“We call it the Check 21 lockbox, or the fully integrated lockbox,” said Victor Notaro, the senior vice president of PNC Bank’s strategic partners group and U.S. domestic correspondent banking. “This is very different from the traditional outsourced lockbox product.”

The Check Clearing for the 21st Century Act is widely viewed as a critical driver of imaging technology and the use of image exchange networks to clear and settle payments electronically.

Mr. Notaro said the outsourced product lets regional banks serve corporate customers that have a national reach without having to build their own lockbox networks. In effect, client banks are outsourcing the mundane tasks of opening envelopes and converting checks into images, while retaining the actual check processing business and its fee income.

The product lets banks “compete effectively, even more effectively, against those top five banks,” he said. “As the bank of first deposit, … [PNC’s client banks would] get all the additional revenue. More important, they capture and control all that customer data.”

The Pittsburgh banking company began planning the product in January 2004 and started a pilot test at its Chicago site with one client bank Oct. 28, the day Check 21 took effect, Mr. Notaro said. “We jumped right into it.”

That bank remains PNC’s only customer for this product. He would not name the bank, except to say it was a top 10, but not a top five, bank. Nor would he discuss the volume of business under the new arrangement.

PNC has discussed the image lockbox product with several top 15 banks, and “they have looked at this with immense interest,” Mr. Notaro said.

“It’s the large banks that do the most business” in corporate banking, he said. “They have very strong customer relationships. They have to have a seamless solution.”

It may bruise the national ego that the Canadian loonie has pulled even with the U.S. dollar and the euro is trouncing the greenback, but there is a silver lining: America’s relatively cheap exports are booming and have played a critical role keeping the U.S. economy out of recession. In the second quarter of 2008, the nation’s GDP rose 1.9 percent thanks in large part to a 9.2-percent jump in exports.

In response, more and more small-business owners are looking to tap overseas markets. They realize exports are their biggest growth opportunity, and some banks are beginning to realize that opportunity includes them. “If they learn how to gain access to foreign markets, they’re basically getting in front of more customers and they’re going to be successful because they are very, very good [at what they do]; and if they keep growing, then we grow with them and we all benefit,” says Victor Notaro, an svp at Pittsburgh-based PNC Bank.

In September, PNC planned to conduct seminars in four cities-Cincinnati, Philadelphia, Pittsburgh and East Brunswick, NJ-on how small businesses can best break into the Indian, South Korean and Vietnamese markets. The conferences will be in conjunction with the U.S. Commercial Services department, which is the trade promotion arm of the International Trade Administration, and global-shipping provider FedEx.

This is the second year that PNC has conducted such seminars. Last year more than 1,000 companies and 1,400 participants participated in a seminar on trade with China. “As [PNC’s small business clients] grew and needed to do more things overseas, they didn’t automatically think of PNC as a place to do that,” says Notaro. “Sometimes you think of American banks as just being focused on the U.S. The reality was that we were able to meet all the international services needs of our corporate clients. So part of this was to educate them on all the things that we could do to meet all their goals and the second thing was that it was very good business for PNC.”

There are 50,000 small- and medium-sized exporters in PNC’s footprint, and 11,000 of those are clients of PNC, Notaro says. But even those non-client banks are proving a source of revenue. The $108-billion-asset bank offers its exporting products, services and solutions on a white label basis to other banks for their small business customers. Notaro says 40 banks use it services, 12 of which are major banks. “Many of the medium-sized and small banks in the United States that we do business with, our correspondent banks if you will, are really, really growing quickly with our global products,” he says.

U.S. businesses already have an advantage, according to Victor Notaro, a senior vice president of PNC Bank of Pittsburgh.

“If they are operating in the U.S. they have already proved they can operate in the most competitive market,” Notaro said. “This is the ‘A’ game. If you can make it in the United States you can make it anywhere.”

