Charles Doc Lundberg, vice-president of sales at DS-Concept USA, provides a snapshot of the company’s international business operations.
Our new Los Angeles office has become a West Coast hub for clients, vendors and debtors and puts us closer to their commercial activities than ever before. With so many existing clients using California as an entry point to the biggest consumer market in the world, we are now strategically positioned to service foreign firms’ satellite offices and subsidiaries.
Los Angeles also further aligns us with our Asian offices allowing us to work deeper into many client’s supply chains.
Some of California’s biggest growth sectors include electronic products, food and beverage and the apparel industry. We have also recently noticed significant expansion in the state’s plastics and chemicals sectors, having financed many companies experiencing significant growth.
Around US$1.2bn-worth of cargo comes in and out of the Los Angeles port each day, as per Los Angeles Port data, with the primary import sources being China, Mexico, Japan, Canada and South Korea.
It is no coincidence that many of these also make up the top export destinations list, with almost 50% of goods leaving California destined for Mexico, Canada, China, Japan and Hong Kong.
DS-Concept has close ties within all of these countries, having helped companies such as a Hong Kong-based garment manufacturer establish a subsidiary in Los Angeles where it could better serve a growing customer base. By opening up shop in the US it has been able to avoid the discount it would give buyers that were on the hook for duty and customs taxes when goods were shipped FOB predating the US subsidiary.
Most companies establishing a fresh US presence struggle to receive financing. Despite the US giving them access to a larger pool of lenders, having no domestic sales history and an empty balance sheet leaves them few options in obtaining commercial credit. However, when DS-Concept has previously worked with the subsidiary’s headquarters we are able to leverage its sales history prior to the subsidiary’s opening to offer accounts receivable facilities. Using this example, traditional banks shied away and we were able to use the company’s global sales history to give the US subsidiary a US$3mn accounts receivable facility for both their DDP and FOB sales.
Opening a subsidiary in the US comes with significant benefits for foreign companies. One of the intangible benefits companies have noted is the ability to ‘Westernise’ their brand. Having a ‘boots on the ground’ presence has helped these firms to grow their understanding of their ultimate target market and also improve their growth and brand recognition.
In arranging financing and introducing the firm to our vast US network of contacts, DS-Concept has been able to help our client make the transition to the States as smooth as possible. Among the companieswe have helped to make the move to the US are those in the apparel and textiles, consumer electronics, seafood and sporting goods sectors.
What separates DS-Concept from most of its peers is the willingness to build on established relationships, both domestic and international. Once a history of collaboration has been established, we have demonstrated our willingness to establish vendor finance programmes, leveraging companies’ credit to extend liquidity and longer payment terms to their suppliers. This is a unique programme that we extend to US middle market companies that would otherwise be unattainable for all but the largest corporates with long-established Tier 1 banking relationships.
One of the best examples of this is for a US-based action sports manufacturer. The company was created to take advantage of one of the fastest growing trends in the country and began selling licensed goods within the US. However, spotting the opportunity to boost its margins, the firm wanted to manufacture its own products and DS-Concept was able to help by sourcing manufacturers in China and offer purchase order financing to bring its goods to market. Now the company has capitalised on the industry’s global growth and has been able to enter domestic retailers such as REI and Dick’s Sporting Goods as well as becoming a real presence in the European market.
While the demand for traditional trade finance remains steady, the real growth in the sector has been in open account payment terms by both big businesses and their SME counterparts. Since 2007, when letters of credit financed around US$3.5tn in foreign trade, there has been little growth and the figure is still shy of US$4tn today. Over the same period, open account terms have risen by more than 50%, in just an eight-year period, according to UniCredit, making up more than 80% of financed world trade.
The majority of open account flows have been supported by trading parties themselves or non-bank entities such as DS-Concept.
As the market for open account transactions grows, traditional financial institutions have spotted more opportunities to increase their supply chain finance customer base.
Because of the massive demand for open account trade, this has opened up significant opportunities for DS-Concept to partner with banks to help finance their clients. One of the major benefits of DS-Concept’s wide network of financial entities and corporates is that we can team with banks focusing domestically to finance their clients’ overseas vendors or even their clients’ export sales. Recently, banks have been unable to win new business if their open account offering is not as sophisticated as their competitors. DS-Concept is well positioned around the world to team with these banks and improve their knowledge base and ability to work in unfamiliar territories.
In today’s turbulent retail environment, DS-Concept’s ability to finance international open account transactions has resulted in clients’ being able to conform to the longer payment cycles that are being demanded by Fortune 500 customers and large international buyers. In many cases, this financing has also facilitated new business for clients by allowing them to extend terms without the negative cashflow implications of acting as their customer’s creditor for 60, 90 or even 120 days.
We have partnered with an array of banks entering unfamiliar jurisdictions, credit insurers and providers to ensure optimal coverage for clients and private equity firms whose portfolio companies are growing quickly or distressed and need extra liquidity and even purchase order financiers.
The DS-Concept Group maintains a network of offices and affiliates all over the world, including the USA, Bulgaria, Hungary, Turkey, Pakistan, Bangladesh, Spain, the UK, China, Hong Kong and the United Arab Emirates as well as the headquarters in Germany.
Combining credit protection, collections and financing into a single suite of trade finance products, DS-Concept brings streamlined, flexible and best-in-class services to the world’s exporters.