in which you or your colleagues engage. Be friendly, informative and honest about your business and how it operates. Make sure any sales staff are not only good at selling, but knowledgeable, personable and socially apt enough to lead pleasant and helpful interactions with all prospects. Find a proper balance between driving your sales force and allowing for individual styles and tactics from different team members. If your incentive structure is sound, sales people will be motivated to do their best and will naturally use all their strengths and capacity to get the job done.

Generate leads.

Building your customer base requires patience and focus. Before you can sell to new customers, you need to identify potential customers by casting a wide net. Then, narrow down your market and develop a good rapport with those who show significant interest. Here are a few ways to find leads:

  • Research competitors.

This is step one in the sale process. If you aren’t sure how best to sell your product, it’s a great idea to look at the sales and advertising techniques of your top competitors. See what their websites look like, find out what networking events they attend, and look at as many marketing materials for your industry as possible. If you research a variety of competitors, chances are you’ll find a combination of tactics perfectly suited to you and your business.

  • Attend trade shows.

One of the best ways to find potential retail customers is to attend a trade show. A lot of businesses are inclined to devote all, or the vast majority of their resources to their web presence. While a good website and digital marketing campaign are important, they are not the be-all, end-all of sales. Boots on the ground and hustle might be old school but they’re far from obsolete. Until the machines take over, direct human interactions are still our primary mode of communication and the cornerstone of any good sales strategy. Never underestimate the power of pounding the pavement in an age when more and more people like to meet (and hide behind) the safety and ambiguity of the internet.

Trade shows are beneficial for a number of reasons. First, you will meet a huge number of potential customers in person, allowing you to show the personal, friendly side of your business to a larger pool of retailers than you would generally be able to access. Second, it is an excellent opportunity for you to flex your sales skills and improve your pitch, which prepares you for cold calls and other sales situations.

Exhibiting at a trade show is expensive. Between the exhibitor fees, promotional materials, and travel costs, the total price can add up. However, if you present yourself professionally, get buyers excited about your product, and follow up with interested parties diligently, the benefits will vastly outweigh the costs. In the beginning, you’re just building your database and getting your feet wet while getting a better sense of the market. Don’t expect miracles – this is a marathon, not a sprint, so be patient and don’t be discouraged if substantial sales don’t materialize right away.  It takes persistence, hustle, and grit so stay on top of your contacts, listen to them, and use those insights to improve and refine your product and your pitch.

  • Make phone calls.

Depending on your product, you may find that cold calling is a good resource for generating clients. If that is the case, it is vital that you keep your call volume as high as possible. Obviously, cold calling is, like any aggressive sales approach, a gamble. So, don’t be discouraged if only a small percentage of your cold calls actually lead to sales. This is why high volumes are so important to the success of a phone campaign.

There are many ways to obtain suitable calling lists. You can buy lists from sellers who provide contact information of c-level executives. Many sellers offer their contact information online. You can develop contacts with lead generation websites that specialize in sourcing deals. The best call lists, however, are generated when you do the research yourself or exchange cards or information in person. Such leads are technically “warm leads” that require “warm calls.” If you have had some prior contact or have a reason to call aside from having bought the contact from a list vendor, your chances of making a connection (and sale) improve substantially. Try all methods and see which ones work best for you.

  • Use LinkedIn.

Another way to develop leads is to use a site like LinkedIn. Unlike other social media platforms, LinkedIn organizes users by industry, position, and location. This means that it can be used to both generate leads and pursue existing prospects. Although LinkedIn is currently the largest network of its kind for professionals, there are others that may be worth considering as well, so do your research and find the best platform for your field.

Keep in touch.

Once you’ve generated some leads, make sure you keep in touch with them. Chances are, they’ve got several vendors vying for their business, particularly if you met them at a trade show. Frequency of contact is a balancing act. You want to check in regularly so that your prospect doesn’t forget you or your products, but you don’t want to contact them so frequently that you appear desperate and aggravate them. Use your judgement and do your best to maintain a presence on their radar without becoming an annoyance.

Here are a few tips to optimize your ongoing contact with prospects:

  • Target the prospects you pursue carefully.

The fact of the matter is, a lot of the prospects you find will not be interested in your product. Whatever the reason, this means that you should be sensitive to the level of interest a prospect will show you and choose the prospects you pursue with care. If you meet the person at a trade show, gauge their reaction as you speak to them. Get a sense of their business: is your product a good fit for them? Will you fill a niche that is otherwise unoccupied? If not, are you offering a noticeably improved version of a product they already offer? Does the buyer show enthusiasm for your product(s)?

Once you’ve considered all of these factors, adapt your behavior in pursuing the prospect accordingly.  Find what they’re looking for and see how you and your product can help them achieve their aims.   If you’re not sure about their level of interest, reach out to check in occasionally and don’t be afraid to simply ask. Ask for feedback on your process so you can improve. Assure your prospects that you want to help them, not bother them.

  • Map out and streamline your sales process.

Once you’ve figured out how to navigate your relationship with the prospect, create a game plan for your ongoing contact with them and stick to it. Create small, attainable goals and set deadlines to ensure that you don’t waste too much time on any one prospect, nor let any fall by the wayside.

As you keep in contact, it is also a good idea to create a list of bullet points before you have a phone call. That way, you’ll avoid getting sidetracked even if the prospect has questions that may not relate to your planned discussion.

  • Be appreciative.

As you keep in contact, be appreciative. Buyers usually have to thoroughly research every potential vendor and run logistical and budgetary concerns by their superiors. In other words, if they keep in touch and plan to become a customer, you should understand that it may take some time and thank them for whatever time they are able to devote to your pitch. It’s also a good idea to stay positive. People (including buyers) generally respond better to people who are friendly and flexible. Plus, if you adopt a negative mindset, you will quickly get discouraged when buyers are unresponsive or don’t immediately give the responses you want.

  • Believe in your product.

You are the lens through which the prospect sees both the business and the product. When the person making the sale genuinely believes in what they are selling, not only is the prospect more interested in the product, they are more interested in doing business with a that person. individual touches like this may seem fleeting and inconsequential, but they can mean the difference between a dud and a sale.

Ultimately, experience will inform your sales techniques and some trial and error is necessary to find your best methods. Stay informed, watch trends in your industry, and don’t be afraid to cast a wide net from time to time. Keep going and eventually, your efforts will be handsomely rewarded.

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