1. FEDERAL GUARANTEE PROGRAMS THAT SUPPORT EXPORT LENDING TO SMALL BUSINESS Community Affairs Webinar Series Opportunities for Community Banks :

2. YOUR PRESENTERS: Dennis R. Chrisbaum Director, International Trade Finance, SBA Michael Jackson Director, City/State Partners, Ex-Im Bank Teri Ryan Branch Chief, Risk and Asset Management, USDA Foreign Agricultural Service Stephen Fancher President and CEO, Florida Export Finance Corporation James Moschella Examination Specialist, FDIC

3. Because the more products we make and sell to other countries, the more jobs we support right here in America… Tonight we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports… President Barack Obama State of the Union Address January 27, 2010 National Export Initiative

4. Announced March 11, 2010 by President Goal 1. Double exports in five years 2. Create two million new jobs Actions 1.Create Export Promotion Cabinet 2.Increase technical assistance 3.Increase export financing 4.Increase business advocacy 5.Strengthen trade agreements

5. The Export Promotion Cabinet, July 2012 To Maximize the Effectiveness of Federal Programs, the Federal Government will: (1)increase the national base of small- and medium- sized enterprise exporters by 50,000 by 2017, (2) expand the reach of federal export assistance including trade financing--and counseling to small businesses, and (3) ensure better delivery of export promotion services domestically and overseas.

6. U.S. Global Business Solutions Export Promotion Cabinet, Objective #2: Expand Access to Small Business Trade Financing 1) trade financing perceived as too complex by many lenders 2) not high volume nor profitable for lenders 1) reduce the complexity and present a streamlined package of financing options, 2) focus only on mainstream products with greater volume potential Problem Solution

7. Separating Facts from Myths Myth Small businesses dont export. Fact 296,000 SMEs (98% of all exporters) exported more than $700 billion in 2011, representing 33.3% of all known U.S. exports. Very small companies (fewer than 20 employees) account for 70 percent of all exporting firms. Find out how important exporting is to your state: http://www.trade.gov/mas/ian/statereports/. http://www.trade.gov/mas/ian/statereports/

8. Perception vs. Reality Lender Perception Lending to exporters is too risky Reality Out of all of the SBA Sub-program codes, the Export Working Capital program has the lowest loss rate and the lowest default rate.

9. Perception vs. Reality Lender Perception We cant use SBA export loan programs, since our bank doesnt have an international department. Reality An international department isnt necessary. The SBA/Ex-Im Bank USEAC Regional Managers will work with any bank to walk them through the process. SBA loans are made to your customer down the street, not to a foreign entity in Mexico, China, or elsewhere.

10. One-Stop Shop for Export Business Needs Goals of Export Promotion Cabinet Grow revenues and jobs through exports and the number of SB exportersadd 50,000 by Dec. 2017 Expand the base of financial institutions and service providers who facilitate exportsadd 250 trade financing originators by Dec. 2015 Solution to Increase Access to Trade Finance Reduce complexity by packaging trade financing and marketing options that seamlessly meet exporter needs Simplify marketing materials and increase outreach and training to meet the needs of their financial institutions Streamline access to international experts, credit products, and business services for exporters and lendersbuild volume

11. One-Stop Shop for Export Business Needs Strategy Tailor the options to the stage of exporter development and capacity of the financial institution Combine key trade and commercial finance products and services in a single menu of options made for mainstream use: U.S. Global Business Solutions Offer a seamless, low-cost transition among options Provide a menu of customized financing solutions for more advanced exporter needs: The Specialized Global Solutions (SGS) program

12. What Might a SME Need? Working Capital for Export Development : Attend trade shows Secure CE mark, international patent or trademark Meet potential business partners Vet potential buyers, agents or distributors and purchase foreign credit reports In-country promotions Translation of website/product literature and other marketing costs

13. Solution: SBA Export Express Profile: to $350,000 with 90% guaranty $500,000 with 75% guaranty Processed by SBA-approved Export Express lenders Working capital: 7 years; Fix assets: up to 25 years Required: Entering or expanding in foreign market In business for at least 12 months (can be waived by lender if the applicants key personnel have export expertise and successful business experience and lender does conventional underwriting, not relying on credit scoring)

