Tailor-Made Finances for Exporters

MBH Bank and the Hungarian Export Promotion Agency (HEPA) signed a cooperation agreement in May last year with the aim of coordinating their activities and clientele in order to provide even more effective support to Hungarian companies operating in export markets or just planning to appear there. The main objective of the agreement is to support the development of the competitiveness of Hungarian companies, one of the pillars of which is to enter foreign markets.

Both the bank and the agency share the objective of the agreement to provide the widest and most effective support to Hungarian companies wishing to enter export markets, exploiting synergies between them to ensure that their clients have access to complementary and complex services when planning and conducting export activities. The companies supported by the cooperation will thus be able to benefit from services related to external market presence, consultancy and partner search.

Aligning with an important partner
“It was very important for us as MBH Bank to contribute to the expectations of economic operators on how to run their own businesses more efficiently, how to operate more effectively and how to find new markets. There were a lot of these conversations in the client base as a whole. And we thought that as a bank, as a financial institution, it is one thing for us to have the usual services in this area, but we must also be able to contribute to following and helping the SME sector along the path that will lead them to find solutions to the questions that have been raised. This gave rise to the idea of aligning with an important strategic partner involved in exports,” Péter Nyisztor, Executive Director at MBH Bank tells Diplomacy&Trade.
He adds that they realized that a bank can only enter this process at a certain point and they wanted this point to be in as early stage as possible, when the entrepreneur is still really thinking and assessing what the options are, that is, not yet having taken a step or, if he has, still thinking about where it is worth expanding. “We thought that HEPA was ideally suited to the role of answering the questions and information needs that a business might have. So, in summary, I think that HEPA can be one of the starting points on the path that can move Hungarian businesses towards becoming an exporting company, becoming a successful exporter.”

Sharing information
One of the aims of this agreement is to align the activities and clientele of the bank and HEPA. The Executive Director believes one of the most important steps that has actually been taken since signing the agreement is the flow of information, which is often a fundamental part of the solution: talking about how to exchange information and how to understand what everybody’s role is and what they can do. “The other important part of it, obviously, once you have everything in place, is that then you have to put that into practice. We began with a roadshow, the essence of which is basically to have meetings among our own client base in different parts of the country for clients who are interested in entering the export market, who need information that they cannot get overnight from the internet or any other source, and who want to find out about these things in person. We organize these customer meetings together with HEPA. We invite local contractors and then, from then on, these, shall we say, discussions will be conducted directly by HEPA. When there is a demand for a service that we can provide, we can get involved and be there right at the beginning of the process. So, practically, it's about sharing information and organizing roadshows – these have been ongoing basically since the signing of the agreement, both in the countryside and in Budapest.”

Diverse banking assistance
The services offered by MBH Bank and HEPA cover basically all fields of business the current or would-be exporters could be involved in. “What you really need to see is that a company getting to the point where they decide they wish to enter the market doesn't happen overnight. In the planning stage, we are talking to them about what target countries are worth investigating in this respect. Obviously, those who have been involved in this for a long time and thus, have gained more experience are much more focused on what and how they would like to achieve. Let's say that I would like to sell my products in Turkey. However, things like what I need there, why it is interesting, whether the goods are exportable or not, are all to be figured out. Another, more concrete, example is that of a Hungarian firm that has found that there is interest in its particular product in the Far East, for cultural reasons. The product in question is a kind of commodity that is a little closer to food and is related to it, but we are not talking about the actual food industry. In the initial part of the process, HEPA was able to step in with very appropriate action: discussions were held on how this company could appear in that region in exhibitions, what the legal structure was, etc. So, it has been a bit of an advisory process, which is still ongoing. Whenever the company decides that it is really worthwhile to go into this deal, then we, as a bank, already have the tools, which can mitigate certain kinds of risk,” Péter Nyisztor explains.
Giving a very simple example, he notes that “let us assume that you find customers and partners at local level who are, let’s say, unknown to a certain degree at first. So, there is always a risk, beyond the question of how exportable your goods are, whether you want to make a deal with that business partner, what kind of partner it is, etc. Then we, as MBH Bank, can solve the problem by providing this firm with financing, or even if not financing, with a risk assumption that enables it to deliver and sell to customers in such a way that we actually assume their payment risk. This way, the bank actually pays for the service/goods supplied by the Hungarian entrepreneur, and thus, we assume the risk, if applicable, with regard to the customer's solvency or, in some cases, the solvency of the country in question. In this way, we can provide additional help, so that there is no need to fear that a country is exotic, and there is no need to fear that the partner is new, but we can, of course, assume this type of risk, which is present at the beginning, or perhaps also later on. And this is true for trade, it's true for projects – for countless of them. We can take on these risks. We are good at that as a bank – that is a plus we can provide.”

