Cross-border equipment leasing

International leasing can be considered as an alternative to cross-border equipment loans in some emerging foreign markets, although FMV leases, sale-leasebacks, synthetic leases, and the myriad of other equipment leasing arrangements available in the USA are not feasible for most international leasing transactions.

Finance Leases: For international leasing deals in countries where capital leases are treated as conditional sales agreements, the only significant differences between international leasing and cross-border equipment loans are found in the documentation. The financing structure, export credit insurance, political risk insurance, downpayment requirements (if any), and payment streams are essentially the same. Accordingly, the lease-end purchase option in this kind of international lease is usually a one-dollar buyout.

Operating Leases: True leases or rental agreements may be feasible for exports of very large capital equipment with a long economic life relative to the lease term, consistent with FASB 13, IASB 17, and related guidelines for operating leases. Since there is no outright sale to the buyer and the lessor retains title to the equipment, export credit insurance for operating leases covers a rolling window of monthly rental payments rather than the entire payment stream. International leasing insurance also typically includes protection against a lessor’s inability to exercise its perfected security interest in the collateral.


Project finance

Meridian can structure cross-border financing programs to address the project finance requirements of turnkey installations, technology transfers, infrastructure programs, franchise operations, maintenance contracts, and other kinds of projects.

Pre-shipment project finance, for example funding of progress payments, may be available in some cases, particularly for project finance involving contracts with foreign governments, public-sector agencies, or government-owned companies.

Project finance is more challenging to arrange for projects wherein the primary source of repayment will be the cash flows generated by the project itself. When there is no existing equity position, revenue stream, or satisfactory guarantor, Meridian will become involved in trying to arrange project finance on a retainer basis only.


Pre-export working capital

While Meridian does not provide purchase-order financing or pre-shipment lines of credit directly to U.S. exporters, we do have considerable experience with Ex-Im Bank, SBA, and other federal, state, and private-sector pre-export loan and guarantee programs, and we’re pleased to refer exporters to local banks and asset-based lenders who do extend these kinds of export finance.

Ex-Im Bank and SBA guarantees, as well as other kinds of pre-export purchase order financing, are available when a foreign buyer will be paying (a) via a letter of credit or (b) on open-account credit terms IF the exporter or the lender has an export credit insurance policy to protect against non-payment risks once the order has shipped.

In some cases export credit insurance can even provide protection for exporters and lenders prior to shipment, for example covering against contract frustration due to the bankruptcy or insolvency of a buyer, government actions or political events in the buyer’s country, and/or other risks. Pre-shipment coverage is not available for arbitrary or capricious contract repudiation by the buyer, unless the contract involves an agency of a foreign government.


Pre-import trade cycle financing

Facing limited access to capital in their own countries, and unable or unwilling to borrow from local banks, suppliers in emerging economies now more than ever before are seeking working capital in the form of cash deposits from their U.S. customers.

When U.S. importers send cash overseas in advance of receiving orders from their foreign suppliers, they’re exposed to the risk that the supplier would be unable to manufacture or ship the goods due to government action or political events in the supplier’s country, a risk which can be mitigated with political risk insurance.

If paying cash in advance to a foreign supplier is not only a risk consideration but also an issue of working capital for a U.S. importer, then it may be possible to arrange pre-shipment financing for the supplier. Pre-shipment import finance is typically secured with the supplier’s receivables so that payments of the supplier’s invoices will flow from the U.S. importer directly to the lender.


Custom financing structures

Meridian is often approached with proposed export finance deal structures which we have neither seen before nor even could have imagined, yet we’ve gone on to arrange financing for them. Call or e-mail us with the highlights of your prospective transaction. We’ll respond quickly with a proposal or suggestions of how to restructure the deal to make international trade finance more feasible. If Meridian can’t do the job we may know who can, in which case we’ll be pleased to refer you to other resources.