This article by Doug Bruhnke was published in the Phoenix Business Journal on November 7, 2008. Doug is Founder/CEO of Growth Nation and Founder/President of Arizona International Growth Group (AZIGG).
For every $1 Arizona spends on attracting non-US companies to establish operations in the state, it gains more than $37 in Foreign Direct Investment, according to Rod Miller, VP of International for Greater Phoenix Economic Council (GPEC). Miller told an October Arizona International Growth Group (AZIGG) audience that payback can be higher than 100 to 1, and there are other benefits like ongoing tax revenue.
“In 2007-2008, GPEC found ways to keep Foreign Direct Investment in Arizona improving despite last year’s spending cut by the legislature,” says Miller. “We need investment to capture strategic industry growth for Arizona like Germany-based solar companies. In the current environment, increasing our investment in economic development initiatives will support a quicker and stronger economic recovery.”
Yet Arizona is in the bottom half of US states in attracting Foreign Direct Investment because it spends less on marketing per capita than the national average. GPEC and the Arizona Department of Commerce are making progress, but more opportunity is available. Nonetheless there are positive indicators that Arizona’s global profile is improving, and other investment mechanisms are supporting globalization of Arizona-based businesses.
Firms are taking unilateral action to invest in the global economy. That’s not an option for everyone, and those proceeding to enter the global market should take carefully considered actions that are well-funded. Arizona has funding resources available to support growth.
Early-stage firms presenting to investors at the Scottsdale-based Invest Southwest Capital Conference sponsored by The Miller Group have raised over $300 million. This year there’s a higher level of interest by companies to participate, and the conference will include a company based outside the US for the first time.
“Submissions by early-stage firms increased this year by 20%,” says Dave Bittner, Chairman of Invest Southwest and CEO of Beanstalk CFO. “In addition to Arizona-based companies, the Invest Southwest selection committee chose companies from two other states and Mexico, indicating that word about funding opportunities in Arizona is getting out”.
Arizona companies looking to grow globally are well advised to seek out experts who have “been there, done that” with international operations, marketing and funding. One community asset that small and medium-sized businesses can turn to is SCORE, which in addition to being an alliance partner for Invest Southwest, offers business seminars and free counseling.
“Experienced volunteers at Greater Phoenix SCORE mentor and counsel small businesses in each aspect of global expansion”, says Chet Ross, Chairman of Greater Phoenix SCORE and District Director for SCORE in Arizona. “A large portion of our funding comes from the US Small Business Administration (SBA), making SCORE the ideal source for guidance on loans – including export loans – guaranteed on behalf of the US government by the SBA.”
Several options for export loans exist. The United States Export-Import Bank was established in 1934 to guarantee payment to American businesses on exports, handling the financial risk that commercial lenders will not assume. This reduces the overall risk for US firms selling globally. A variety of export credit insurance and loan guarantee tools exists to encourage US exports.
“International risk management tools for getting paid and for growing sales have high value and complexity”, says Carlos Emmerman, Trade Banking Director at Sonoran Bank. Carlos headed international banking offices for Bank of America and JP Morgan Chase before joining Sonoran Bank. “We sort through the complexity and help small and medium-sized businesses with decisions like when to approach the Export-Import Bank. We’re positioned as the premier community bank for the growing international business market in Arizona.”
The over-riding goal of the Export-Import Bank is to support the growth of US businesses by insuring against non-payment, offering open account payment terms and eliminating the need for expensive letters of credit or pre-payment requirements. The key for any business is selecting the right tool to support their needs.
“Exporting presents a unique set of challenges”, says Adam Keck, Vice President for Bibby Financial. Bibby is a provider of business cash flow solutions for small and medium-sized enterprises, including factoring, export receivables and purchase order financing. The company has been around for over 200 years.
“An exporter often must wait 90 days or more for payment from their international customers,” Keck continues. “In addition, foreign banking systems can be nearly impossible to navigate, with check clearance days and additional bank charges creating unwanted surprises. These issues are easier to recognize and mitigate with a knowledgeable and trustworthy export financing partner.”
FUNDING YOUR INTERNATIONAL GROWTH
When thinking about investing in your global growth, learn from the experts.
- Don’t take unnecessary risks. Use tools like those at the Export-Import Bank to help you sleep better at night.
- Use experienced resources. Don’t reinvent the wheel or get run over by global surprises. Experts are available here in Arizona.
- Ensure that your business is well capitalized. Enter global trade knowing there will be the occasional surprise, and that the journey is well worth it when you’re prepared.
- Spend a dollar to make at least two. The old adage “spend money to make money” is true for Arizona attracting Foreign Direct Investment, and for Arizona-based firms looking to grow internationally. Invest wisely.