California's trade program: a model state-federal partnership - includes information on export finance services; trade contacts; Cresset Powers, an export trading company

Business America, March 27, 1989 by Niels Erich

"We work very closely with U.S. commercial offices overseas while keeping sight of California's unique interests and advantages," says commission Executive Director Mignano. "California products always attract special attention overseas and enjoy a reputation for quality and innovation. Part of the appeal in participating in our programs is that we make it a point to maximize the California image."

The commission also works closely with the three California district offices of the Commerce Department's International Trade Administration in Los Angeles, San Francisco, and San Diego.

Export Finance

In 1985, the commission set up a program to provide financing help for exporters through loan guarantees and insurance that has served as a model for state-federal cooperation.

The California Export Finance Office, drawing from reserves of $4 million, is authorized to guarantee up to 85 percent of a working capital or other pre-export loan from a commercial bank. While the maximum guarantee amount is $350,000, the guarantees typically support transactions four times their face value and can cover 85 percent of a loan as large as $411,000.

The Export Finance Office works closely with federal programs to enhance the overall benefits to exporters. A co-guarantee program developed in 1987 with the Small Business Administration, for example, enables an exporter to obtain financing on larger projects, with an 85 percent guarantee available for loans as large as $822,000.

In 1988 the office signed a unique "California Custom Umbrella Policy" with the Foreign Credit Insurance Association (FCIA). The FCIA master policy enables a qualified exporter to obtain trade insurance quickly when needed, without having to apply for a separate policy. With 100 percent of a loan insured, banks can also make accounts-receivable financing more available and at better rates for exporters.

"We work with sound, well-managed companies that want to extend their reach past a point where the bank can comfortably support them alone," says California Export Finance Office Director L. Fargo Wells. "Our job is to look beyond the risk involved to the potential for long-term export growth, and to provide a measure of comfort that allows an often pivotal sale to go forward."

Since its inception, the Export Finance Office has issued guarantees valued at $25 million, supporting some 140 export sales valued at more than $100 million-an impressive return on a $4 million state investment. Also significant is the program's growth: last year alone the California Export Finance Office issued 79 guarantees supporting $60 million in transactions, 62 percent of its total business to date.

The first major challenge undertaken by the World Trade Commission once it was organized was to study the impact of international trade policies and trends on California industries and on the state's economy.

"It quickly became clear that the state had to get beyond all of the rhetoric and anecdotal claims," explains Mignano, who came on board in 1983 to set up the new commission. "We needed to identify California's interests as a major trading entity in its own right, and then to articulate our message in Washington and overseas. We're doing just that."