14. Solution: SBA Export Express Proceeds may be used for any export development activity, such as: Translation of product literature or website Participation in a trade show or on a trade mission transaction-specific financing of export deals, including standby letters of credit general lines of credit for export purposes term loans for permanent working capital, machinery, equipment, or real estate used in the production of goods or services for export

15. What Might a SME Exporter Need? Working Capital and Credit Insurance for Export Orders: Inventory, materials, labor, other production costs Foreign accounts receivable insurance Insurance and freight costs Bank fees related to the transactions Standby-letters of credit to guarantee bid, performance, or advance payments

16. Working Capital for Export Transactions 1.SBA Export Expressto $500,000 Guaranteed loan; 7 years maximum working capital 2. Ex-Im Banks Global Credit Expressto $500.000 Direct loan, if credit is not elsewhere available Provides businesses with export history or orders with short-term, working capital Terms: either 6 or 12-month revolving line of credit Line can support general expenses of exporting, including export development and transactional costs. Credit scored

17. Working Capital for Export Transactions 3. SBA Export Working Capitalto $5 million 90% guaranty; $4.5 million guaranty Maximum term, 3 years; typically, 1 year Guaranty fee if 12 months or less:.25% (1/4 of 1%) Transaction-Based Financing (Purchase order financing) Single Order or Revolving Line Most supplier and production costs through collections Or, Asset-Based Line-of-Credit W/C for pre-shipment, post-shipment or both Borrowing Base: inventory, WIP, (insured) A/R Advance rates: up to 75% against inventory and WIP up to 90% against foreign accounts receivable

18. Working Capital for Export Transactions 4. 4. SBA Working Capital CapLine Up to $5 million loans with 75% guaranty Maximum term: 10 years Benefit: One line to support both domestic and international sales Required: credit insurance on foreign A/R One-to-one collateral ratio: – Advance rates up to 50% against inventory and equipment; – 80% against A/R and real estate

19. Mitigate Transactional, Non-Payment Risk Solution: Ex-Im Banks Trade Credit Insurance Up to 95% coverage against non-payment due to commercial and political risk Express Insurance: 5 day turn-around, up to 20 buyers Insure world-wide buyers or single buyerpolicy options Benefits: Marketingbigger orders Financingcan add to borrowing base Reduced complexityno need for letters of credit Healthsleep at night Cost: ~65 cents per $100 invoiced amount 25% discount paired with any SBA or Ex-Im Bank loan

20. What Might an Experienced SME Exporter Need? Term Loan for fixed assets: Machinery or equipment to expand production in order to meet foreign demand Retooling expenses necessary for metric production or to meet other standards Permanent working capital Real estate needed as a result of expanding export sales

21. Solution: SBA International Trade Loan Summary: A 7(a) loan up to $5,000,000 for plant and equipment maximum guaranty: 90% up to $4.5 million either: a) expanding because of exports, or b) adversely impacted by imports and c) will improve companys competitive position a combination of fixed assets or term loan with W/C -- maximum Working Capital guaranty: $4,000,000 maximum term: 25 years; 10 years for working capital refinancing is allowed can be process by PLP lenders can be used for on-shoring if conditions above met business plan required--application must document eligibility requirements (i.e. export projections or evidence of adverse impact by imports)

22. All Four SBA Loans Can Be Used to Support Indirect Exports Applicants who produce products or services that enter into the export channel, but do not directly export their products – Manufacturers using an Export Trading Company – Suppliers to other domestic manufacturers that export directly Requires certification from domestic customer that goods are, in fact, being exported.

23. What Else Might an Experienced SME Exporter Need? Term Loan for the Foreign Buyer: Ex-Im Banks Medium Term loan guarantee to a lender that finances a foreign buyers purchases of U.S – made capital equipment and any related services. BENEFITS: Enables an exporter to sell large ticket capital equipment to a foreign buyer on favorable credit terms generally between 1 and 5 years and be cashed-out up front by a lender ELIGIBILITY: Products must be of U.S. origin. Buyer must make a minimum 15% cash down-payment. COST/FEES/TERMS: A variable exposure fee is based on the risk of the transaction and a commitment fee of 0.125%. The interest rate is negotiated between the lender and the foreign borrower. RESTRICTIONS: Lenders must have a Master Guarantee Agreement in place to participate.

