What Can Transatlantic Trading Do For Your Business?
Our objective is to contribute to the success of African businesses. We work with businesses and put at their disposal our experience and our expertise in international financing research, thus enabling them to acquire equipment and services. Below are the specific supports that Transatlantic can supply to your business:
I) For the Importation of Goods and Services:
- Locate equipment suppliers and research possible financing for the transaction.
- Research equipment and services for businesses that already have financing at their disposal and who wish to find suppliers.
- Help companies to apply for financing from the Export-Import Bank (EXIMBANK) of the United States.
- Help companies apply for financing from export credit agencies from other industrialized nations.
- Enable African businesses to take advantage of The Global Trade Finance Programs available for trade-related transactions in a new or challenging market where trade lines are constrained.
Participating banks in the program can issue lines of credit with payment deferred for three years in order to purchase goods and services in the southern countries (example: an importer from Benin wishing to purchase products in Brazil, China, South Africa, etc.). Transatlantic can confirm quickly whether a bank in a specific country participates in this type of program. If a bank, which participates in the program, decides to finance your business, we can help you locate goods and services that your business wishes to acquire. An example: an African business recently used this financing to purchase buses in Brazil.
We can help companies to reduce the costs of importing commodities—such as rice, wheat, milk, fertilizers, cement, etc.—by consolidating the purchase of several importers who purchase in the same period and use the same ports or ports close to each other. In regrouping the orders of small buyers, it is possible to benefit from the prices linked with volume purchases and also to get better freight rates. In international trade, the freight rates often represent an important part of the cost of imported commodities. It is well-known that overseas transportation, per ton, is clearly higher for small quantities of goods than the price, per ton, of an entire 12,500 or 25,000 tons boat is leased by the importer or the exporter. This strategy, which requires perfect synchronization between importers, can allow a substantial savings on the costs of commodities purchased in small quantities.
II) For the Creation or Expansion of Businesses:
We have the necessary experience to efficiently help you elaborate your business plans. Our services include:
- Research consultants and financing for the feasibility studies.
- Research suppliers for goods and services.
- Help research financing for the project.
- Work with international organizations to research and locate competent and experienced personnel capable of assuming large responsibilities in the management of your business.
If you need financing for feasibility studies, we can help you locate institutions that are likely to help your business to finance those studies. Feasibility studies can be financed by organizations in developed countries. These organizations have conditions, which we can help familiarize you with if you are interested in them. Equally, we can recommend first-class consultants for your feasibility studies.
For large projects that have particular importance for a specific country and require costly feasibility studies, it is also possible to apply for international financing. The project for consideration must represent a variety of the country’s high priorities, including energy, transportation, telecommunication, advanced technologies, industry, the environment, and mining. For some financing, the project must receive an endorsement or have the support of the host government. In 2004, the National Waters Office of Djibouti (ONED) received a financing of $276,790 in order to finance a feasibility studies for the creation of a water desalinization unit valued at $43 million.
- We can guide you and help you to understand the mechanisms of financing for large business project like the construction of social housing.
- We can show you the key areas, which attract financing due to the interest they stimulate, such as renewable energy (for example solar energy), medical equipment, etc. We have, for example, contacts with a company that sells equipment to begin a solar-panel factory, which is a future avenue in many African countries.
- We will give you critical information for the success of your projects.
- We can help you understand, for example, the reasons for which Export Credit Agencies are often hesitant about financing African business projects. One of the major reasons is the lack of confidence in the financial statement of African businesses. We will tell you what these credit agencies expect from those financial statements and what you can do.
- We can also tell you the primary reasons for which the regional or international financial institutions cannot finance expanding or creating business proposals presented by African entrepreneurs. Some of the reasons are the lack or insufficiency of the owners’ capital, the lack of real motivation of the promoter, the quality of the feasibility study, the qualifications of the management team and their lack of experience in the industry in question, etc. We will tell you how you can try to resolve or minimize some of these problems.
Very recently, under Eximbank financing, Transatlantic was able to obtain a financing of $800,000 for a business from Niger. The financing was used to purchase new Mack trucks for transport. We are currently negotiating another financing for the purchase of trailer tankers. In partnering with international development agencies, Transatlantic Trading completed a feasibility study for a milk production company of FCFA 2 billion, and we are currently working with an African development bank to finance the project.
For the financing of Eximbank, before submitting financing requests for African businesses, Transatlantic consults Eximbank’s regulations in order to ensure that the required information for each transaction is included and to determine which requirements are particularly important for the application. We also work with private American banks to obtain their advice in the preparation of those applications. In a recent case, our permanent contact with the private American banks allowed a business to know, with sufficient time, that for that amount of financing, it was strongly recommended to have their financial statements audited by one of the four major international accounting firms.
Transatlantic also consults specialists in the different industries. In case of need, Transatlantic can also place advertisements in specialized journals. The information will be analyzed in order to select the best options for the task at hand.
