Trade Finance Explained: How to Become the Bank and Sell More Globally

Luis Castillo (00:00)
Well, what I said, and I rephrase it, you can have a bad service, you can have a bad quality, and you can have the higher price. But if you’re becoming the bank of your buyer, they will buy from you. Because at the end of the day, it’s all about the margin that they can sell for, right? That’s the that’s their profit. How can you do that? Especially for exporter in the United States or people who sell in the United States, goods that they want to sell to another business. We provide to

Companies who sell an insurance. The insurance mitigate the non-payment risk of your buyer.

Meghan Escobar (02:05)
Hello everyone, welcome back to Real Estate Pros, hosted by Investor Fuel. I’m your host, Meghan Escobar, and today I have the pleasure of sitting down with somebody a little out of the box, a little out of the norm of what we have on the show here. He is doing something pretty special in the real estate worlds, and it’s a term most people might not be familiar with. Trade financing. I’m gonna let him talk about it because he’s the expert here.

But I I’m excited to bring this on to the show. I truly believe our audience is going to be able to jot down some gems and learn something new today. So thank you so much, Lewis, for being here. Appreciate having it ha appreciate having you on the show.

Luis Castillo (02:49)
Thank you. I’m honored to be here. And thank you for bringing all the good values to different people in different industries.

Meghan Escobar (02:56)
Thank you so much. And for those listening in who might not be familiar with what trade financing is, who Luis Castillo is, or what Global Trade and Financing is, give us a 30,000 foot view of what it is that you’re focused on these days and what markets you’re operating in.

Luis Castillo (03:14)
Yes, first of all, I understand that your audience because I’m also a real estate investor, a re real estate operator and in different states. And and I did some transaction in in Brazil, another country. And I’ve been doing it some real estate since two thousand six. So I I understand your audience well. And that’s why I wanna speak about trade financing, but who is Luis Castillo? I’m

Someone who can provide solution to companies who can move merchandise from business to business worldwide. When you do a construction in real estate, you you can move it anywhere in the world, you can do a project in anywhere in the world, and it can be a structure with the trade financing and not necessarily you need an LC. So that’s in a very short sentence.

Meghan Escobar (04:09)
I love that. And you know, one thing that caught my attention pre in our discovery conversation was you you made a statement, and I want you to kind of enhance on that a little bit. You said if you became the bank, your client will buy from you regardless. That to me was like, tell me more. So tell us how can you become a bank?

Luis Castillo (05:24)
Well, what I said, and I rephrase it, you can have a bad service, you can have a bad quality, and you can have the higher price. But if you’re becoming the bank of your buyer, they will buy from you. Because at the end of the day, it’s all about the margin that they can sell for, right? That’s the that’s their profit. How can you do that? Especially for exporter in the United States or people who sell in the United States, goods that they want to sell to another business. We provide to

Companies who sell an insurance. The insurance mitigate the non-payment risk of your buyer.

Use the insurance is like your automobile insurance. If you have an accident, you have you submit a claim and you get paid. Same thing. Accident for us is when they stop paying you. The beautiful about this kind of insurance that let’s say you give someone 60-day payment, but at day 61, the start.

They’re not paying you, you can submit a claim and you get pay. Most of the time, 95% of the invoice or 90% of the invoice. Depends if you use government insurance or if you use private insurance. So once you have this structure, which is the insurance in place on your company to mitigate your non payment risk of your buyer, now you can endorse this insurance to a financial institution that could be your own bank.

Or it could be a non bank company, like a private private financing. And so if the beneficiary of the policy is the bank, let’s call them bank. If the if the beneficiary of the policy is the bank, when a claim happens, the insurance will pay the bank because beneficiary. Now the bank can disperse money to you, not necessarily running rest.

But the risk that you have in the bank doesn’t have it because he’s the one, he’s the payee at that moment. So at that moment the bank can give you funds so you can so you can produce or you can resell. So you you’re the bank because your buyer doesn’t know where you’re getting the money from. You’re only providing credit.