24. What Else Might an Experienced SME Exporter Need? Working Capital Over $5 million: DESCRIPTION: To purchase finished goods, raw materials, labor and fund overhead costs to fulfill export sales orders or to post a bid or performance bond. Guarantee 90% of the loan amount. BENEFITS: Offers generous advance rates (up to 75% on inventory and work-in-process, and up to 90% on foreign A/R). HOW IT WORKS: Lender either approves under their own delegated authority or sends to Ex-Im for concurrence. Loans may be revolving lines of credit or transaction-specific. ELIGIBILITY: Company must be in business for at least one year with financial statements available on its operations. Goods and /or services exported must be of U.S. origin. COST/FEES/TERMS: $100 processing fee. 1.75% annually, 1.25% available on a case-by-case basis for lower-risk transactions. Interest rate on the loan and any other fees are set by the lender.

25. USG Programs for Your Export Customers A.Export Development --SBA Export Expressto $500,000 B. Working Capital --SBA Export Expressto $500,000 --SBAs Export Working Capitalto $5 million --SBAs CapLineto $5 million --Ex-Im Banks Global Credit Expressto $500,000 --Ex-Im Banks Working Capitalover $5 million C. A/R Payment Risk Mitigation --Ex-Im Banks Trade Credit Insurance programs D. Foreign Buyer Financing --Ex-Im Banks Medium Term Loan Program Please USE Them!

26. Regional Export Finance Centers Midwest Western Chicago Regional Export Finance CenterOrange County, CA Regional Export Finance Michael Howard: 312-353-8081David Josephson: 949-660-1341 DetroitSan Francisco Field Office John Toles: 313-309-4158James Lucchesi: 415-705-2285 MinneapolisSeattle Denis Griffin: 612-348-1213 John Brislin: 206-728-2264 Northeast and Mid-Atlantic Northeast and Mid-Atlantic New York Regional Export Finance Center Thomas Cummings: 212-809-2650 Southeast Southwest Southeast Southwest Miami Regional Export Finance CenterHouston Regional Export Finance Center Sharyn Koenig: 305- 526-7436Patrick Crilley: 281- 721-0465 AtlantaNorth Texas Branch McKinney (Dallas), TX Susan Kintanar: 404- 897-6082Kelly Kemp: 214-551-4959 Ex-Im Bank Field Offices

27. SBAs Network of Trade Finance Specialists at U.S. Export Assistance Centers CHARLOTTE Territory: North Carolina, South Carolina, Eastern Tennessee Dan HoltDan Holt 704-333-4886 x226 CHICAGO Territory: Wisconsin, Illinois, Iowa John NevellJohn Nevell 312-353-8065 CLEVELAND Territory: Ohio, Western New York, Western Pennsylvania, Patrick HayesPatrick Hayes 216-522-4731 DALLAS/FORT WORTH Territory: Texas, Oklahoma Rick SchulzeRick Schulze 817-684-5506 DENVER Territory: Colorado, New Mexico, Utah, Wyoming Bryson PattersonBryson Patterson 303-844-6623 ext.218 DETROIT Territory: Michigan, Indiana John O'GaraJohn O'Gara 313-872-6793 MIAMI Territory: Florida, Puerto Rico, Virgin Islands Mary HernandezMary Hernandez 305-526-7425 ext. 21 ATLANTA Territory: Georgia, Alabama, Kentucky, West/Central Tennessee Sandro MurtasSandro Murtas 404-815-1496 ARLINGTON, VA Territory: Virginia, Maryland, District of Columbia, West Virginia, Delaware William HouckWilliam Houck 202-557.4063 BOSTON Territory: Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island John JoyceJohn Joyce 617-565-4305 CALIFORNIA IRVINE Territory: Southern California, Southern Nevada, Arizona Martin Selander 949.660-8935Martin Selander SACRAMENTO Territory: Northern California - Fresno to the Oregon border, Northern Nevada, Hawaii, Guam Jerry R. Avila 916-735-1708Jerry R. Avila MINNEAPOLIS Territory: Minnesota, North Dakota, South Dakota Carlos SosaCarlos Sosa 612-348-1642 NEW ORLEANS Territory: Louisiana, Arkansas, Mississippi Pellson LauPellson Lau 504-589-6730 NEW YORK CITY Territory: New York City & 5 Boroughs, Eastern Upstate New York, New Jersey Toni Corsini Toni Corsini 212-809-2645 PHILADELPHIA Territory: Eastern Pennsylvania Robert ElsasRobert Elsas 215-597-6110 PORTLAND Territory: Oregon, Southern Idaho, Montana Jeff DeisJeff Deiss 503-326-5498 SEATTLE Territory: Washington, Alaska, Northern Idaho Pru BalateroPru Balatero 206-553-0051 ext.228 ST. LOUIS Territory: Kansas, Missouri, Nebraska John BlumJohn Blum 1314-260-3788

