Financing programs and other numbers-heavy announcements often ride pillion to the glitzy P&A at Dealer Expo. Still, GE Capital Solutions used Indy to unveil a new financing system for importers and exporters that could profoundly impact imports from Asia.
On the surface, GE's Trade Flow program alters how importers finance the products they bring into the United States. Drilling down, however, one realizes that it will follow every aspect of the supply and sales channels, from the factory where the machines are manufactured to the moment the U.S.-based dealer or consumer takes delivery.
While aimed at both sides of the import-export market, Trade Flow Financing is marketed primarily to U.S.-based importers. Carter Brothers/SYM and United Motors are early signers.
According to United Motors' purchase and finance manager Carlos Perico, the Trade Flow program will enable his 10-year-old company to stock more inventory and order inventory more frequently. It also will free up working capital that can be reinvested into marketing programs, R&D, operating systems and other areas. This in turn would allow UM dealers to offer customers a larger selection of vehicles, he notes.
"Given that the demand is there, the dealer is able to have the breadth of the UM product line on the floor," says Perico. "The more choices the end user has, the more bikes he can buy."
Traditional financing practices require an importer to pay almost all of its costs up-front, before ever seeing the product. This forces the importer to give up a large amount of working capital for down payments and letters of credit.
Trade Flow Financing eliminates these upfront costs. GE provides importers with a line of credit containing terms that match the inventory turns, and guarantees payment to the exporter up to 100 percent of the value of the products.
The program is a big leap of faith for GE, as it has to build a trusting relationship with the importer and exporter — which often are two entities doing business on opposites sides of the world, says Jack Kang, GE's trade finance marketing director. And by financing both ends of the deal, GE also assumes the risk.
"We found a way for GE to get security on the motorcycle while it's coming over the water. I can't say how we do it — that's the 'secret sauce' — but we felt good about it," says Kang.
Given GE's extensive involvement in the sales and supply chain, both importer and exporter are carefully screened — a due diligence process that could affect not only any questionable product manufactured in China and Taiwan, but also the companies that bring that product into the United States.
GE is interested only in partnering with importers with a good reputation, a vision of how they want their companies to grow, and who support the traditional sales channel in the U.S., says Kang. Once the partnership is established, GE vets the importer's supplier. GE employees in the country of origin visit and tour the supplier's manufacturing plants and conduct extensive background checks.
For approved transactions, financing terms begin the moment the motorcycles, scooters or ATVs are packed into containers and placed on the shipping vessel. The terms end, and the importer starts making payments on the credit line, when the vehicles are sold to the end user.
On the export side, GE will guarantee payment prior to shipping and assumes responsibility for credit and collections. GE also can monitor the importer's credit line and how fast inventory is turned over.
GE commandeered similar programs for the furniture industry and six other markets before venturing into the $260 million powersports import/export market.