A growing number of treasurers and CFOs are facing these challenges. In 1990, the value of goods and services exported and imported by U.S. companies equaled $552 billion and $630 billion, respectively, reports the U.S. Department of Commerce. Those numbers had risen to $1.175 trillion and $1.782 trillion by 2004. “It’s strategically critical for companies to access the global market,” says Victor Notaro, senior vice president and group manager for PNC global treasury management in Pittsburgh.

With two-thirds of companies indicating that improving global trade management is among their three most important initiatives, (Aberdeen Group report: “The CFO’s Agenda for Global Trade”), middle market companies can no longer afford to have their business remain exclusively within U.S. borders.

Smart Business talked with Victor Notaro of PNC’s International Services Group to discuss the importance of doing business overseas, particularly some strategies for success in the global economy.

What should a company that is thinking about expanding internationally take into consideration?
Doing your homework and understanding the market is critical. Carefully think through your market entry strategy and plan for language, cultural and regulatory differences.

Regulations vary from country to country, including marking and labeling requirements. There are many different regulatory bodies with various levels of certification, depending on the industry type.

Also, you need to know who the local players are: competitors, distributors and customers. Knowing the nuances of how to do business with local players can make or break your business as you look to global markets.

In addition, understanding selling terms and documentation are critical to smooth transactions and ensuring you get paid.

What might be a typical strategy for market entry for a product or service?
Many companies first choose to work with a sales agent or distributor who provides local knowledge and guidance as the company tests the new market. If your product or service has a large demand, if you serve a specialized niche, or if buyers come directly to you (e.g., through trades shows), direct sales may be another option. A company may next look to set up a sales office or form a joint venture where an offshore firm can provide the local market expertise. A final phase of expanding internationally could involve building a plant or acquiring a local company once you are firmly established in that market.

What are some of the risks involved in doing business internationally?
Political instability increases financial risk. If governments are overthrown or violence breaks out, plan ahead to assure payment for your goods or services. Working with a financial institution that has relationships with offshore banks and using back-up documents such as letters of credit can mitigate payment risks.

Identify translation exposure and discuss hedging alternatives to reduce or eliminate foreign currency risk resulting from currency fluctuations. When currency values fluctuate, unrealized gains or losses may occur for the business. Likewise, if interest rates in one country change, an imbalance can occur in the currency markets. It is important for companies to work to hedge foreign exchange risk.

How can a middle market company protect itself and/or manage the risk of doing business internationally?
If cash payment in advance is not an option, one of the best tools available to reduce payment risk is a letter of credit where your bank works with the bank of the offshore company. The correspondent bank determines the customer is creditworthy, and your bank validates the correspondent bank. While this option covers the most risk, there is an associated cost.

As you build relationships with offshore buyers, a documentary collection is another vehicle used to ensure the title documents of the sale are secured until payment has been made or drafts have been accepted. It is less costly than a letter of credit.

Finally, you might establish an open account settlement with credit terms directly between you and your foreign buyer. It carries the most risk, and in true risk-reward fashion is the least expensive.

Again, companies should develop a hedging strategy to protect against currency exposure. It’s important to deal with a trusted financial adviser who understands currency fluctuations, economic risk, and how to ensure payment.

What other strategies can a company employ to improve its business globally?
Identify a trusted adviser who is a specialist in international services and who understands your business and the global markets you seek. A financial institution maintaining key relationships with foreign banks and alliances with important partners such as the U.S. Department of Commerce and Export-Import Bank will have the experience and expertise to help you navigate smoothly through international waters.

This was prepared for general information purposes only and is not intended as specific advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk. PNC is a registered trademark of The PNC Financial Services Group, Inc.

VICTOR NORTARO is senior vice president and group manager of PNC’s International Services Group. Reach him at (412) 768-3066.

