Why foreign companies need equipment financing

Planning ahead for economic recovery in the USA, Europe, and other markets, companies in Latin America, Asia, and other exporting regions will soon begin ordering more capital equipment to ramp up their manufacturing capacity.

It has never been easy for equipment buyers in emerging economies to access multiple year trade finance within their own countries, and under present economic circumstances medium-term loans may not be available from in-country banks at all, even for the largest and strongest of borrowers.

Meridian Finance Group has over fifteen years of experience in export finance, successfully arranging cross-border equipment financing for manufacturing companies and other equipment importers located in emerging foreign markets.


What types of transactions can be financed?

International sales of all kinds of capital equipment are eligible for export finance, as long as the buyer is a well-established creditworthy company located in one of the many emerging foreign markets where Meridian does business.

The equipment can be manufactured in the USA or in another country. Likewise, the equipment may be shipped from the USA or elsewhere, although some export finance transactions may need to be invoiced by a vendor located in the USA.

Most of the equipment sales for which Meridian arranges trade finance are between $500,000 and $10,000,000 in size. We have the capacity to support larger export finance transactions, but most of the demand we encounter is for equipment costing in this six- to seven-figure range.

Exporters of smaller-ticket equipment may be able to use export credit insurance to extend and finance shorter payment terms to their international customers, up to twelve months or in some cases longer, with no minimum transaction size.


How cross-border equipment financing is structured

Cross-border equipment financing is usually structured as a loan although in some cases equipment leasing may be feasible. Export finance payment terms are typically from three to five years in semi-annual, quarterly, or monthly payments, with interest rates and loan conditions considerably more favorable than those available from banks or other lenders in the buyer’s country.

The equipment supplier gets paid upon shipment and presentation of its invoice and export documents, or upon delivery or installation or whatever other starting point has been contractually agreed with the buyer. In some cases a small cash downpayment from the buyer to the exporter may be required prior to shipment.

The first step in seeking export finance is to provide Meridian with the buyer’s audited financial statements and the exporter’s equipment quotation as described below. In most cases this information enables us to determine quickly the feasibility of arranging trade finance for the transaction, at which point we issue a terms sheet (financing proposal) to the buyer.

After the buyer accepts Meridian’s terms sheet and pays our commitment fee, we visit the buyer, perform our due diligence, get the trade credit underwritten, and place the loan with one of our lenders. Once the export finance facility is activated, the buyer sends a signed promissory note to Meridian. We notify all parties that the trade finance is in place, the exporter ships the equipment and gets paid by the lender, and the buyer pays the debt obligation in accordance with the terms of the promissory note.


What kinds of information are required?

Meridian evaluates the creditworthiness of foreign buyers for trade finance based on information including, but not limited to, three years of annual reports or audited financial statements, interim financials, credit reports, bank and trade references, searches of public records, market research, and other due diligence.

The equipment exporter should initially provide us with a copy of its quote, proforma invoice, or other information describing the sales contract. Please note that when arranging export finance, we consider the cogency of the underlying trade transaction to be as important as the buyer’s financial information.

Personnel from Meridian may travel to the buyer’s country to meet with the buyer, visit its facilities, assess local market conditions, etc. In order to keep the due diligence process moving and expedite turn-around times, we fly as soon as possible after receiving the buyer's acceptance of our terms sheet and payment of our commitment fee (which is refundable, minus travel expenses, if the export finance is not approved).
Why you should work with Meridian

Over the past fifteen years, Meridian Finance Group has developed unique expertise in arranging cross-border financing and other kinds of trade finance for equipment buyers located in emerging foreign markets.

While we’re proficient at using Ex-Im Bank programs and other conventional export finance techniques, many of our transactions are structured using proprietary methods we’ve formulated ourselves by working with a wide range of countries, buyers, exporters, lenders, and underwriters.

We understand your business. Our staff is multicultural and multilingual, with experience not only in trade finance, insurance, credit, and collections, but also exporting, manufacturing, logistics, and international distribution.