Production Finance International LLC, a Spokane-based trade financing company, says its been growing steadily as demand for import-related loans to U.S. businesses increases, and that its focusing on strengthening its western U.S. markets.


The 13-year-old concern says it competes with the top trade financiers in the country, despite its location in a city thats more than 200 miles away from the nearest major port. Its growth has been achieved relatively quietly, with revenues rising at a steady clip of about 5 percent to 10 percent each year, says CEO R. John Kubiak Jr. Kubiak declines to disclose the companys revenues, but says its combined loan volume and fees typically range from $50 million to $60 million annually.


Weve done more business, had more clients, and made more money in the past few years, Kubiak says. Weve established ourselves as one of the half a dozen companies we find to be direct competitors for trade financing in the U.S., he says.


Production Finance isnt large, with just nine employees, five of whom work here, with the other four in the companys offices in Seattle, Los Angeles, Dallas, and Washington D.C., he says. It moved its Spokane office from the Great Western Building, at 905 W. Riverside, to a larger space on the fourth floor of the Spokane Regional Business Center, at 801 W. Riverside, a few years ago.


It has become a national player, Kubiak asserts, by carving a place for itself in some of the countrys major import-export markets. The bulk of its competitors are based on the East Coast, so the company is concentrating on growing its markets in the western part of the country, he says.


Production Finance International provides financing to fast-growing U.S. companies that import materials or finished products in leisure lines such as sporting goods, casual apparel, footwear, furniture, and electronics, he says. Its lending activities include export and domestic trade, but most of its business comes from import-trade transactions, he says.


In import-trade financing, the financier issues a letter of credit so that its client can buy wholesale goods from a foreign supplier based on a purchase order that the client has received from one of its customers. During the delivery process, the financier temporarily owns the goods it finances. Production Finance offers credit through U.S. Bank, which issues letters of credit on the companys behalf, Kubiak says.


In one example, Production Finance issued a letter of credit for a client in the San Francisco Bay area to buy toy replicas of the light saber weapons used in Star Wars movies from a supplier in China. As a result of those imports, the client was able to quadruple its sales to customers including Barnes & Noble Inc., Target Corp., and individual collectors.


Production Finance lends between $100,000 and $2.5 million per transaction, and it conducts between 300 and 500 transactions per year, Kubiak says. It charges clients a one-time application fee of $1,000 and a monthly commission of 2.5 percent to 3.5 percent of the amount loaned, depending on the riskiness of the transaction, he says. An annual credit-facility fee, which varies in amount, also is charged in some circumstances.


In export-trade financing, Production Finance issues a letter of credit or provides funds to its U.S. client so the client can buy goods from a supplier in the U.S. or overseas and then sell the goods to a foreign customer. Sometimes, the foreign customer might get a letter of credit of its own from its own financier. Production Finance then would take that letter of credit to its own funding sources to pay for the goods its client bought to resell overseas, to cover its own fees, and to provide its client any profit due from the sale.


Each year, Production Finance provides financing services to about 40 customers, who mostly import consumer products or materials for them from suppliers in Asia, such as in China, India, Taiwan, and Pakistan, as well as from Europe, Kubiak says. One country that seems to have increased its exports to the U.S. in recent years is Vietnam, which supplies products to some of Production Finances clients, he says.


When we first started 13 years ago, we didnt see anything from Vietnam, Kubiak says. But, now were seeing more products, mostly apparel, coming from there.


While the companys import-related lending activities still are growing strongly, the increased speed and ease of doing global business by computer has translated into foreign manufacturers becoming more willing to provide credit for buyers in the U.S., rather than requiring a letter of credit, Kubiak say. Foreign suppliers typically have required a letter of credit to ensure theyll get paid when they ship goods abroad, he says. Production Finance hasnt experienced a decline in demand for import-related loans, though, because its clients still need more financing than the amount they have available otherwise, he says.


Meanwhile, export-trade financing constitutes only about 10 percent of the companys lending activities, Kubiak says. He suspects thats mostly because the U.S. imports far more products than it exports.


Production Finance started financing export-related transactions in 2000 when it acquired Dallas-based First American Trade Inc. and Potomac, Md.-based Gateway Trade Capital Inc. First American Trade underwrote export transactions, while Gateway Trade Capital conducted mostly import-trade transactions, he says. At the time of the acquisition, the company was considering expanding further by opening an office in Miami to serve the Caribbean market, but now its focusing solely on its current markets, Kubiak says.


Were doing the same thing weve done before, were just doing a little more of it, he says. Thats keeping us busy enough.


Kubiaks experience with foreign suppliers began prior to the formation of Production Finance when he owned Serac Inc., a ski-wear manufacturing company he started in the 1970s. By 1989, the Sandpoint, Idaho-based concern employed 130 people and had sales of about $13 million.


In the early 1990s, Serac began suffering significant losses as the ski industry declined and foreign competition increased. Although Kubiak tried to save the company by consolidating its operations into a warehouse in Spokane and shifting production offshore, it went out of business in 1992.


Contact Emily Brandler at (509) 344-1265 or via e-mail at [email protected].