Lessons Learned For Businesses Entering the Trade Finance Market

The Internet has become in incredible earning tool, especially for small businesses. While there was a time when the international trade finance market was limited to corporations with big budgets that could advertise internationally, the Internet has made it possible for small businesses to go mainstream with a simple click. It has become so popular that there are specialty agencies and branches of financial institutions to assist in this very process.

For the small business that is having issues with finances to take advantage of this new niche that is suddenly available, there is government funding that can be used if they qualify. Online searches will usually turn up a wealth of information and then it is a matter of sifting through it to find what will work. If there are questions, contacting the agency directly is always the best way to make sure that the right information is obtained.

Most of these programs can direct the small business owner to the proper contact or financial institution that can help secure the funding that is needed. These specialists are versed in the latest international laws and will set the small business owner up for success. Because they have people in just about every country, they are familiar with laws that someone strictly based in the United States may not be fully versed on yet.

Most websites have a FAQ section that will enable the user to ask questions. There may also be a public forum where questions can be asked and then answered by other users that have already gone through the process. Some of the more popular sites will also have guides or how to manuals that can be easily downloaded for a more thorough look.

International trade finance is a niche of business that is filled with quite a variety of opportunities. Because there are so many different areas to explore, it can be a bit overwhelming at first, but with the right guidance, the answers and direction will be found. Whether it is through a help menu or an actual advisor, you can get help setting up everything from financing to legalities that must be completed before the business is opened.

Filling out the paperwork and forms is easy. Most of the time, it can be done right online. For the business owner that is skeptical of having their information put out on the internet, there is also the option to download the files and fill them out by hand. Once completed, they can be mailed into the proper agency.

While the concentration of this has been on small business owners, the same opportunities are available for large corporations that are looking to go global. Regardless of the size of the business, international finance trade laws are run through the same agencies. Where small businesses are usually limited in staff, many larger corporations will have specialists that handle all of these technicalities for them.

While the Internet is a great place to do business, it is also a great place to find information. Instead of rummaging through the phone book and trying to get information from government offices that are going to put you on hold for hours, use the Internet as the tool that it is. There is a wealth of information at your fingertips and it will not be long before you become an international trade finance expert.

Why Developing a Strong Islamic Finance Market is an Important Step For Hong Kong

Islamic Finance is a big new area of interest for banks and financial services. Not only does it offer opportunities for new products and services, but it is also one of the fastest growing areas of finance. Despite the global economic slowdown, analysts estimate that the market for Islamic assets will grow by 10 to 15 percent in 2009. While this is not as fast as the 20 to 30 percent growth experienced in 2008, it nonetheless is an important opportunity for banks, particularly in Hong Kong. Hong Kong has made a point of being an attractive destination for investors and marketing participants of Islamic Finance.

With a worldwide market size of US$400 billion and no clear leader in the market for Islamic Finance, Hong Kong stands to gain considerably from boosting its market presence, infrastructure and capabilities in this area. While Dubai, Kuala Lumpur and London all have sizeable markets for Shariah products, no one can claim global leadership in Islamic Finance. And with over 1.6 billion Muslims in the world, this is an important and growing market that no financial center can afford to ignore. Islamic law (Shariah) prohibits taking or giving interest (Riba) which is the most essential feature of Islamic banking. Because of this, other approaches such as profit-sharing and fee-based financing have developed to comply Shariah laws.

These special modes of financing have emerged in retail, private and commercial banking for debt and capital markets, insurance, asset management, structured finance, project finance, derivatives, and other areas. To capture this opportunity, it is important that market participants in Hong Kong are well-trained and properly versed on the intricacies of Islamic Finance.

Broadly, Shariah investing prohibits taking or paying interest (Riba), speculative transactions or gambling (Masir), selling something with uncertain contract terms or which you do no own (Gharar), and investments in businesses that have non-Islamic behaviors (such as businesses dealing in alcohol, drugs, gambling, weapons, and so on). Financial services companies that want to get into the Islamic Finance market need to ensure that their staff members are trained on the fundamentals of:

Bai’ al-inah- sale and buy-back
Bai Ad-Dayn – sale of debt
Ijarah – leasing
Istisna – contract of exchange with deferred delivery
Mudarabah – profit sharing
Musharaka – equity participation
Murabaha – cost plus
Sukuk – Shariah compliant bonds
Takaful – Islamic insurance
Jualah – service charges
Kafalah – guarantee
Qard – loans
Wakala – Agency

In addition to developing domestic business, Hong Kong can be seen as a gateway to China for Islamic Finance. With the large number of petrodollars and Chinese sovereign funds looking for investments, the creates a unique opportunity for Hong Kong (which is the fund-raising platform for Chinese companies outside of the China).

Hong Kong has already developed financial products that are Shariah compliant and has several tracker funds and exchangeable sukuks in its markets. While proven structures will continue to flourish in a the Islamic Finance market, there are signs that some of the more sophisticated originators and investors are looking for more value-added and innovative structures. As a center for financial innovation in Asia, Hong Kong is well-positioned to capture this opportunity.

