When Patel Maganlal of Rockville wanted to go international with his scrap metal business, he quickly found out that getting a line of credit for such a venture is not that easy.
It's a case where having someone from the government on your side can be a big help. Through its Maryland International Division, the state provides several kinds of help in obtaining financing for ventures such as Mr. Maganlal's S. M. Metals Inc.
Even with the state's help, it took Mr. Maganlal a year and a half to line up his impressive current financial arrangements. He has a substantial line of credit with First National Bank of Maryland, guaranteed by the federally funded Export-Import Bank of the United States, plus insurance against non-payment by his foreign customers for less than 1 percent of revenues involved from a related agency, the Foreign Credit Insurance Association.
To get that kind of clout, Mr. Maganlal didn't apply directly to the bank. He went to the Maryland International Division, with offices in the World Trade Building in downtown Baltimore. Established in 1988 to provide one-stop shopping for global-minded business people, the agency actually acts as an umbrella for other agencies and helps the business person coordinate applications.
Marie Torres runs MID's trade financing program.
Before giving the kind of help S. M. Metals Inc. received, Mrs. Torres said, "We look for two things: Can the borrower produce and ship the product? And secondly, will the exporter be paid?"
Without those two factors, Mrs. Torres said, "We can't do anything. Even if you have just one of them, it won't be a doable transaction."
The first time Mr. Maganlal applied for a line of credit to expand internationally, he was turned down by Ex-Im Bank, he said.
While the bank now claims to be reaching out to help small businesses more than in the past, he was told in 1989 to come back after he had more experience.
He did, and in 1990 he received approval from Ex-Im Bank, which provided him with both a loan guarantee and credit insurance. The loan guarantee is actually extended to the local bank, making it very likely that the bank will lend the money, since it reduces its risk to zero.
The credit insurance comes from an associated government agency, the Foreign Credit Insurance Association. One of the policies it offers is for firms that are new to exporting.
Mr. Maganlal said his policy lets him switch the coverage on and off for individual clients, so he doesn't end up paying for insurance on clients he knows and trusts. this credit insurance costs him less than 1 percent of the value of the invoices being protected.
In addition to First National Bank of Maryland, a number of other regional banks offer international services and coordinate loans and credit lines with MID, said Ms. Torres.
The current list includes: Crestar Bank, Maryland National Bank, NCNB National Bank, Riggs National Bank of Maryland, Philadelphia International Bank, Mercantile Safe Deposit & Trust Co., Bank of Baltimore, Signet Bank/Maryland and C&S Sovran Bank/Maryland.
"I have a lot of respect for the state programs," said Timothy McCarthy, vice president in charge of Crestar's international activity in Washington and Maryland.
Mrs. Torres "can potentially take away one major hurdle, which is reluctance on the part of banks to enter lending relationships which don't pass underwriting standards."
With state help, Mr. Maganlal cleared that hurdle, and he now supplies scrap copper and brass to several customers in India, and he also is fielding inquiries from Korea, Japan and Taiwan.
While not every fledgling business survives and grows as Mr. Maganlal's has, Mrs. Torres says that getting the proper counseling up front can increase any venture's chances for success. In fact, she considers counseling to be the most important service she and her staff can provide.
To reach the Maryland International Division, located on th seventh floor of the World Trade center in downtown Baltimore, call (301) 333-8180.