Editor’s note: Jay Hale is a Global Financial Services Advisor for the Eastern Division of Silicon Valley Bank. He has been active in international banking and commodities markets for 11 years, six specifically in international finance and five in commodities trading. Hale received his undergraduate and graduate degrees from the University of Mississippi. This is the latest in a series of Entrepreneurial Sprit columns done in partnership between the Council for Entrepreneurial Development and WRAL Local Tech Wire.
________________________________________________________________________________________Shanghai, Tokyo, Buenos Aires, Johannesburg — exciting locales not only for a visit but for business as well. As a growth-minded company in the 21st Century, it is certain that you have begun to set your sights, penetrate, and establish trading partners in markets beyond the US and if not already, it is probably somewhere within your business plan.

As you move forward in the process from the strategic planning of selecting a market to the tactical execution of selling into overseas markets and establishing an in-market operating subsidiary, your first thought will be to engage both legal and accounting advice to assist you. Certainly important first steps in order to understand the regulatory and tax implications of selling into and having assets overseas. In addition, you might also consider engaging the assistance of a third-party consulting service specifically devoted to providing US companies with assistance in the areas of human resources, business development, local regulatory requirements, and real estate services along with tax and corporate structuring. This is indeed an important step in the process to provide you with directed local know-how and tactical support for your business.

Banking Partner

Here’s a question for you in your overseas strategy: have you spoken with your banking partner? At first glance, you may view your banking relationship from a purely tactical standpoint, providing domestic operating accounts (along, perhaps, with credit facilities and other ancillary services), and might perhaps wonder what your local financial services provider can do for you in Sydney say beyond providing foreign currency exchange or other trade services. However, since your relationship and its associated aspects of daily contact and control will be, needless to say, remote, the choice of your global banking partner will be an important question for you to ponder and bears some exploring.

Clearly, many domestic US banks have for many years now been actively involved in international markets and have well-established operations overseas. These take many forms depending on the country from small, trade-oriented representative offices to fully incorporated subsidiary branches involved in providing loans, taking deposits in the retail and corporate markets, in addition to other, more sophisticated financial services such as investment banking. In addition, all banks also involved in providing foreign currency exchange and trade services to their clients have developed deep and extensive relationships with local partners, correspondent banks, in order to both deliver and enhance their product capabilities. In conjunction with this global expansion and the concurrent development of online banking, both retail and corporate, many have created robust technology platforms to support the needs of their domestic and, more important to this discussion, international clients able to aggregate US and overseas accounts.

As a local, in-market account will be necessary when establishing a subsidiary in most countries around the globe, you should have a discussion with your banker to explore the capabilities of their network to assist you in either directly establishing an account within the bank or leveraging their partners to streamline the account opening process and provide your US-based treasury team with visibility and transaction functionality through an online interface. In addition, you will find that many banks, even those without overseas branches, are able to provide you with these services. These are roughly categorized as Global Treasury services and include at the minimum overseas and multicurrency accounts and run, on the high-end of sophistication, to full-service netting and pooling services.

Key Elements

The key elements to keep in mind when inquiring into Global Treasury services are your needs and goals, account visibility, functionality, and control, the depth and nature of overseas relationship, and cost.

Obviously, the first of these, your company specific needs and goals, are paramount to the process and a frank discussion with your domestic relationship manager will highlight for your banking partner the objective of your overseas interest and investment. In addition, this will give them the opportunity to better craft a specific solution combining various solution elements as dictated by you.

Account visibility, functionality, and control, the next key elements, address the concept of how your company will manage the account on all levels, from personnel to payments. Since most new overseas operations tend to burn cash and, therefore, generally need continual funding from the parent organization, this piece will be crucial to your early success as accurate cash-flow forecasting tend to limit the need for excessive and emergency outlays of working capital. This is also not to mention, the more accurate your cash-flow projections, the easier it will be for you to work with your bank to institute a foreign currency hedging program to the extent your exposures dictate.

You will want to inquire into the depth and nature of the overseas relationship for several reasons. As many banks have many different approaches to global banking, you will certainly want to find a partner that truly understands your needs and goals, can offer the services your feel are important to your success, and whom you can trust to establish a close working relationship in-market. It is important to note here that not all banks, not even the largest, may have representation or be the right fit for you in the market to which you find yourself drawn. However, most banks should, through their international groups and their networks, be able to provide you with reliable information about reputable local financial service providers and offer some minimal level of functionality to assist you in coordinating and consolidating account reporting.

The Costs

Finally (not that it is the least of your concerns), we come to question of cost. As in most, if not all business decisions, cost will be a decision to consider since, like your company, a bank must justify and, ultimately, pay for its own infrastructure. Fortunately, as technology advances and the number of competitors offering similar services has increased, the costs associated with Global Treasury have steadily decreased.

As a young and growing company, you already know there is, literally, a world of opportunities out there. Additionally, there are a variety of ways to pursue these opportunities and a multiplicity of service providers to assist you in your quest. You will find that your bank will be an important stop in your search and will hopefully become a key ally as you look to expand globally. You have merely to ask.