However, my analysis shows that Hong Kong’s banks and financial services firms do not have the human capital, skills or knowledge to truly engage in the Islamic Finance market. Banks should therefore invest in broad-based employee training initiatives so that their staff understands the market opportunity and potential approaches to Islamic Finance. This can only be done if top leaders truly believe in the potential for Shariah compliant products and embrace effective training as a way to drive change.

Alex Raymond is the Founder and CEO of Vast Talent, which provides online finance courses, including for Islamic Finance training. He has been in the e-learning business for ten years and has worked with dozens of banks around the world on their training strategies.

The RV Park Financing Market

In the last few years the RV market in general has become very active, thanks in part to the increasing number of retiring baby boomers, snowbirds and the increased amount of disposable income for the average consumer. These increases have indirectly correlated to the number of RV sales and the values and sales of RV parks. Finally, along with this comes the increased amount of financing available for these parks.

Lenders and their bean counters have had a hard time understanding the nature of the business. Most fear that all income could be lost in a day because of the mobility of the tenant and with the limited amount of value in the land and improvements all equity could be lost in the event of foreclosure. Five years ago the number of lenders willing to finance RV parks was a quarter of what it is today. The lenders that have realized that there is stability in the income and most RV parks operate with excellent cash flows have been able to make secure loans with higher returns than they are seeing on other types of commercial property.

There are two tiers of lenders in the market, those for loans less than $1,000,000 and those above $1,000,000. Lenders making loans of $1,000,000 or less usually require personal guarantees. The majority of these loans are made by small commercial banks, local savings and loans and the SBA. Above $1,000,000, there are number of financing vehicles including, commercial lending institutions, mortgage conduits and life insurance companies. Nationwide commercial lending companies such as GE Capital have dominated the industry. However, a few smaller more regional based banks have established that RV parks even with their cyclical nature are sound investments and worthy of their portfolios. As they become more familiar with the RV park/resort market underwriting criteria should become less stringent and loans should be easier to obtain.

Above and below $1,000,000 the interest rates continue to hover around 6.5% to 10% depending on the quality and type of occupancy in the RV parks. Fixed rates are available but reserved for larger, nicer parks with more stable occupancy. Adjustable rates are usually based upon LIBOR, 11th DCOF or 1 yr treasuries, Prime rate based loans are usually that last alternative. Amortizations are usually 20-30 years with 10-15 year terms. Fees are generally less than 2 points plus appraisal, phase I survey, and legal.

Over the next few years the RV industry should become much more of a mainstream lending market. This is due to the huge numbers of consumers expected to enter the market and the increasing numbers of lenders that will follow the trend. In addition, all of the lenders in the RV industry have entered it by way of the mobile home park financing market where competition for loans has become pretty fierce. This transition has occurred because lenders are finding it harder to originate higher yielding loans due to the intense competition for mobile home park loans. As a result of this saturation it is only a matter of time before the RV industry has the number of lending sources as do other area of commercial real estate.

Vince Reynolds specializes in selling and financing Mobile Home and RV parks. He has sold and financed over 100 parks in excess of two hundred million dollars.

Finance Marketing Organizations Adapt to New Technologies

Finance marketing is becoming more common with the growth of the internet and smartphones, and there are several things that large organizations are doing to attract new clients and increase their revenue streams. Social media sites are growing in popularity at an exponential rate, and many companies are taking advantage of their ability to market their goods and services on this forum. Smartphones and other mobile devices present another opportunity that is being used by finance marketing to ensure they are visible on these platforms as well.

Social media sites are one of the primary ways that large organizations are using to connect with their clients and increase the visibility of their services. The major players are ensuring their brands are seen on these pages, and they are providing consumers the ability to offer feedback about their relationships with the companies they deal with every day. This is used to improve the relationship that firms have with their clients and market their services to new clients.

Smartphones and other mobile devices are another way that financial organizations are marketing their services to consumers. Most people want to be able to access their accounts and payment history at any time from their phone. Financial service providers are offering this to their clients, and they market their products in this way. Competition is fierce for this type of technology, and organizations are assuring their clients they will be able to meet all their needs for their mobile payments.

Near field communications and QR codes are other measures that are being embraced by this industry to improve their relationships with consumers and increase their visibility. The future of payments is seen by many experts to lay in the area of near field communications, and this permits the end users the feature of being able to make their payments from their smartphones. Organizations, that enable their clients the ability to use this technology, are outpacing their rivals who do not. Many lenders and banks are also working on their use of QR codes to provide their customers with a meaningful way to interact with the services they provide.

The financial industry has long been risk averse and neglected the ability of finance marketing to help them increase their revenue streams. This is slowly changing, and there are a host of organizations that are implementing the latest technologies in their platforms. Social media sites are one focus, but those with a well-rounded approach also rely on smartphones, QR codes and near field communications to make their services visible to consumers.