Steps of efficiency
The main objective of the agreement between MBH Bank and HEPA is to support the development of the competitiveness of Hungarian companies. Here, the Executive Director stresses that competitiveness has to be interpreted in different ways. “What is the fundamental idea of efficiency and competitiveness? One is that for a given level of cost, I sell more and thus, I increase efficiency or I reduce my costs below a given level of revenues – and there are different combinations of those that tend to work. I think that on the efficiency side, we can contribute in terms of revenue growth, and – in cooperation with HEPA –, we can make it a little easier to enter the export markets, we can mitigate and reduce the risks associated with this. Again, this is a step of efficiency, because when we talk about costs, there is always the risk of the customer not paying, so, I think we can take that on board as well. And then, of course, through the normal financing structures, there are those kinds of cost-effective solutions that can again, by the way, provide an extra help.”
In the MBH Group of companies, there is Forrás Plc. that also provides grant advice and loan application preparation. “It is another source of assistance, so, when an entrepreneur has an idea of what he would like to do, what his idea is, we can also help him by providing him with not only bank financing, not only concerning the aforementioned risk and international issues, but also, depending on what his idea is, even in terms of loan applications. So, considering all of this, the connection here is that the entrepreneur does not have to tackle each step alone and that leads to more efficient operation. I believe that that we can provide additional support and assistance in terms of financing, financial solutions, information, tender process advice, and I could list other such elements,” he points out.

Providing something unique
In addition to the aforementioned assistance, Péter Nyisztor emphasizes that they also have the sort of generic products that are customary for a financial institution. “Let's not forget that the predecessor, if I may put it like that, of MBH Bank was MKB Bank, the Hungarian foreign trade bank – so, those are our roots. I think that I can safely say that at that time, market leadership meant recognized knowledge in the market. In addition to that, MKB's knowledge in the field of operations of authenticated documents, letter of credit collection, bank guarantees and I could list them all, was also of a consultancy nature. We were trying to combine this expertise with the knowledge brought into the group by Budapest Bank and Takarékbank when they merged in. So, I think that by now, we have accumulated and developed a kind of a combined set of knowledge that I think can provide something unique for each company, which then provides opportunities. I don't necessarily always think in terms of products. We are actually fundamentally dedicated to deliver solutions. So, when we have a dialogue, we get to know the business model, we get to know the ideas, we usually come up with something clever, something that's good. The same thing happens in working with HEPA or, for that matter, with any institution within our banking group or even outside our group. There have been countless of such partnerships where you can say it is a win-win position for everybody and from there on, the project is on the road to efficiency.”

Tailoring to individual needs
When the preparatory phase successfully completed and there is a concrete deal in place, MBH Bank is ready for further cooperation – as the Executive Director puts it – “with whatever financing is currently available in the market, we can provide it. We have the necessary products, the documentary products I mentioned before, such as factoring, forfaiting, underwriting, and I could go on and on about the products that are essential for export activity, but what is important beyond that is that we can always tailor these products and services to individual needs. And that, I believe, is our advantage: thinking together with the client, thinking about what he needs, because he may not always be able to say what is the most appropriate product or service for his particular situation. For example, it is not the best idea to go ahead by taking out a loan in principle; a letter of credit may be better a better option that, say, a bill of exchange – depending on the country you are shipping to or do business in. We can figure out what is good for the customer or the business from their point of view and we can tell them what options, advantages and disadvantages, are available. Of course, it is obviously ultimately up to the business to make the decision to choose from this set of options the one that is best and most advantageous for it in terms of pros and cons.”

Not only financing
MBH Bank’s options are not depleted, either once a Hungarian company has established a position in a market abroad. As Péter Nyisztor highlights, “again, I think there are countless opportunities available at this stage. One is the expansion itself, that is, when a company has consolidated its foothold. Suppose a company went out to Germany and basically got its first business partner there. Obviously, it is different from when you set up a company there, which is another option. And there is also the version where you serve your German partners from Hungary, and from then on, what can the bank do to help you expand as quickly as possible? Here again, a need for financing may arise, because in order to be able to acquire new stocks as quickly as possible, for example, or to be able to manufacture products more quickly, it is essential to develop technology, including the modernization of machinery, or to be able to serve partners more quickly by purchasing more stock. There may be customers who are not satisfied with having to pay within 30 days, who only want to pay for the goods/services after 80 days. Under any circumstances, that may create problems or obstacles to their being able to grow further, and in these cases, let us say, in terms of examples, we, as a bank, can come forward to offer help and support. I can say that this can be not only financing but also other kinds of things.”
Giving a completely different example, he underlines that in the case of foreign multinational companies, one can often find that they think differently of what the business partner expects. “In fact, what matters to them when they make a decision is not always the price, but that they want to pay as late as possible, because for a financial manager in the case of the German company in the example I mentioned, it is actually a much better solution not to take out a bank loan, but rather to have debt towards a supplier. In such a case, a bank effectively finances the transaction indirectly on behalf of the German company. Again, this can be an advantage when it comes to deciding whether the buyer now prefers a Hungarian company or a French one or a German one or any other. We have already seen examples of this that can contribute to competitiveness,” the Executive Director concludes.