African businesses often think that large companies offer the best quality at the best price. This is not necessarily true. These companies are especially well-known. A recent study of Thomas Global Register shows that 42% of American businesses do not operate internationally because they do not know how to market their products in foreign countries. Among the surveyed businesses, 15% had problems with the differences in culture, and 12% had problems with language differences.
Some American banks specialize in funding Eximbank transactions and have particularly distinguished themselves in their willingness to finance these transactions. Transatlantic knows these banks and approaches them first for the transactions of African businesses.
American banks each have their financing criteria. Some of the banks only finance short-term transactions (6 months to one year). Others only finance transactions of a certain amount (for example, more than a million dollars) while others only finance operations in certain countries.
III) Eximbank's Financing
A) What can Eximbank financing be used for?
The American equipment and services market is immense and exceptionally diversified. The fall of the exchange rate of the American dollar against the other monies of the world make the price of American goods and services very competitive.
Eximbank finances exportations of almost everything that is produced in the United States. There are many areas of opportunity for Africa.
- Public works equipment (for road-construction companies and those specialized in building)
- Telecommunication equipment and services for public and private businesses. For example, the sale of American communication satellite services.
- Transportation vehicles (industrial transport vehicles, buses, purchase or leasing of planes)
- Airport equipment. With the AGOA program ensuring the facilitation of commercial exchanges between the United States and Africa, Eximbank is particularly able to finance the development of airports, ports, and railway transportation systems.
- Prefabricated houses. Eximbank’s financing can be used to acquire houses or even commercial centers.
- Pharmaceutical products and medical equipment. Eximbank has begun a special program for purchasing generic medication. For private African clinics, this method of financing offers the possibility of rapid expansion.
- High technology (computer equipment, solar energy production equipment, water treatment, etc.)
- Foreign, name-brand equipment made in the United States. Acquiring Toyota and Nissan vehicles, assembled in the United States, can be financed by Eximbank with the objective of encouraging American exportations while creating jobs in America.
- Expansion equipment for existing industrial businesses. Many foreign companies purchase new or remanufactured material. The American market is swollen with new and used equipment. American businesses have industrial material in good condition, which they would like to resell. Sometimes these companies simply want to acquire more sophisticated equipment in order to compete in the market.
- American consulting services. Recently, the TC Basbakani Society of Istanbul, Turkey, benefited from $38 million worth of engineering services from an American company.
- American franchises. Many companies, such as McDonald’s and Burger King, are desirous of expanding their franchise levels in the world. Franchising is a marketing method that allows the proprietor’s goods and services to offer others the right to produce and to sell and share the royalties. It is a rapid way for small and medium-sized businesses to expand. Eximbank’s short-term financing can be used to stock and restock goods and services. Medium-term financing can be used to finance acquiring franchise equipments.
- American cosmetic products, especially those conceived for Africans.
B) Businesses that have benefited from Eximbank financing:
Many African businesses have benefited from this financing. In 2006, Eximbank financed 140 transactions in 23 sub-Saharan African countries for a total of $532 million. Total trade with sub-Saharan Africa increased 10% in the first half of 2007 from the same period in 2006, with US exports increasing by 30% to $6.7 billion.
During these last years, some African companies that have benefited from Eximbank’s financing: (Note: Not all of these transactions were arranged by Transatlantic Trading, Inc.)
- Groupe Sikieye of Niger: $800,000 dollars for the acquisition of Mack trucks.
- Concasseur Basalte of Ndiambour in Senegal: $2 million for the acquisition of road construction equipment.
- Générale Malienne d’Entreprise (GME) of Mali: $2 million for the acquisition of road construction equipment.
- Societe N’Diaye and Frere SARL of Mali: $4 million for the production of gas.
- Trans-Cordec SARL, of Burkina Faso: $2 million for the purchase of industrial vehicles.
- Monarch Communication of Nigeria: $9 million for the purchase of telecommunication equipment.
- Cons-Equip SARL of Senegal: $2 million for the purchase of road construction equipment.
- Ceta Constucao of Mozambique: $672,000 for the acquisition of Mack trucks.
- Flying Doctors Service of Zambia: $3.2 million for the acquisition of Cessna planes.
- Texas Connections Ferries of Nigeria: $745,000 for the acquisition of containers.
- Alumna Company of Guinea: $200,000 for the acquisition of mining equipment.
- L’Etablissement Bechir Ould Moahammed Fadel of Mauritania: $450,000 for the acquisition of agricultural products.
- Overseas Knitwear Fabrics of Ghana: $551,600 for the acquisition of textile machineries.
- Royal Air Maroc of Morocco: $36,258,221 for Boeing airplanes.
- Shariket Kakraba Skikda (SKS) of Algeria: $192,000,000 for an electricity project.
C) What is this financing?
Eximbank support provides US exporters with protection against overseas political and commercial risks, and it gives those exporters the ability to offer competitive financing to their international buyers through export credit insurance and loan guarantees.
