By Dennis Grubaugh, Illinois Business Journal. April 2014
EDWARDSVILLE — Technology is making even the most remote points on the planet more accessible, and Illinois entrepreneurs are among those clamoring to ride the global trading wave.
The water can be difficult wading, though, especially during a slowdown in the global economy and particularly when you’re not sure where to start.
“As we cross global borders in terms of international transactions, risk becomes a major factor. I hear from many of our clients almost every day that they have to become more creative not to lose to competitors,” said Silvia Torres, director of the Illinois SBDC International Trade Center at Southern Illinois University Edwardsville, a part of the School of Business. The center provides free, detailed assistance to entrepreneurs — and a network that can connect them to worldwide markets.
Some of the biggest challenges also represent opportunities. Among them are advancing technologies, innovation and research strategies, finding supply chain partners and providers, the increased costs of shipping, rising wages in China and the Eurozone crisis. The list of regulations and documentation is a daunting one and prompted the center this past month to stage a seminar in which the many issues could be openly discussed.
A lot is at stake in understanding the export system. Some $65 billion in goods was sent out of Illinois last year. Some 75 percent of the value is from the state’s larger employers. But 90 percent of the state’s exporters are small- to medium-size businesses.
“We are a very active state; we shipped to 215 countries last year,” Torres said.
The most recent numbers show:
- Illinois is the fifth-largest exporter among states. The top three destinations are Canada, Mexico and China.
- A little over 64 percent of U.S. exports came from manufacturing in 2011.
- Some 632,800 jobs were supported by exports.
The SIUE trade center is part of a 12-center network in the state that jointly reported more than $800 million in export business that it assisted in 2012. This past year, the SIUE center reported more than $57 million in such business.
The Trade Center’s funding comes from two sources. Half comes from the U.S. Small Business Administration, channeled through the state’s Department of Economic Opportunity, and the other 50 percent comes from SIUE. The Trade Center is part of the school’s Small Business Development Center.
The Trade Center provides information at no cost on various aspects of exporting, from companies who are just starting out to more seasoned operations that need advice on business plans, distributors, agents, etc.
The local center works with SIUE faculty and students toward its goals, as well as 11 foreign offices through the State of Illinois Office of Trade and Investment. The newest office is in Sao Paulo, Brazil.
Torres underscores a program called ISTEP (Illinois State Trade and Promotion program), which started with the Small Business Jobs Act in 2010, as a three-year pilot program. Some states have already discontinued funding but Illinois is continuing it with internal funds. Basically, it’s designed to provide companies with financial and technical assistance in three categories — group trade missions, individual foreign market missions and achieving product compliance certification.
Funding is available on a first-come basis, she said.
Under group trade missions, ISTEP helps to reimburse 50 percent to 75 percent of travel costs, not to exceed $5,000 per company. Partial reimbursement is available for up to two company representatives.
Under individual foreign market sales missions, ISTEP helps to reimburse up to 75 percent of related travel costs, not to exceed $7,500 per company. Partial travel reimbursement is available for only one company representative.
Under product compliance certification, financial assistance of up to 50 percent reimbursement, not to exceed $5,000 per company, is available.
“I hear from clients who are trying to attain ISO certification (for international standards) or CE marking, if they are trying to penetrate the European market, or the CCC (certificate) if they are going after the Chinese market,” Torres said.
ISTEP eligibility is extended to businesses that have been in operation for at least one year, have fewer than 500 employees, have a minimum of $250,000 in annual revenue and can demonstrate an understanding of the costs associated with exporting.
“This is continuing in the state through June 30, and I tell my clients, who knows what’s going to happen starting July 1,” Torres said. “We have been able to help over 10 companies so far through various projects, one different than the next. We have been very creative in making these funds available whatever the objective is for the client.”
Al Li, vice president of Global Trade Finance at Regions Bank in St. Louis, which co-sponsored the recent seminar, has spent years on helping clients mitigate financial risks and obtain working capital.
“By 2020 we’re looking at world trade to be at 40 percent of the global GDP, two and a half times what it was in 2010,” Li said. “Global trade is not one of those things we can ignore any more. Your customers are not just domestic, and if they are, there is a world of opportunity out there.”
Not every state has the network that Illinois has, Li said.
Illinois’ top exporting sectors are industrial machinery, transportation equipment, chemicals, computers and parts, and petroleum and coal products. Agriculture, oddly, falls No. 8.
The United States’ reputation for quality manufacturing has evolved. Years ago, in such areas as auto making, it was much lower. Today, that industry sets the standard for the rest of the world, Li said.
Compared to China, he said, the perception of the rest of the world is this country is a much better goods maker.
“One of the trends we’re seeing from Asia is that those countries are trying to secure the food supply from the U.S., because they don’t trust their own food supply as much,” Li said.
The rise of the middle class in such places as India and China has had the effect of increasing interest in more reliable U.S. goods, he added.
