Sometimes U.S. exporters get lucky. When a flurry of bank consolidations a few years back led to the exit of many large lenders from equipment trade finance, or at least from smaller transactions and smaller firms, a new roster of lenders quickly saw an opportunity, and stepped in to fill the gap.

Some were regional and community banks that recognized a chance to build trade finance as a new profit center, or as a lead product to expand business with additional customers.

Others were fairly large multi-state institutions that chose to grow their existing equipment lending by seeking exporter customers far from their home base. Some began to do transaction-based business, where the exporter was not otherwise a customer. And, a few decided to build marketing networks overseas in key emerging markets, to find their deals on the buyer side, as well as working with U.S. exporters.

But now, finance companies are joining the export lender crowd. Over the past year, a dozen or so specialty trade finance lenders have opened their doors for business. They include, for example, WorldBusiness Capital in Hartford, Connecticut, New Continent Finance and Drake Finance Group, both in Miami, and Chancery Export Finance in Baltimore.

Two of these trade finance groups are actually located in Central America, but focus primarily on supporting U.S. equipment sales into the Latin America region. One, Finex Trade Group, launched in early 2003, has its main office in Costa Rica. Another, Centre Merchant Finance, started earlier (in the 1990s), and has its main base in Guatemala City, but its head office in New York.

Some common patterns

These companies display some obvious patterns. For one thing, they have mostly been created by ex-bankers, usually people with extensive experience in trade finance. At WorldBusiness Capital, founder and chief executive Brett Silvers was CEO at First International Bank in Hartford, which for several years was the leading lender (in number of deals) in U.S. Export-Import Bank business.

At Finex Trade Group, principals Lou Aguilera and Alfonso Munoz are veterans of Citibank international operations. Peter Swain, principal at Chancery Export Finance, spent many years at First National Bank of Maryland (now M&T Bank) in Latin America, Africa, and Middle East business.

This experience has brought important networks and contacts in the U.S. and abroad that have helped generate a flow of deals fairly quickly.

Then, too, each group relies heavily (even exclusively) on the Export-Import Bank to cover risk through its guarantee program (or in some cases its insurance facility). Each has been approved for an Ex-Im Bank master guarantee agreement, a legal structure that provides a framework for transaction documents and disbursement procedures.

That, in turn, has made it possible for each of these lenders to sell most, or all, of its equipment trade receivables to the Private Export Funding Company, known as PEFCO, in New York. PEFCO was originally created by a group of leading international banks to fund "big ticket" exports (such as aircraft) that were guaranteed by Ex-Im Bank. But in the 1990s, Ex-Im, seeing a need, nudged it to build a small business finance role.

The New York group brought in Alfred Daiboch, a trade finance veteran, to head the program, which has provided a reliable source of financial liquidity to lenders that want to sell off their portfolios of trade receivables. Small business has become highly visible at PEFCO: in 2003, it approved 305 loan commitments ($316 million) for the program, though large equipment deals (aircraft, power, transport) are still the major dollar part of its operations.

"PEFCO deserves a lot of the credit for the emergence of the newer lenders," says WorldBusiness Capital's Silvers. "Smaller institutions need an ongoing funding source." It's also good for Ex-Im Bank, he added, since these lenders are investing in the Ex-Im programs.

Deals start to flow

The PEFCO "Small Lender Program," as its newest strategy is called, has begun to generate a flow of transactions by the emerging crop of finance companies. Finex Trade Group, for example, recently financed a food manufacturing equipment sale to a Costa Rica buyer, using an Ex-Im $2.0 million guarantee.

And, WorldBusiness Capital's recent transactions have tapped an Ex-Im $2.3 million guarantee to cover the sale of plastics machinery to Mexico, a $2.0 million guarantee to finance farm equipment exports to Mexico, and insurance coverage in the $1-5 million range to support construction equipment sales to Honduras.

Meanwhile, more of these specialty finance groups are expected to come on stream. "We are working with about a dozen at this time," says PEFCO's Daiboch, but others have expressed interest in the strategy.

At the same time, even a larger financial institution can find the finance company format an effective strategy. RZB Bank, one of Austria's biggest, and a leading trade finance lender, created RZB Finance in New York in 2000 just to tap the Ex-Im Bank programs. It had maintained a New York branch for many years, but chose this approach to pursue a dedicated trade support role.

In the first six months of 2004, RZB Finance won Ex-Im approval for equipment financing in a bevy of emerging markets, including Mexico, Egypt, Ghana and Nigeria. Significantly, it markets its services both in the U.S. (through active calling on middle market exporters) and overseas through a network of agents.

WorldBusiness Capital's Silvers put his finger on what may be the essence of the trend. "Pockets of expertise that have been available within larger financial institutions have begun to be transplanted into dedicated specialty groups." The entrepreneurs who launched these new outfits have found it attractive to do the business independently, since their activities were often ignored by the management of larger organizations.