International Funding

Datafordummies · Site Admin

Considering offshore financing? You'll need this information before you take the plunge.

• Developed countries - United Kingdom, Germany, France. Their financial institutions are very similar to ours; however, most are affiliated with a large commercial bank. Therefore, it is best to contact a bank in the country in which you are considering doing business.

• Developing Countries. Today there is more and more funding available to small and medium-sized companies in the less developed countries - South Africa, South America, Eastern Europe, Central Asia, and most of East Asia.

U.S. Institutions

Export Import Bank in Washington, D.C.
The Ex-Im Bank finances exports, it does not finance imports, and no one seems to know why IM is in the name. This bank has financed over $300 billion in exports of U.S. goods and services.

The programs include:
• Working Capital Guarantee
• Short-term, multi-buyer
• Short-term, single buyer
• Bank Letter of Credit
• Financial institution buyer credit
• Medium-term single buyer
• Leasing
• Guarantee
• Credit Guarantee
• Direct Loan (over $10 million)
• Project Finance
• Small Business (if less than $833,333.00, it is processed by the Small Business Administration)

The basic policies of the bank are that U.S. control must be at least 50%, any foreign control must be financed outside of Ex-Im's programs, and reasonable assurance of payment is required.

The bank does not finance sales of military goods or services, with the following exceptions: (1) humanitarian purposes, (2) drug interdiction, and (3) items that have dual use.

Overseas Private Investment Corporation (Washington, D.C.) – O.P.I.C., as it is called, helps finance U.S. investments in developing countries through the following programs:

• Insures investments against certain political risks up to $200 million/project.
• Finances direct loans and loan guarantees: (1) up to 50% financing on new ventures, and (2) up to 75% financing for a successful existing business.
• Finances venture capital companies that provide equity to business overseas.

Its basic policies are:
• It will not support projects that could result in the loss of U.S. jobs.
• Insurance Eligibility – business beneficially owned by U.S. citizen.
• Financing Eligibility – at least 25% of equity in the program owned by U.S. citizens and more than 59% of equity held by the private sector.

US Trade and Development Agency (Arlington, VA) – USTDA funds feasibility studies and orientation visits by individuals from developing countries, provides specialized training grants and various forms of technical assistance.

USTDA funds approximately 125 of these project plans each year, ranging from $50,000 to $1 million. Its basic policies include:

• Costs are shared between USTDA and the U.S. firm. In private sector projects, the USTDA requires reimbursement of the agency's investment after it has been implemented and the U.S. firm obtains a "significant" economic benefit.

• The project must represent an opportunity for sales of U.S. goods and services, generally on a ratio of 75:1. Example: If the feasibility study cost is $100,000, there must be an opportunity for the sale of at least $7,500,000 of goods and/or services.

• U.S. Embassy in the country involved must have endorsed the project.

International Institutions

• Debt – The standard model for international financing in developing countries is The World Bank in Washington, D.C. It lends money to countries for economic development.

The International Monetary Fund (IMF) lends to countries for country operations, not to be confused with the operations of the World Bank.

The World Bank's affiliate, the International Finance Corporation (IFC) lends or provides equity financing for companies.

This basic distinction is carried out around the world through the following institutions, often in conjunction with the World Bank or the IFC:

1. Inter American Development Bank (Washington, D.C.) – Lends money to Central and South American countries. Its affiliate, the Interamerican Investment Corporation (IIC) lends money to companies in these countries.

2. European Bank for Reconstruction and Development (London, England) It both lends to countries in the former Soviet Union and to companies there. Occasionally, it gets involved in equity situations.

3. African Development Bank (Abidjan, Ivory Coast) – It both lends to countries and companies in Africa.

4. Asian Development Bank (Manila, Philippines) – It lends to both countries and companies in Asia.

• Equity – Each of the above institutions has provided financing to various venture capital companies in the U.S. and elsewhere: equity financing from $100,000 to $5,000,000 in developing countries. (Note: These are international institutions and don't require U.S. involvement.)

Also providing equity financing in these countries are various venture capital companies funded by U.S. institutions, OPIC and the Agency for International Development (AID).

In short, there is a lot of money, both debt and equity, for companies desiring to operate in developing countries, providing they can demonstrate the 3M's – Management, Market and Marketing.

International Networking Resources
British Venture Capital Association - Comprehensive source of information on the UK venture capital industry. Search the BVCA "Directory" of members for VC sources.

Business Angels Pty. Ltd. - A matching service for private investors and businesses based in Australia.

European Business Angels Network - A non-profit association, the network promotes the recognition of business angels networks. Its members are all professional in matching informal investors (Business Angels) and entrepreneurs.

First Tuesday - A global meeting place and market place for start-ups. At First Tuesday events and on its web site, entrepreneurs can connect with everything they need to fuel growth: capital, talent, technology, knowledge and services.

garage.com Europe - Contact Katia Verresen, Managing Director of European Business Development. She coordinates Garage.com activities in Europe, including deal origination, marketing, and entrepreneur development. Garage.com is a venture capital investment bank that provides funding services for high technology and life sciences startups. Headquartered in
Silicon Valley, the company has offices in Austin, Boston, Seattle, Israel and London.

International Small Business Consortium - A Dow Jones Business Directory Select Site, it locates business assistance, makes business connections, and provides a newsletter & issues of interest.

National Business Angels Network - A new, national service working across the UK to achieve introductions between private investors (business angels) and businesses seeking finance. Sponsored by the major high street banks and leading professional firms, its head office is in the City of London.

NVST.com - An online hub for the global private equity community, giving participants a means of offering or finding both venture and M&A investment opportunities. Listings may be offered by the principal seeking funding for an
enterprise, or a business intermediary service.

Local SBA Offices - The place to go for information on U.S. Government programs to help small exporters.

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Written by Eugene Foley, a veteran venture capital specialist, former head of the SBA and founder of SCORE.