Meghan Escobar (07:32)
Listen folks, you can slow it down, you can pause it, you can rewind, go back and write this stuff down. This is literally a step by step of like how you can become a bank. And that’s information that is not out there on social media. I can guarantee that. And you know, one thing that I would also like to talk about here, and I think it’s an an important thing for the audience to hear is

We talked about competition and you mentioned how you there is not much competition for you and and that is it that’s amazing. But in in your entrepreneurship journey, has there ever been a time where things got real and you had to pivot really fast or where a deal went sideways?

Luis Castillo (08:17)
Yeah, I I believe that you learn on difficult times. When everything goes nice and beautiful, you’re not learning. So you have to expose yourself and and do something new. I always say to myself, when was the last time you did something new? You gotta go out of the box. You gotta do something that’s how I got into this business. Somebody from the Dominican Republic in two thousand nineteen ninety eight, I think. he asked me, Can you give me a million dollars to buy this equipment?

Let me find out. And that was everything started. Wow. You have to be curious in life. You cannot that that’s how we read books. Because the book has to be diversified. You cannot have the same order all the time. But but yes, I had a lot of many challenges. I used to be a I used to have a real estate mortgage company for many years. I did very well, but it was a lot of work.

So I had to change to something that not work too long or too much and be able to do new things or explore things. So yes, during 2015, I was very involved. Well, let me go back and say one of the agencies that we get paid by, and also we do financing, and sometimes we we get paid by the borrower, is an agency of the United States government called Eximbank.

That’s eximbank.gov. So that organization it was kind of standby, kind of closed in 2015. That’s when we had some challenges. And I had to reinvent myself. So before 2015, I was doing large transactions. We did transaction as a movie theater in Mexico. We finance some airplanes, we finance so many large transactions, but 2015.

I don’t know if you guys know what is a earmark. Earmark is a law that goes attached to a large law. I don’t know if you remember the Alaska pipeline that in 2015-16 they stopped that because it didn’t pass the Senate at the government, it didn’t pass the Congress. So there was their renewal of the Eximbank. So they had to stop. So at the Eximbank stay, but we cannot bring new business. And then later it came up to $10 million maximum. So it didn’t work out very well for us.

So we have to reinvent ourselves. And that’s when I got into other types of financing, same Eximbank residual income. That’s something that.

Meghan Escobar (11:21)
Very interesting. So although you Yeah, so although you were doing well in life and you were in a good industry, w earning a a a decent income, you mentioned, you know, you worked you had to work really hard for it. And so through that challenge, you reinvented yourself and found a way to work smarter, not harder.

Luis Castillo (11:24)
You have to reinvent.

Another time was COVID. During COVID, you could not do anything, you have to stay home. So when you stay home, what happened? I’m glad that during COVID my business grew because there was a lot of risk involved. So people they were looking more for credit insurance. But the interesting part is that I having more time in with me, I have more time in my life. That’s when I got into underwriting with real estate.

large property one is a hundred units the other one 233 units so but i had to learn i took a whole year underwriting even though i underwrite when i i underwrite more deeply than real estate but doesn’t mean that because you know how to underwrite a full financial statement it doesn’t mean it’s the same underwriting as a real estate transaction it’s two different underwriting it’s easier than real estate transaction because there’s much less there’s less ratio you’re looking for IIR AR

And the and and the return the investment. That’s it. And the other one we see is so many ratios that we have to pull it. So but I have to learn that. And that’s another one that I came alone. I mean, and also the one of the property, by the way, he was not doing well is like a couple of years ago. We have to put money we have to put money into the property for now the operators so we don’t lose it. I’m glad that now it’s back in track. So yeah, you have you have to go down in order to learn. Yeah. You have to

Yes, push yourself.

