World Trade - September 2008 - (Page 37) COVER STORY factories are provided the chance to bid on the manufacture of the goods. A key component to the success of this process is direct interfaces between Capstone’s clients and their overseas sources. “If we can locate a better factory and get the cost of goods down that is a home run,” says Ingrassia. “If we keep the same factory at a lower cost of goods sold that is a success, as well.” Ninety-five percent of Whaling’s manufacturing is now offshore in China, Cambodia, Vietnam and Thailand. The firm maintains a small domestic manufacturing presence. Objective set of eyes: sourcing and inspection As part of Capstone’s performance risk mitigation strategy, a sourcing and inspection service has been developed in China. These two aspects of the program work hand in hand with the funding of the offshore manufacturers. Through our sourcing department, we are able to determine whether or not the factory selected by our borrower is adequate and can maintain the output required to meet the demand of its customers. Once this is determined, Capstone insures that the pricing of the goods on a cost of goods sold level is appropriate. Many times there are daisy chains of intermediar- ies know as agents who add unnecessary costs onto the cost of goods sold thereby reducing our borrowers’ gross margin. Specifically, our sourcing department actually assists in reducing borrower costs at the cost of goods sold level, thereby increasing the gross margin and covering our finance charges in most cases. Higher gross margins for our borrowers translate into less risk for us. The inspection group is intended to be an objective set of eyes for our borrower. They insure that the goods are being manufactured to the standards set between our borrower and the ultimate buyer. Through the use of the Internet, we can get daily inspection reports from the producer of the raw materials all the way through the entire production process when goods are being loaded into a container for shipment to the U.S. Once the variables of whether or not the factory can produce or the quality of the product are known, we then work out a supplier credit facility of some kind whether that is a letter of credit, a letter of guarantee or a partial or full cash payment against documents etc. Joseph Ingrassia and John Rice are managing members of Capstone Business Credit, a New York City-based venture merchant banking firm that provides innovative financing for growing businesses within the consumer finished goods and import/export industries. WTM09084GTNEX2.indd 1 WWW.WORLDTRADEMAG.COM 8/12/08 10:09:52 AM 37 http://gtnexus.com http://gtnexus.com http://WWW.WORLDTRADEMAG.COM
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