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R. John Kubiak Jr., founder of the now-defunct skiwear maker Serac Inc., has spent the past three years building a new venture here that provides international-trade financing to the kind of spunky leisure-product manufacturers that Serac once was.
The company, called Production Finance International (PFI), is based in Spokane and has branch offices in Seattle and Vancouver, Wash. It employs just four people but at any given time has around $5 million in loans outstanding to clients located throughout the West who buy goods from factories all over the world.
PFI provides what's called merchant trade finance. In its simplest terms, that's a type of lending in which an institution issues a letter of credit that enables its client to buy goods from a foreign supplier based only on a purchase order the client has secured from its own customers. Foreign suppliers typically require a letter of credit to ensure that they'll get paid. Merchant trade finance also is distinctive in that the financier takes temporary title to the goods it finances.
Commercial banks offer letters of credit to their clients, but typically not when a loan is secured only by a purchase order, and they don't take ownership of wholesale goods during a transaction. Merchant trade financiers such as PFI are willing to do those things because they usually specialize in loans to clients involved in industries they understand, says Kubiak. Thus, they can assess the risks involved more accurately than commercial banks, and can solve problems that arise during trade processes more easily.
PFI is financially able to offer such credit because its 15 investors have provided it with enough capital to collateralize a line of credit with U.S. Bank, which issues the needed letters of credit on PFI's behalf, says Kubiak. The loans typically are for no more than six months and can be as short as 45 days.
PFI charges its clients a $1,000, one-time...