Meghan Escobar (13:05)
Yeah. Thank thank you for sharing that. I think that’s that’s the kind of stuff that doesn’t get talked about enough is, you know, the the work behind the success. You know, we live in such a highlight focused world. It’s very difficult sometimes for people to understand that y you gotta start and build a foundation and sometimes you’re gonna have to rebuild the foundation because there might be a crack in it. So thank you for sharing that with me.

Luis Castillo (13:32)
Mm-hmm.

Meghan Escobar (13:35)
Talk to us a little bit about Lewis, like what’s the next real big goal for you? personally, professionally, what’s you know, what what are you looking to focus on solving next?

Luis Castillo (13:44)
One of my big goals, maybe not much I’m I’m not very young. I’m already in a retired age. So my goal is having the same production in less amount of time. So that’s the reason I start at eleven in the morning with my appointments. And funny enough used to laugh. I said I wanna do it that way, but one of these days I was listening to Bezos from Amazon and I learned that you also start late in the morning.

I’m glad there’s another multi multi billionary doing it. So I don’t feel that bad. So that’s one of my goal is spending live life. Mm. Not necessarily get more. Because yeah, of course you have co I can’t retire. You have to continue. But I s right now we’re doing a Dominican Republic seminar. It’s coming up in August. We’re gonna do it in two countries.

I love it because it’s a lot of challenge. the adrenaline start getting in getting out and all that. I like it. And so so another goal that I have is end of the year I wanna wanted to start getting into RV resort. I already did some research. I went to Tennessee, South Carolina, and Georgia. And so that’s when I’m one of my goals getting a RV resort.

And already start looking at some of them, but I’m not ready now. It’s gonna be like a September, October. So so by the next year, I should have like a couple RV resort. That’s one of the goal. And most and most important, one of another goal, is take one vacation per month. At least a week. Before I’m doing it. But yeah, but that’s it, that’s the idea. Take at least one week a month.

Meghan Escobar (15:21)
Well

Luis Castillo (15:30)
I mean because what happened is in my business, you can do the work anywhere you are. Even my doctor get upset. And they say, listen, that’s the reason I come to you often as much as often as I want, is because I don’t have to be on a desk. That’s the beauty about it.

Meghan Escobar (16:26)
That is a b that is the true beauty of it. It sounds like you I see on your shirt you have a shirt that says freedom. Is that what freedom means for you?

Luis Castillo (16:33)
Yeah, do what you love to do. And yes, as simple as that. I mean that’s freedom. Yes, love do what you love to do. Yeah. Because it doesn’t feel like a work. I mean I there is an asset management, for example, I have an obligation because I took the obligation three, four years ago with these properties. I don’t like to do it. So if I get another property, I don’t want to be a asset management.

So you have to learn what you love to do. You see, so but that’s what it is. So but but I have an obligation. So so you have to also be respectful and be obligated to your commitments. Sometimes you have to sometimes you do want a goal, but you have to pay for it.

Meghan Escobar (17:16)
Yeah. Somehow. For sure. For sure. And you know, a lot of our listeners, they’re either very early on in their journey, they’re, you know, super green, looking into getting into entrepreneurship or real estate, or they’ve been in the game for a while and they’re looking to level up. And I think that they would benefit from here in this, like building relationships, any business, it’s a people business. And you know, I think

building relationships and growing your network is a big influence on what level of success you’re gonna get to. What would you say, Lewis, is the the has made the biggest difference for you in your journey?

Luis Castillo (17:53)
Well, I would say in your audience it has to do with real estate. when I started after COVID, I I put myself to work. I mean I was attending three main events in different states. I was actively in so many communities. but yes, if you’re starting in this journey, you have to give as much as you can. I mean so so once you get into certain steps to step down.

And relax, now you can do it in a different way. I’m not in that mood to push hard because I did that already. I already went through so many things. Even in Brazil. In Brazil I saw it’ll be crazy about this, but I bought a castle in Brazil. Castelo do Batel is the name. Was during the crash 2008. I we were developing land in North Carolina.

