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Trade Financing Solutions Export-Import Bank of the United States Increasing Your Export Sales… While Minimizing Risks! AIM Quarterly Meeting October 3,

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Presentation on theme: "Trade Financing Solutions Export-Import Bank of the United States Increasing Your Export Sales… While Minimizing Risks! AIM Quarterly Meeting October 3,"— Presentation transcript:

1 Trade Financing Solutions Export-Import Bank of the United States Increasing Your Export Sales… While Minimizing Risks! AIM Quarterly Meeting October 3, 2006

2 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Who We Are - What We Do + Ex-Im Bank is an independent agency of the United States >Established in 1934 >Headquartered in Washington, DC >5 regional business development offices (New York, Miami, Chicago, Houston, Long Beach, CA) + Mission: Support the export of US-manufactured products and services, and to create and sustain US jobs

3 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Small Business IS Our Business + 83% of transactions supported small business exports in FY04 For manufacturers main product is working capital Overall the main product offered is insurance

4 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Your Needs - Our Solutions 1.Inventory Financing 2. Short-Term Accounts Receivable Financing 3. Medium-Term Financing 4. Long-Term Financing Working Capital Guarantee Export Credit Insurance Export Credit Insurance or Loan Guarantee Loan Guarantee or Direct Loan Pre-Export Financing Post- Export Financing

5 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Working Capital Guarantee

6 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Working Capital Guarantee + Used by small & medium-size U.S. firms to fulfill international sales orders. >Ex-Im provides guarantee to lending Banks for working capital loans to U.S. exporters. >Funds must be used to make or buy US goods /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 US. Goods must have at least 50% content -services must be performed by US staff, ( if less than 50%, loans can only be supported up to % of US content).

7 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Working Capital Guarantee >Can be “transaction-specific” or “revolving” >No minimum or maximum amount, but exporter’s financial statements must support the size of the loan requested >Inventory & accounts receivable (L/C’s or insured receivables) are used as collateral >Advance loan amounts as high as 75% on inventory and 90% on eligible receivables

8 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Working Capital Guarantee >Ex-Im offers 90% guarantee to lender including principal & interest (100% if woman/minority-owned). >Fees: 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

9 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Working Capital Guarantee + How to Apply: >Preliminary Commitment Application: Call Sharyn Koenig (212) >Delegated Authority Lender list go to: view Lender Locater or Lender Referral Listwww.exim.govLender LocaterLender Referral List + “ Additionality” must be addressed by lender : >No “deep pockets” >Why is Ex-Im needed for financing to materialize? >Ex-Im “delegated lenders” can approve loan by their loan committee and attach Ex-Im Bank’s guarantee without prior approval + Smaller loans available through SBA: >call U.ASK.SBA or visit

10 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s WCG Increases Borrowing Power !

11 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Export Credit Insurance

12 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Export Credit Insurance Benefits Risk Protection: Protects your balance sheet against risks associated with foreign buyer non-payment >Policies can cover a single sale, or your entire export portfolio and cover both commercial risk (Insolvency, bankruptcy, protracted default) and political risk (War, revolution, insurrection, civil unrest, “transfer risk”) Marketing Aid: Gives you freedom and confidence to offer buyer friendly payment terms, like open account to global buyers, and secure more international sales Financing Aid: Lenders are more likely to advance against Ex-Im backed receivables which can yield you greater cash flow. Also, by budgeting premium costs and avoiding catastrophic bad debt expenses you stabilize your cash flow.

13 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Export Credit Insurance + Risks Not Covered >Disputes, unless and until they are resolved >Cancellation of a sales contract >Devaluation of a currency ( as a political risk ) If a default occurs, and the buyer asserts that it was due to a government devaluation of the currency, we will view that as a commercial loss as opposed to a political loss.

14 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Just A Few Restrictions + Military Exports (exceptions apply) + Restricted Countries (political or economic) + Foreign Content + Buyer’s Creditworthiness (more later!)

15 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Military Restrictions + No Defense Articles or Services + Three Exceptions 1. Humanitarian purposes 2. Drug interdiction 3. Dual use items

16 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Eligible Countries + Ex-Im Bank conducts business in many countries throughout the world + Restrictions may apply for political or economic conditions + 1st step - check the Country Limitation Schedule (CLS) at Limitation Schedulewww.exim.gov + X means support is not available.