28. Questions Primary Contacts: Dennis R. Chrisbaum, SBA Dennis.Chrisbaum@sba.govDennis.Chrisbaum@sba.gov; 202.205.6885 Michael Jackson, Ex-Im Bank Michael.Jackson@exim.govMichael.Jackson@exim.gov; 202.565.3479

29. FOREIGN AGRICULTURAL SERVICE United States Department of Agriculture EXPORT CREDIT GUARANTEE PROGRAM GSM-102 FACILITATINGTRADEFINANCE

30. WHAT IS GSM-102?GSM-102 Its not a loan… Its not a loan… Its not a grant… Its not a grant… Its a guarantee Its a guarantee Backed by the full faith and credit of the United States Government

31. PURPOSE OF THE PROGRAM Promotes the export of U.S. agricultural products by facilitating the financing component via a credit guarantee. USDA guarantees the letter of credit to emerging markets where sales may not occur without the financing and guarantee. GSM-102

32. PROGRAM DESCRIPTIONObjective Protects U.S. exporters or U.S. banks against the non-payment of the importers foreign bank under a Letter of Credit (L/C) Terms Guarantees up to 98% of the loan principal Covers a portion of the interest Fees are based on country risk and length of financing Fees dependent on frequency of principal repayments Coverage Coverage up to 2 years Over 190 agricultural products Freight costs are usually covered Over 140 banks covered in almost 80 countries GSM-102

33. PROGRAM PARTICIPATION Approved Countries/Regions Approved Foreign Banks Approved Foreign Banks Qualified U.S. Exporters Qualified U.S. Exporters Approved U.S. Banks Approved U.S. Banks Importers do not need to be approved Importers do not need to be approved GSM-102

34. Not just for bulk commodities High-value processed products are also covered Not just for large corporations Approximately 47% of participants are SMEs Not just for large dollar transactions Transaction sizes have no minimum. Many are under $1 million USD GSM-102 is… MISCONCEPTIONS GSM-102

35. Consumer-ready - Intermediate - Bulk ELIGIBLE COMMODITES 100% produced in USA High-Value products (90% U.S. Content) GSM-102

36. HOW MUCH IS THIS GOING TO COST? Guarantee fee (fully transparent) Cost of L/C Financing costs GSM-102

37. COMPARISONGSM-102 WITHOUT GSM-102WITH GSM-102 U.S. exporter reluctant to ship without being paid in advance Bank in region may be unwilling to provide credit to importer Any financing to importer may have very short repayment terms & higher interest rates U.S. exporter more likely to ship since USDA carries 98% of the risk and payment is received upon presentation of documents Presence of loan term extended by the U.S. bank to the foreign bank may encourage extension of credit by the foreign bank to the importer Importer now in better position to negotiate favorable loan terms with GSM-approved bank in the region

