Company Details
Company: China Export Finance
Based: London; with offices in New York and Shanghai
Clients: Around 25 buyers, 25 sellers
Website: www.chinaexportfinance.com
Who are you?
Karl Alomar, CEO of China Export Finance, which was founded two and a half years ago to open up the Chinese export market.
What do you do?
We provide supply chain services. We have two customers in every relationship – the buyer and the seller. Our headline service is to do with credit terms. Traditionally, China doesn’t accept credit terms; they ask for letters of credit, or up-front payment for goods being purchased out of the country. We’ve created a model allowing early payment, so securing better credit terms for the buyer.
What does this mean in practice?
Problems going into China revolve around structuring reliable relationships with manufacturers, or creating payment terms people are used to getting elsewhere. We’re able to support you in building lasting relationships with suppliers, to monitor and audit suppliers in China for you, and to secure credit terms which essentially increase your working capital.
What size company suits you?
We work in the small and mid-sized business market. Major companies generally have departments to handle these things. But companies with, say, £5m-100m revenue a year – this market could really benefit from the relationships and network we have in China.
Why should I care?
China is, even with the changing economy, still a powerhouse in manufacturing. Any company not sourcing at least a proportion of its goods from China is missing out on an opportunity to improve its supply chain. And what was difficult before has now become a lot easier. We’ve resolved difficulties surrounding logistical issues, and financial issues of meeting Chinese exporters’ demands on payment terms. So now, suddenly, you’re able to take advantage of a huge manufacturing powerhouse.
What can you do that I cannot do for myself?
We can establish credit terms and make payments that are open credit, so you get a much stronger working capital position. We can help on auditing processes – making sure manufacturers are solid and capable of producing the required quality. We can resolve dispute issues that are due to language differences. And we also manage the document flow.
What mistakes will you prevent me making?
One of the biggest problems with China is risk – from both sides: the exporter feels there’s a risk dealing with foreign entities because they don’t know them, and the foreign entities feel there’s a risk because they have little control over the exporters. We take away much of this risk, as well as helping you avoid mistakes in dealing with bad exporters, such as paying down too much early then not getting what you want, or working within a fraudulent structure that’s trying to take advantage of you.
Give me an example
We work with a number of industries. We have one business in the auto-parts industry that needed to compete aggressively in its market and secure better credit terms for its buyers. But it was unable to do that because it didn’t have the working capital. It had three factories it sourced from, we established relationships with all three, and ended up with 120-day credit terms for them. So the buyer was able to extend those credit terms to its customer and as a result, has built its revenues between 10 and 15% in the past year.
Why should I trust you?
We’ve come from very solid foundations, from a business that has done more than $2bn worth of exports out of China, and our board of directors is very significant, with people well recognised in the industry. This offers a certain level of credibility. We know what we’re doing and how we do it. We create lower risk for people, we’re taking a lot of risk on your behalf.
What will it cost me?
We’re often lucky enough to replace existing costs, and therefore not bring any cost to the buyers’ side. So in some situations it becomes a free service to the buyer. In other situations, where margins are tight, there is a basic cost of funds that the buyer is sometimes asked to cover to extend the credit terms. It’s going to be similar to an overdraft – very reasonable.