A Connecticut bank that specializes in lending to small and midsize manufacturing companies is trying to capitalize on South Korea's economic turmoil.
First National Bank of New England will begin offering trade financing in February to Korean manufacturers that export to the United States, according to Brett Silvers, chairman and president of the Hartford, Conn., lender.
"There wasn't much opportunity to lend creatively in that market before," Mr. Silvers said. "Korea was considered a developed country that didn't need much financing."
But that changed in December when Korea's currency and stock market plunged, leading to hundreds of corporate bankruptcies and a squeeze on credit available to smaller businesses.
"There appears to be a severe local credit crunch with no lending whatsoever," Mr. Silvers said. "In a credit crunch, smaller companies get hit the hardest and for the longest period."
Stephen Green, senior vice president at First National, said, "Before the crisis, Korea wasn't as attractive because their banking sector was so strong and they had sufficient trade financing."
Because many small Korean businesses are having a hard time financing their inventories, First National plans to act as an intermediary between such companies and their U.S. customers.
The bank will issue a letter of credit that essentially pays for products being shipped to U.S. customers. First National will collect directly from the U.S. company within six months and charge the exporter a fee for the service.
Mr. Silvers said the bank will evaluate such Korean companies' health but that its lending decisions will be based on the credit history of the U.S. company.
The bank will offer financing of $50,000 to $1 million for each U.S. company that a Korean business serves.
The U.S. customers will not pay interest or fees for the financing.
Though this will be First National's first move into South Korea, the bank is active in 10 emerging markets, including Indonesia, India, and the Philippines.
The bank, a subsidiary of First International Bancorp, Hartford, became active in Mexico in 1995 after the peso plunged.
First National, which has $200 million of assets, originated $191 million of loans during the first nine months of 1997. One-third of that total is international loans.
The bank makes the bulk of its loans through government programs such as those run by the Small Business Administration and the Export-Import Bank.
If the trade finance program succeeds in Korea, Mr. Silvers said, First National will expand it to other Asian markets.
He and several bank executives expect to spend February in Korea.
Working from the Seoul office of one of the largest freight forwarding companies, they will try to drum up business by attending a trade show for Korean businesses.