We had a mall in South Carolina and my partners, it was a everybody knows it was a huge crash. We divided assets so we can control independently to decide even you’re gonna sell it, you’re gonna lose it, whatever. So so I took the castle in Brazil because they didn’t speak Portuguese. so I took the castle. I give my share to the other mall and I took this one. I sold it. And then those people who bought it, they stopped the payment.

And they didn’t want to pay the cash, they didn’t want to continue payment because in Brazil, if you’re not a resident, you cannot sue someone unless you have the same amount in the bank for you suing for. So they didn’t know I was a resident. So I was able to bring it to court and I got them back on track, and then they pay me the difference. But the interesting thing is that I sold it for the same amount we bought it because the

Currency exchange. currency exchange would be against me, it would be terrible. So I said, I don’t wanna I don’t wanna do it again. So I took a break. So it is you have to go through the mud and you have to cross the river you have to get wet to cross the river. Yeah.

Meghan Escobar (19:47)
I should.

And you know, creating the relationships and making sure that you are shaking hands with folks that can help you level up. I think that’s something that can’t be faked. You know.

Luis Castillo (20:12)
Also

what you’re like I said before, the more you know, you know more than you know less. So what you don’t have, somebody else has it. You have to be partner, you can do everything by yourself. And building relations, like you said, I mean you have to be ethical. I mean and you have to sell with the I mean is there’s a lot of fake people in this world. There’s a lot of and I know them personally and I respect them, that’s their life. But

But you have to be you have to do the due diligence who they are. And and you have to be very careful because there might be good speakers, might be a good influence people, but not real, they’re not real behind. So tr getting the right partner is great. I mean, you have I’m glad that we have some good partners in real estate. So but due diligence is very important, yes. But definitely I agree.

Meghan Escobar (20:45)
Yeah.

Luis Castillo (21:06)
You have to be part of different communities.

Meghan Escobar (21:08)
Yeah, absolutely. Absolutely. And before we wrap things up here, Lewis, like if anyone in the audience wanted to reach you, connect with you, learn more about this amazing industry that you’re in, what would be the best way for them to reach you? Is it through a social media, is it a website, is it an email?

Luis Castillo (21:28)
Give you simple way. Okay. There is a website of the United States government called Exim Bank. That’s a US government website. If you put in Google Luis Castillo, Exim Bank, E X I M Bank, Luis Castillo, Exim Bank put in Google. The first link will come up. It will be a link with a gov at the end. That’s the government. If you click, my information is there.

That’s my email and that’s my telephone number there. So you put Luis Castillo Exim Bank. And we’ll show up. Did he show up?

Meghan Escobar (22:04)
It did. Yeah, it did. Did you over? And you know, folks, we’ll actually put that link down here so you can connect directly to them and not even have to. We’ll eliminate the typing for you. So thank you so much, Lewis, for sharing your wisdom, being on the show. I really appreciate you taking the time to be here and and giving us this knowledge. It’s

Luis Castillo (22:05)
Yeah, you’re right there.

No, everything is there.

Meghan Escobar (22:28)
It’s something that I think most people in the real estate industry aren’t aware of and you know, the more you know, the more the more you know, the more you know, but the more you know, the less the no the less you know.

Luis Castillo (22:39)
Yeah,

that that used to be an old book that I read. And my social media is @mrcastilloluis, all of them. All of them they’re the same. @mrcastilloluis.

Meghan Escobar (22:49)
And if you see on his screen too, folks, it looks like he has his you know, handle and his phone number there as well. So feel free to utilize the resources that he provided. And we will, you know, hopefully have you back on the show someday. But for those of you that are tuning in, if you got any value from this, please be sure to hit like and subscribe. We’ve got more conversations coming in with owners and operators just like Luis Castillo here.

And you know, he’s building real businesses in real time with real people. And if that’s something that you want to do, keep listening. We’ll see you on the next episode you.

Luis Castillo (23:25)
Great job.