38. Foreign Bank Less risk – USDA assumes almost all risk in the event of nonpayment Ability to leverage country & foreign bank limits Reduce capital requirements due to USDA guarantee Ability to lend at reduced rates because of USDA guarantee Ability to lend up to 2 years BENEFITS TO U.S. BANKS Establish or improve correspondent banking relationships Service U.S. exporter clients & expand relationships GSM-102

39. BENEFITS TO AN EXPORTER Open new markets and expand sales where risk may be greater Open new markets and expand sales where risk may be greater Minimal cost – fees average about 1 percent Minimal cost – fees average about 1 percent Reduce importer and foreign bank risk Reduce importer and foreign bank risk Get paid quickly by assigning guarantee to U.S. bank and delivering shipping documents that conform with L/C Get paid quickly by assigning guarantee to U.S. bank and delivering shipping documents that conform with L/C Ability to lower all-in-costs to the buyer Ability to lower all-in-costs to the buyer GSM-102

40. 40 HOW TO GET STARTED? Provide most recent audited financial statements Documentation from federal or state agency regulator Identify shareholder ownership & management Contact information of principal and U.S. regulator U.S. Bank GSM-102

41. 41 HOW TO GET STARTED? Exporter Get a DUNS number Submit qualification application Negotiate sales contract with buyer Submit request for guarantee/pay guarantee fee Contact U.S. bank (if assigning guarantee) GSM-102

42. Africa & Middle East Central America Caribbean Central Asia Mexico China Russia South America South Korea Southeast Asia Vietnam Turkey MARKETSGSM-102

43. .26%4.23%5.23%.49% $5.32 billion $1.44 billion $3.09 billion $4.12 billion $4.13 billion $3.11 billion REGISTRATIONS (USD BILLIONS) GSM-102

44. GLOBAL USAGE FY 2011 – 2012 (in USD millions) +Eurasia Region discontinued in 2012 $ USD Millions GSM-102

45. TOP COMMODITIES FY 2012 GSM-102

46. FY 2013 PROGRAMMING Country/Region($5.5 Billion per Farm Bill) Africa/Middle East Region$ 400 Million Caribbean Region$ 300 Million Central America Region$ 550 Million Central Asia Region$ 50 Million China Region$ 200 Million Korea, South$1,000 Million Mexico$ 400 Million Russia$ 250 Million South America Region$ 600 Million Southeast Asia Region$ 450 Million Turkey$ 700 Million Vietnam$ 100 Million Reserve$ 500 Million TOTAL:$5.5 Billion GSM-102

47. FOREIGN AGRICULTURAL SERVICE United States Department of Agriculture ADDITIONAL INFORMATION Teri Ryan 202.720.0663 teri.ryan@fas.usda.gov www.fas.usda.gov/excredits/ecgp.asp See how your business can benefit from GSM-102 Contact Us

50. Florida Export Finance Corporation FEFC A not for profit corporation created and funded by the State of Florida by the Florida Export Finance Corporation Act of 1993- FL. Statutes 288.770-288.779.

51. Legislative mandate to increase job opportunities and income for residents of Florida by providing financial, technical and consulting assistance to small and medium sized Florida Companies in support of their export sales.

52. FEFC financial assistance is available only for exporters and transactions which meet the following requirements: FEFC financial assistance is available only for exporters and transactions which meet the following requirements: The exporter/borrower must be registered to do business in Florida and be able to produce a current corporation, partnership or proprietorship registration. The exporter/borrower must be registered to do business in Florida and be able to produce a current corporation, partnership or proprietorship registration. The exporter/borrower must have less than 250 employees. Full and part time employees are included in this requirement. The exporter/borrower must have less than 250 employees. Full and part time employees are included in this requirement. The exporter/borrower must have less than $6,000,000 of net worth. The exporter/borrower must have less than $6,000,000 of net worth. The equity owner of the exporter/borrower must sign the FEFC application, all loan documents, and personally guarantee the loan. The equity owner of the exporter/borrower must sign the FEFC application, all loan documents, and personally guarantee the loan. The exporter/borrower must have a specific and verified order from a foreign buyer and the loan must be made to support the order. The exporter/borrower must have a specific and verified order from a foreign buyer and the loan must be made to support the order. The goods or services must be shipped from Florida. The goods or services must be shipped from Florida. The maximum FEFC guarantee amount is 90% of the loan or $500,000, which ever is the lowest. The maximum FEFC guarantee amount is 90% of the loan or $500,000, which ever is the lowest. The maximum term for guarantee is one year. The maximum term for guarantee is one year.

