Companies predisposed to international trade remain concerned about currency manipulation, a distorting reality faced by importers and exporters that SunTrust Banks Inc. can minimize through a series of hedging strategies, Allison Dukes, Atlanta division chairman and CEO, told Global Atlanta. An interest in overseas markets, however, is on the rise, according to the bank’s annual survey.
SunTrust recently released its 2016 Business Pulse Survey showing that there is a “significant shift” in growth strategies of middle-market and small businesses as they plan for future expansion in the next five years with a growing interest by mid-sized firms in trade, which the survey concludes “could lead to increased profits and sustained growth.”
Last year, the survey revealed that more than 17 percent of mid-sized businesses planned to enter or expand into new international markets in the five-year time period. This year’s survey indicates that “29-percent of middle market companies are now looking to expand into international markets,” just three percentage points lower than the 32 percent looking domestically to grow their businesses.
The on-line survey was conducted in December and January and completed by 508 executives nationwide and across business sectors, excluding financial services and insurance, who have the authority to strongly influence decisions involved in business planning activities and decisions.
Ms. Dukes said that the survey revealed a widespread interest in international markets particularly among growing consumer goods companies and cited as examples firms in the Atlanta area producing beauty products and consumer products for juveniles and explained that a motivation may be that they have found that their domestic markets are saturated.
Susanne Keough, director of the bank’s global trade solutions, added that the bank also actively serves agriculture producers and high-tech companies. Additionally, it works with the incubators at local universities whose member-companies produce exportable goods.
The survey found generally that 36 percent of companies with annual revenues of $10-150 million are exploring mergers and acquisitions, up from 25 percent in 2015, while 41 percent with annual revenues of $2-10 million plan to introduce a new product or service, up from 31 percent.
The Internet and falling trade barriers have made it easier for small and mid-market companies to engage in international trade, according to the bankers, but risks abound, which they seek to minimize.
The three main concerns of firms exporting for the first time, the bankers said, are how to get paid, working through their capital needs and currency fluctuations.
As a first step in developing an international export business, companies should have the necessary inventory and financing. Among the trade financing solutions that the bank offers are pre- and post-export financing to provide funding for procurement, inventory, receivables or production orders, as well as insured foreign receivables and buyer financing. The bank also issues a warning about dealing in emerging markets where exporters may be asked to provide financing to close a sale because interest rates are higher and bank financing is limited.
The bank also suggests that exporters tap expert and third party resources by assembling a team of experts including attorneys, financial partners, freight forwarders, customs brokers and export credit insurance specialists.
In addition to establishing secure payment solutions such as letters of credit or using a documentary collection process, it calls for preparations involving currency fluctuations.
Currency manipulation reportedly has declined sine 2013 as China and other countries intervened to keep their currencies from falling further rather than from rising. Nevertheless, the bankers warn their clients about the risks and have established preventive measures on the chance that the value of the dollar may decline again.