AIM Quarterly SeminarEXIM BANK FINANCING September 25, 2007
Ex-Im Bank • Ex-Im Bank is an independent U.S. agency. Mission is to support export of US manufactured goods & services, and create & sustain US jobs • Established in 1934, Headquartered in DC with 5 regional business development offices (New York, Miami, Chicago, Houston, Long Beach) • Most clients are small businesses main products are: • Working capital (Pre-Export Shipment) • Credit Insurance (Post Export Shipment) • Short- term Insurance • Single buyer • Multiple buyer policies • Medium-term Insurance or Guarantees • Long-term Direct Loans • Special Policies • Small Business • Environmental • Services • Leases
Working Capital • Used by small & medium-size U.S. firms to fulfill international orders. • Ex-Im gives guarantee to lending banks who in turn provides working capital loans to U.S. exporters. • Funds must be used to make or buy U.S. goods and services (raw materials, equipment, labor) to fulfill export orders. • AND/OR to finance export receivables by posting performance bonds (stand-by L/C’s) • Exports must be shipped from U.S. and goods must have at least 50% content, services must be performed by US staff. • If content is less say 45% -loans can only be supported up to 45%.
Working Capital • Loans can be “transaction-specific” or “revolving” • No minimum or maximum amount • Exporter’s financial statements must support size of loan requested • Inventory & accounts receivable (L/C’s or insured receivables) are used as collateral • Advance loan amounts as high as • 75% on inventory • 90% on eligible receivables
Working Capital • Ex-Im offers 90% guarantee to lender including principal & interest (100% if woman/minority-owned). • Application Fee is $100 for a final commitment. • Ex-Im fee to lender is up to 1.5% of the loan total; lending bank may pass the fee on to the exporter • Interest rate negotiated by exporter & lender. Most loans are one year but can be up to three. • Owner(s) with more than 20% equity must pledge a personal guarantee
Working Capital How to Apply: • Preliminary Commitment Application: Call Sharyn Koenig (212) 809-2653 • Delegated Authority Lender list go to: www.exim.gov view Lender Locater or Lender Referral List • Ex-Im “delegated lenders” can approve loan by their loan committee and attach Ex-Im Bank’s guarantee without prior approval • Lender “Additional Requirements”: No “deep pockets”-Why is Ex-Im needed for financing to materialize? • Smaller loans available through SBA: Call 1-800.U.ASK.SBA or visit www.sba.gov.
Risk Protection: • Protects balance sheet against risks of foreign buyer non-payment • Policies can cover a single sale or your entire export portfolio • Covers both commercial risk-Insolvency, bankruptcy, protracted default and political risk-War, revolution, insurrection, civil unrest, “transfer risk” Credit Insurance • Benefits to Exporters • Increase competitiveness • Able to offer buyer-friendly terms- open account to global buyers • Flexible terms helps you secure more global sales • Ensures a greater, more stable, cash flow. • Banks prefer to lend against Ex-Im backed receivables • You can budget premium costs - avoid catastrophic loss • Risks Not Covered • Disputes, unless/until they are resolved • Cancellation of a sales contract • Devaluation of a currency as a political risk-If a default occurs, and buyer asserts it was due to government devaluation of the currency, it is viewed as commercial loss not political loss.
Credit Insurance Few Restrictions • Military Exports :No Defense Articles or Services 3 Exceptions:1.Humanitarian aid 2.Drug interdiction 3.Dual use items • Restricted Countries (political or economic) Ex-Im help is available in many countries but some political/economic restrictions apply. Check the Country Limitation Schedule (CLS) at www.exim.gov X means not available • Foreign Content Goods must be produced in and shipped from US. Services performed by US-based personnel. ST, at least 51% US content, incl. labor but not mark-up MT, at least 85% US content, incl. labor not mark-up • Buyer’s Creditworthiness (more later!)
Credit Insurance How to Apply • Ex-Im Bank regional offices and registered insurance brokers can help • Insurance brokers can assist with documentation and provide required information to Ex-Im Bank • Go to www.exim.gov click on Insurance Brokers to find a list of EXIM registered providers of credit risk insurance Policy by Buyer Type Small Business Multi-Buyer Basis Small business single-Buyer Basis Multi Buyer Basis Single-Buyer Basis Policy By Term Type • Short-Term Policies (up to 180 or 360 day terms) • Medium-TermPolicies(capital equipment / 1-5 year terms) Other: Special Policies • Small Business • Environmental • Services • Leases
How To Access Ex-Im Products • Banks • Lender LocaterLender Referral List • Working Capital Program • Lenders with delegated Authority • Credit Risk Insurance • Insurance Brokers • Ex-Im Bank Regional Office • Sharyn Koenig, Sr. Bus. Dev. Officer VA Region Tel: (212) 809-2653 firstname.lastname@example.org