The export credit insurance supports exporting US goods and services, including raw materials, semi-manufactured, and finished goods. Eximbank currently offers credits to suppliers and buyer, as well as Letter of Credit insurance for US lenders. Short-term insurance policies support exporting US goods and services with repayment terms, which are up to one year and cover up to 100% of the US contract value. Medium-term insurance policies support exporting US goods and services with repayment terms, which are up to seven years and cover up to 85% of the US contract value.
D) What is Eximbank’s method of financing?
When a financing application is accepted by Eximbank, a private American bank (for example, Bank of America, Citibank, Chase Manhattan Bank or any private bank wishing to finance the transaction) will purchase an Eximbank insurance. It will use the insurance to finance the American exporter, who will deliver the goods or services. The amount of financing depends on the financial situation of the importing business. Eximbank finances transactions equal to a maximum of 40% of the net value of the business. For instance, if it is Bank of America that finances the transaction, then after paying the supplier, the bank will wait for the credit settlement date in order to be reimbursed. In general, the reimbursements are semi-annual with attractive interest rates. If the borrowing African company does not reimburse the private bank that financed the transaction, then Eximbank will be obligated to pay the loan. Eximbank will then turn to the African company to collect its money. Without the guarantee of Eximbank, private American banks would not be willing to finance the transactions with most of the developing countries.
E) What are the interests rates?
The interest rates are very competitive and are tied to the interest rate of the US treasury bond. The interest rates are often much lower than those offered by African banks. The interest rate of Transatlantic’s last medium-term transaction was around 7% per year for 5 years.
F) How can Eximbank help the beneficiaries of AGOA?
The African Growth and Opportunity Act (AGOA) provides reforming African countries with the most liberal access to the US market available to any country or region with which the United States does not have a Free Trade Agreement. To certain African countries, it offers access to the American market without bearing the weight of taxes and/or quotas. In order to profit from the power of this new opportunity, the African manufacturers will have to increase their capacity of production. Eximbank is ready to help them develop their activities by financing the American exportation of production equipment and services.
AGOA offers sub-Saharan countries the following diverse benefits:
- Access, without taxes, to the American market for 1,800 products of more than 4,600 products already accepted before AGOA.
- Unlimited access, without taxes and without quotas, to the American market for clothing made from American fabrics and threads.
- Access, without taxes and without quotas, to the American market for clothing made from fabrics and threads that are not available in the US.
Although Eximbank does not finance importing to the US, the bank facilitates commerce between Africa and the United States. The financing can enable the importation of American material and services necessary to profit from the opportunities offered by AGOA. American industrial equipment can thus be supplied to African producers who need to improve their facilities. American fabric and thread, which are used to manufacture clothing, can be imported from the US, qualifying these clothes to an access, without taxes, to the American market. The primary American material for the production of qualified products under AGOA can also be financed.
AGOA gives clothing manufacturers in sub-Saharan Africa new opportunities for sales in the American market. The increase in sales means the increase in production capabilities. In order to profit from this new opportunity offered by AGOA, Eximbank is ready to help the clothing industry of sub-Saharan Africa and any other eligible industry to develop, by financing the exportation of equipment and services.
G) Other questions:
Is it possible to reimburse the loans in other currencies than the US dollar? Eximbank has begun plans, which give importers the power to repay their debts in certain local currencies, such as the CFA and the Rand of South Africa, by protecting them from exchange-rate fluctuations. The Foreign Currency Guarantee Policy (FCG) was established in order to counteract the threats that constitute these fluctuations. This mechanism aids foreign importers in controlling certain risks linked with exportation credit. It is also possible to take precautions from fluctuations of the dollar by using other means of financing.
Is the cost of transport and custom duty included in the financing?
The transportation expenses to the destination are included in the financing. For landlocked countries, these expenses include maritime transportation to the destined port, as well as transportation expenses over land by truck or rail to the final destination. Eximbank does not finance customs expenses for goods and services.
Coverage of used and new material
In its financial aid, Eximbank covers the exportation of uses materials from the United States. Eximbank sets some conditions on the acquisition of remanufactured equipment. For example, industrial vehicles can be more than five years old.
Financing Plan Program
Eximbank’s financing helps American exporters to compete in industries such as private, electric energy, telecommunications, and other areas in the infrastructure. Moreover, for smaller plans of under $30 million, Eximbank will study the possibility of affecting the necessary financial and judicial analyses, without which American exporters or international purchasers would have to incur the costs. In greatly reducing the costs of the transaction, Eximbank enables American exporters to offer a more complete financial packet to the African buyers during the construction period to the end of production.
Transaction with Governments of Foreign Countries
Eximbank’s program, as with all private businesses, enables foreign public entities to use this financing in order to acquire goods and services. An entity is considered as being a public sector if it is 50% public. If the state wishes to acquire products or to guarantee private businesses in acquiring American equipment, it can do it by submitting a letter of guarantee issued by the sovereign nation (in general) by the Minister of Finance. With endorsement from a state, Eximbank finances 100% of short-term transactions (maximum of 1 year). Medium-term transactions are guaranteed a maximum of 85%.