Interested in learning more about global strategies? Join PNC for an informative Web seminar “Insights into Global Strategies” on Nov. 16 from 10 to 11 a.m. (EST). To register: http://livemeeting.viewcentral.com/reg/pncbank/1116061116sb or send an e-mail to advisoryseries@pnc.com.

Amid the economic gloom and doom of the past two years, a potential bright spot may have been overlooked. In spite of the impression that U.S. exports are not competitive, are shrinking or are hamstrung by protectionism, the U.S. remains a major player with enormous untapped potential.

Victor Notaro, the senior vice president of PNC Global Treasury Management, believes that the U.S. is doing very well as an exporter, but could be doing better.

“While we certainly import more than we export, we remain the third largest exporter of goods in the world,” says Notaro. “And when you add in services, the picture gets even better. In spite of this historic success, however, too many companies are reluctant to explore the international market, even though 95 percent of the world’s consumers are beyond our borders.”

Smart Business spoke with Notaro about what’s holding companies back and how winning companies have learned to grow internationally.

What proportion of U.S. companies export?

According to the U.S. Department of Commerce, only 1 percent of U.S. companies export. On the other hand, the U.S. has about 30 million companies, so even 1 percent of that total is a large number. That small percentage has been able to keep the U.S. in the top tier of all exporters worldwide. When you include high-value services such as professional and technical services, insurance and financial services, the U.S., at $1.5 trillion, tops every other country. And, contrary to popular impression, exports are growing. U.S. goods and services exports in the first two months of 2010 are up 14.8 percent, according to the U.S. Department of Commerce.

Why does such a small percentage of companies export?

First, U.S. companies have enjoyed such a rich home market that they have not needed to export in order to grow. Second is the risk you take on whenever you venture into the unknown. Companies may not be comfortable navigating within other cultures and they are concerned about managing risk, getting timely information, even getting paid.

Is protectionism a problem?

Certainly, we hear that undervalued currencies in China and other countries make U.S. exports more expensive. And foreign governments often provide low-interest loans and subsidies that put the U.S. at a disadvantage.

But there is so much room for growth and hunger for the innovative products and services that the U.S. creates that companies should not let these issues discourage them.

What is the profile of a typical exporter?

Companies of any size can enter the world market successfully. However, we see more of an export concentration by larger companies. So of total exports, 60 percent is accounted for by the top 500 U.S. companies.

Although large companies dominate, smaller companies — those with fewer than 500 workers — are getting into the game in increasing numbers. Our domestic market is very competitive, robust and innovative. If a company is doing well here, it has what it takes to outpace foreign competitors.

If a company is interested in exporting, how does it get started?

First, gather information on the markets you are considering. This doesn’t require a large investment. Trade shows, informal discussions with vendors and even competitors can help you understand how your products might compete abroad.

Second, get as many people as possible involved in the effort. It is particularly important that senior management and key people understand the foreign market.

Third, take advantage of agencies such as the U.S. Commercial Service, a bureau of the Commerce Department that has offices all over the world. Many states have a presence or commercial support in other countries, as well. Industry associations offer different levels of support, but many provide useful information such as changes in the regulatory environment in key countries.

Enlist the support of a financial firm that has a global advisory service that can provide intelligence and advice based on first hand experience. And if you are importing or sourcing abroad, leverage the relationships you have already developed. Many companies are moving from sourcing to selling successfully. Most important, talk to everyone you can — customers, suppliers, even competitors. By asking about their experience, you can pick up a lot of sector-specific information.

What kind of support should companies expect from their bank?

At the very least, you want a bank that understands the full range of financing and settlement options that are available — letters of credit, ExIm Bank facilities, cash management, treasury management for multiple currencies and cross-border transactions. Other important capabilities are foreign exchange and risk mitigation solutions.

On top of that, your bank should be able to provide guidance on local business customs and advice on the creditworthiness of potential trading partners.

Then, look for help in meeting general business challenges in emerging markets. Advisers who have first-person experience in a target country can provide invaluable support as you explore your options.