17 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

18 Providers + How to Apply for Credit Risk Insurance. >Ex-Im Bank regional offices and registered insurance brokers can provide assistance with export credit insurance applications. >Insurance brokers can provide the required information to Ex-Im Bank and assist with the documentation. >Go to click on Insurance Brokers to find a list of EXIM registered providers of credit risk insurancewww.exim.govInsurance Brokers

19 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

20 Short – Term Products

21 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Short-Term + There are four basic types of short- term export credit insurance >Small business- multi buyer ( under 5 million export credit sales) >Small business- single buyer >Regular business multi-buyer (over 5 million export credit sales) > Regular business single buyer

22 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s ST Export Credit Insurance: All Multi-Buyer Policies + Exporter is required to insure all export sales made on credit terms (except for specified exclusions) to all markets where Ex-Im Bank provides coverage. (See Country Limitation Schedule (CLS) at Limitation Schedulewww.exim.gov + Policy is issued for period of one year and is renewable annually. Policy covers all eligible shipments made during the policy period. + Coverage begins when goods placed en route to the buyer. + Discretionary credit limits mean fewer pre- approvals

23 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

24 ST Small Business Multi-Buyer Premium Rates Term Sovereign Buyer Financial Institutions Private Buyer Sight L/Cs $0.04 N/A 1-60 days $0.19$0.24$ $0.32$0.39$ $0.41$0.50$ $0.51$0.63$ $0.62$0.77$2.08 Per each $100 of invoiced amount

25 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

26 ST Export Credit Insurance Multi-Buyer Policy + Discretionary Credit Limits (DCL’s ) A DCL is a limit that enables the exporter to extend credit terms, up to a specified amount, without prior Ex-Im Bank approval. To use this limit, specified credit information on the buyer justifying the credit amount to be extended must be obtained prior to shipment (*The DCL may be superceded by a “special condition” on the Country Limitation Schedule (CLS) - check the CLS carefully)

27 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s ST Export Credit Insurance Multi-Buyer Policy DCL approval (two-types) is based on exporter’s credit experience & procedures. Credit DCL: NEW buyers. Requires exporter to obtain current (dated within 12 months), favorable credit information on buyer (generally credit agency report and/or written trade references) before making shipment. Ledger DCL: EXISTING buyers. Allows exporter to use buyers prior history as basis for future shipments, if prior payments were made promptly, and were similar amounts and terms.

28 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s ST Special Buyer Credit Limits (SBCL) + Eligibility >For single buyers needing credit limits above DCL >Exporters may apply for revolving (12 month max.) credit limits and may apply to renew before expiry >May request changes (credit limit/terms) any time >SBCL’s supercede DCL’s, but not the Country Limit Schedule (CLS)! + Coverage: >Insures single or multiple shipments to ONE buyer >No deductible >Risk-based premium rates listed on >Min. premiums vary based on buyer/exporter type >$1,000 minimum for “small business” >Equal commercial & political risk coverage:  90% for private sector obligors  95% for L/C transactions  98% for bulk agricultural products  100% for sovereign obligors

29 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s ST Export Credit Insurance Single-Buyer Policy Application Process >Submit the application along with credit / financial information on the buyer. >If approved, Ex-Im Bank issues a formal “commitment notice” locking us in for 60 days >To purchase coverage, exporter pays the full premium, up-front >There is no application fee. This is a GREAT marketing tool, as an exporter can quote a NEW buyer open account terms, making it “subject to credit approval”. The buyer will only know it is credit insured if told by the exporter, or if a claim is filed and Ex-Im Bank initiates collection efforts.

30 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Short-Term Policies: Claims Information + Claims may be filed no earlier than 90 days after the due date and no later than 240 days after the due date (that’s between the 3rd and the 8th month after default). + Ex-Im Bank will pay completely documented claims within 60 days.

31 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Medium – Term Products

32 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Medium-Term Support + For buyer financing of capital equipment: >Loans under $10 million with 1 to 5 year repayment terms (7 years in rare exceptions) > 15% downpayment required; Ex-Im Bank supports 100% of the remaining 85%. + Two MT products are available: >Guarantees: Available only to lender issuing “buyer credit” >Insurance: Medium-Term Single-Buyer Policy available to exporter OR lender

33 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Medium-Term Guarantees >Available to lenders with an active Master Guarantee Agreement with Ex-Im Bank >Lender “loans” money to a foreign buyer to purchase US goods/services >The lender “cashes out” the exporter and creates a PN between it and the buyer. The guarantee is in place to protect the lender against the buyer’s default >Fees are a commitment fee of 1/8th of 1% plus the exposure fee as calculated on fee calculator (www.exim.gov)

34 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s Medium-Term Insurance >Exporter OR lender extend credit terms to buyer >Ex-Im Bank insures the exporter/lender against non-payment by the foreign buyer >Fees are calculated using Ex-Im Bank’s exposure fee calculator on Ex-Im Bank’s website (www.exim.gov)www.exim.gov >Ex-Im Bank publishes Medium-Term Credit Standards for guidelines on evaluating a buyer’s creditworthiness. (www.exim.gov)

35 E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s How To Access Ex-Im Products + Banks >Lender Locater Lender Referral ListLender LocaterLender Referral List + Working Capital Program >Lenders with delegated AuthorityLenders with delegated Authority + Credit Risk Insurance >Insurance BrokersInsurance Brokers + Ex-Im Bank Regional Office >Sharyn Koenig, Sr. Bus. Dev. Officer VA Region Tel: (212)


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