The top concern of any fledgling business, of course, is money. Li said banks traditionally do not advance money for businesses that rely heavily on payments from overseas importers, because there is no way to recover those moneys should something happen.
But there are three main sources of such capital, two from the government (the U.S. Export-Import Bank and the U.S. Small Business Administration) and through credit insurance.
The programs offer a mix of loan guarantees and percentage advances on inventory, and they all have restrictions dealing with eligibility.
Regions is a top 10 Ex-Im Bank lender, Li said.
“We can advance up to 90 percent on the Ex-Im Bank guarantee,” he said. “As long as the exporter fits a certain grid in terms of financial ratios, and positive, tangible net worth of the company, as long as they qualify, we can establish an Ex-Im borrowing base line.”
Among financial services that Regions assists with are arranging letters of credit with foreign importers, basically a means of shifting the credit risk from the end client (the importer) to the bank that they use.
By Dennis Grubaugh, Illinois Business Journal. April 2014
[IMAGE: IBJ Apr14 Page 09 Image 0006]
CARLINVILLE — Sherry Brianza’s life centers on cosmetics, but her fondness for the work of the International Trade Center at SIUE goes way below the surface.
The Carlinville native is well on her way to a full launch of a cosmetics distribution company, thanks to the advice she’s gotten and the connections she’s made in the last six years.
“I could not have done this without the trade center. Silvia Torres (the director) has been phenomenal helping me out,” she said.
Brianza was a sales representative for Revlon for many years until 1985 when she launched her first business, Brianza Sales & Marketing, Inc. In that role, she works to place the cosmetics products of other companies on store shelves and with distributors around the country.
Six years ago, she decided to broaden her horizons with her own cosmetics-production company, called Brianza Bella, LLC. As she struggled during the recession to get established in the domestic market, she sought out the help of the SIUE International Trade Center to see what was available outside the United States.
The Trade Center’s network of connections eventually led her to travel twice to Brazil and once to Africa, and she is now working on distributors for her products.
She plans to return a third time to Brazil to nail down relationships.
“I’m looking to relaunch in the U.S. and internationally. Brianza Bella is my company. It’s my chance to be a real success,” she said.
Some would argue she’s already crossed the success threshold, but it hasn’t been easy.
Cracking the world market requires an understanding of not only the exporting process but the financing of it. She is getting that help from SIUE and from Regions Bank.
The line of Brianza Bella products are being manufactured out of a center in California, but the corporation is headquartered in Carlinville, in Macoupin County.
“We’re just doing baby steps now. We’ve got the (U.S.) distribution, but it’s not enough to be proud of,” she said.
Working through the trade center at SIUE and the State of Illinois Office of Trade and Investment, she attended a 2010 trade show in Sao Paulo, Brazil. She had several meetings and meals with important business executives. She paid for some of the trip and the rest was underwritten by the state of Illinois. She returned in 2012. Later, she traveled to Johannesburg, South Africa.
Africa and South America are two huge, emerging markets for her products, which are designed to be multicultural.
Torres said the center will first try to help entrepreneurs identify a market for their products. The initial discussion will involve such things as staffing, language barriers, resources, manufacturing plans and the like.
“If we determine they are ready to proceed, we then go over their products,” she said, noting that sometimes business people have too broad a focus and are advised to narrow what they are attempting to market to better ensure their success.
Evaluation also looks at the potential for profitability and the safety factor — whether the country has established trade practices with the United States.
“We hold hands with companies that way,” Torres said.
In Brianza’s case, the graduate students who work with Torres — who otherwise represents a one-person office — drew up an international marketing plan as one of the first priorities.
Brianza took part in multiple categories of funding. On her first trip to Brazil, she went as part of the Gold Key program of the Department of Commerce and Economic Opportunity, which covers “matchmaking expenses” for business people seeking foreign distributors.
On her second Brazil trip, she went as part of an “individual foreign sales market mission,” which allowed up to 50 percent reimbursement of eligible expenses through the state’s ISTEP program .
“I would never have been able to do this on my own,” Brianza said. “I don’t speak Portuguese. I had an interpreter. I had chauffeured service. I had pre-arranged appointments. Look how much they did. I could never have afforded to do that.”
On her third trip, which was to Africa, she went as part of a group trade mission and was eligible for up to 50 percent reimbursements on her air fare and hotel. “All other expenses I paid,” she said. The U.S. also had a large booth at the trade show and it was no charge for the space Brianza used.
“I was gone for about a week for each of my trips,” she said.
The founder and managing partner of Brianza Bella has three other business partners.
She recounted: “All through this time, I always come back to Silvia and say, ‘Do you have any more sources?’ They have been very good to work with, and very business friendly.”
Her future success is going to pay dividends to Illinois.
“There’s a benefit for the state,” Brianza said. “The more they export the more they make. It’s a very wise investment.”