Trade Finance Company Relieves Cash Flow Pressure for SMEs in China
October 19, 2011
China Business News
At the recent Summer Davos Forum, the survival of Chinese SMEs was still a hot topic. The tightened monetary policy still has no sign of loosening during the second half of the year, making cash flow a matter of survival for Chinese SMEs as their businesses heavily rely on bank loans.
In light of this, there has been an increasing request for finance innovation. Mr. Andrew Tananbaum, Executive Chairman of CBC (Capital Business Credit, LLC), an international trade finance services provider based in the United States, told China Business News that CBC has paid close attention to the significant financing needs of the large number of Chinese SMEs.. In the past two years, CBC’s financing services have helped resolve the financing pressure between Chinese-based exporters and the U.S. importers.
“Globalization, and the lengthening of the international supply chain has created challenges in customer credit and working capital for many importers and exporters. The current uncertain global financial environment further aggravates these problems,” said Andrew Tananbaum. “CBC’s financing model is designed to relieve the pressure on cash flow between China exporters and U.S. importers. “
Another roadblock Chinese SMEs face is the high interest rates associated with borrowing from a local bank. Commercial bank’s facilities are tightened by the Central Bank. This, combined with the huge financing demands of SMEs, has resulted in private, unregulated lenders offering high interest rates. It is easy for state-owned enterprises and government entities to borrow from commercial banks at quite low rates. Contrarily, SMEs, who heavily rely on the non-regulated financing market, have to bear an extremely high lending rate which can reach approximately 10% per month in some areas of Zhejiang Province.
“In the China export industry, the U.S. buyers are in a good position to get credit terms of 90 days or even 180 days because they have more bargaining power,” said an overseas export sales manager of a domestic manufacturing enterprise. ”This is immaterial when the economy was good. However, when the U.S. is weakening, China exporters are facing cash flow liquidity issues. In order to avoid the risk of bad debts, some Chinese exporters are asking U.S. credit companies to investigate their buyer’s credit, or they are even asking their buyers to share the costs of payment guarantee,“ the sales manager concluded.
Chinese customs statistics show that import and export volume hit $ 318.77 billion in July 2011 with a 21.5% growth. Although the export increase with U.S. slowed, it still reached U.S. $ 29.96 billion, and China was ranked as the number one U.S. trade partner.
During the 2008 financial crisis, lots of American companies shut down or defaulted. This resulted in a large amount of overdue and bad debts to China exporters. This makes Chinese exporters very wary moving forward as they are concerned that history will repeat itself.
Mr. Patrick Ho, CBC Asia Regional Manager & Executive Vice President, commented that CBC has received a lot of inquiries about financing and insuring exporters’ business as CBC’s solutions ensure that Chinese exporters immediately receive 100 percent payment after shipment and U.S. importers still obtain up to 120 days credit. “This helps to reduce trade risk like credit and currency exchange rates etc.,” Ho concluded.
在日益高涨的金融创新呼声中，来自美国的国际贸易融资服务供应商CBC（Capital Business Credit）行政主席安德鲁·塔南博（Andrew Tananbaum）在接受《第一财经日报》记者专访时表示，这两年已经关注到大量中国中小型企业面临融资需求，希望可以通过提供规范的融资服务，缓解中国出口企业和美国进口商之间的资金链压力。