53. FEFC will not offer financial assistance to companies that qualify for the Ex-Im Bank or the SBA Working Capital Loan Guarantee programs. Most likely reason for non-qualification for these federal government programs is lack of collateral, short time in business, lack of profitability, or poor financial conditions.

54. FEFC will issue a guarantee for 90% of a working capital loan made by a lender to an approved exporter up to a maximum liability to FEFC of $500,000. The guarantee is subject to certain conditions which the lender must adhere to.

55. The most important are as follows: 1. The loan must be revolving. 2. Loan advances are not given to the borrower, only to a supplier and in payment of items required in order for the borrower to fill a qualified foreign order. 3. In some cases the borrower (sometimes the lender) must obtain trade credit insurance covering nonpayment by the foreign buyer. FEFC will help in obtaining such insurance. 4. All payment from the foreign buyer must be sent directly to the lender. IMPORTANT

56. FEFC The FEFC Guarantee may prevent a small business loan from being Classified by the bank regulators.

57. Medium term (over 1yr.) loans commitments arranged on behalf of small Florida exporters$1,797,665,000 Export value of Political and Credit Risk Insurance arranged to support sales of small Florida exporters $ 248,800,000 Export value covered by FEFC loan guarantee commitments for small Florida exporters $ 393,731,000 Total value assisted (100% small business/approx. 72% minority and women owned)$2,440,196,000 Total for 2012 activities $ 48,970,000 Total Grants received (1993/2012) $12,590,000 Capital - $1,000,000 Operating Expenses$ 13,590,000 Net Worth of FEFC - 12/31/12$ 9,578,658 Total number of seminars - 382 FEFC seminar attendance - Exporters 13,074 - Bankers 2,498 FEFC Status - Non stock not for profit corporation with IRS 501(c)3 status 13 Member Board of Directors (3 Government/10 Private Sector) Loan Defaults – 25 ($3,710,991 Net Loss) Legislative Mandate - To increase job opportunities and income for residents of Florida by providing financial, technical, and consulting assistance to small and medium sized Florida companies in support of their export sales.

58. 5.3 70,000 3,850

59. Filename 59 Regulatory Perspectives

60. Filename 60 Regulatory Benefits Portion of the loan guaranteed could receive a preferential capital risk weight under Part 325 of the FDIC Rules and Regulations.

61. Filename 61 Risk Issues Have the right people, policies, and procedures in place before entering a new business line.

62. Filename 62 Risk Issues Fully understand the guarantying agencys requirements for underwriting, servicing, and liquidation processes.

63. Filename 63 Risk Issues Know your customer from the Credit Risk, Anti-Money Laundering, and Office of Foreign Assets Control (OFAC) perspectives.

64. Filename 64 Risk Issues Execute proper due diligence prior to entering into any third-party vendor relationship.

65. Filename 65 Reference Material Supervisory Insights, June 2011 - SBA Lending: Insights for Lenders and Examiners http://www.fdic.gov/regulations/examinations/supervisor y/insights/sisum11/examiners.html Small Business Lending Initiatives http://www.fdic.gov/consumers/banking/businesslending /index.html

66. Filename 66 Reference Material FIL-44-2008 - Guidance for Managing Third Party Risk http://www.fdic.gov/news/news/financial/2008/fil08044.html Bank Secrecy Act Guidance http://www.fdic.gov/regulations/examinations/bsa/index.html Jim Moschella, Examination Specialist jmoschella@fdic.gov jmoschella@fdic.gov 917-320-2542

67. FOR FURTHER INFORMATION: Email us at: CommunityAffairs@FDIC.gov Check back with our website: www.fdic.gov An archived version of this presentation Links to agency websites Additional resources