CPE Forum Financing Exports November 9, 2010 Helping you start, grow and succeed.

Trade Finance Finding the right mix for your company of: Workable cash flow Payment assurance Winning customers and increasing sales

SBA Loan Programs for Exporters Export Working Capital Program (EWCP) Export Express International Trade Loan (ITL)

Export Working Capital Program 90% Guarantee to the bank $4.5 million is maximum SBA guaranteed portion $5 million maximum loan amount

Export Working Capital Program Transaction financing No minimum financial ratios to qualify Single Contract or Revolving Quick turnaround time Preliminary commitment availability

Company meets SBA new size standards based on Net Worth and Average Income: –Net Worth less than $15 million (including affiliates) and –Average net income of less than $5 million after federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years. Export Working Capital Program Eligibility

Product is titled and shipped from the United States –SBA has no U.S. content requirement –Military sales are allowed The borrower must be in business 12 months or with proven expertise The borrower may be new to exporting Export Working Capital Program Eligibility

EWCP - Indirect Exports Applicants who produce products or services that will be exported, but who do not directly export their products are eligible for EWCP financing. –Manufacturers using an Export Trading Company –Suppliers to other domestic manufacturers who will export their final product Requires certification from domestic customer that goods are being exported.

EWCP Use of Proceeds Loan is used to acquire or produce goods or services for export and/or to finance the accounts receivable of such foreign sales. Pre-shipment Guarantee –100% Labor, Material and Overhead costs –Purchase products for resale Post-shipment Guarantee –Foreign Accounts Receivable financing Combination Guarantee

EWCP Use of Proceeds Portions of the EWCP Line of Credit may be up to fund standby Letters of Credit when required as: Bid Bond Performance Bond

EWCP – “It’s the Transaction” Exporter’s ability to perform Transaction evidenced by Purchase Order, Letter of Credit or signed contract Acceptable payment by foreign buyer Cash in Advance Letter of Credit Open Account (insured) Open Account (no insurance)

Discounted Credit Insurance The Export-Import Bank of the United States (Ex-Im Bank) provides small businesses a 25% discount on export credit insurance premiums. Export credit insurance protects exporters against nonpayment and enables them to sell on competitive “open account” terms. Ex-Im Bank provides up to 95% coverage for both commercial risks (i.e. buyer insolvency and default) and political risks (i.e. war, revolution and the cancellation of an export or import license).

Open Account No Insurance No Insurance is required if: Receivables are from financially sound corporations, multinationals or highly-rated governmental entities in countries with minimal political risk or Exporter can provide favorable ledger experience with specific accounts over a significant period of time.

EWCP - Advance Rates Determined on a case-by-case basis Pre-shipment - limited to exporter’s cost of the product being exported (materials, labor and overhead) or the cost of purchasing a product for resale. Post-shipment – Up to 85% on Receivables (no more than 60 days past due) and 90% on usance letters of credit.

EWCP - Collateral Self-liquidating loan First lien on all assets being financed Personal guarantees of all owners of 20% or more who are active in the business (as with all SBA guarantees). Other collateral as required by the bank on a case-by-case basis

EWCP Fees SBA guaranty fee of 1/4 of 1% of the guaranteed portion for loans with a 12 month maturity or less; e.g: $2,250. for a $1 million line of credit Through December 31, 2010: The SBA guaranty fees are waived on loans with a maturity greater than 12 months. Business and lender negotiate interest rate and fees, not subject to normal SBA 7(a) limitations.

EWCP - How to Apply Exporters are directed to apply with a commercial loan officer at their existing bank. The Bank forwards the application to the SBA at the local USEAC for approval if SBA support is needed.

Export Express Loans and Lines of Credit up to $500,000. Lines of credit can be up to seven years maturity. Through December 31, 2010: The SBA guaranty fees are waived on loans with a maturity greater than 12 months.

Export Express Banks that are currently authorized under the SBA Express (domestic loan program) are automatically approved to use Export Express. Approved banks make their own credit decision and use their own forms. Lender receives a 90% guaranty on loans up to $350,000 and a 75% guarantee on loans between $350,000 and $500,000.

Export Express Applications are processed using the existing SBA Express procedures Eligibility: –Applicant must have been in business for at least 12 months –proceeds are to be used to develop or expand their export markets

Export Express – Use of Proceeds Proceeds may be used for any of the following purposes: –Transaction-specific financing of export sales, including backing standby letters of credit –General lines of credit for export purposes –Export marketing activities such as brochure translation or participation in a trade mission –Term loans for permanent working capital, machinery and equipment, or real estate

International Trade Loan (ITL) Term loan with a maximum amount of $5 million Maximum SBA guaranty of 90% Can be combined with an EWCP line of credit

ITL Eligibility Loan proceeds will significantly expand an existing export market or develop new export markets; or The applicant business has been adversely affected by import competition And Upgrading facilities or equipment will improve the applicant’s competitive position. Application/business plan must document eligibility; i.e: export projections or evidence of adverse impact.

ITL Use of Proceeds Acquisition or improvement of production facilities or equipment to be used in the United States in the production of goods and services involved in international trade. Permanent Working Capital Debt refinancing is allowed if the original debt qualified for ITL financing.

ITL Fees Regular SBA 7(a) guaranty fees normally apply: –.25% for maturities less than 12 months –2.0% % on long term loans depending on loan amount. Through December 31, 2010: The SBA guaranty fees are waived on loans with maturities greater than 12 months.

Free resources that provides a comprehensive guide to exporting.

Export Finance John P. Joyce SBA Export Finance Manager New England Region U.S. Export Assistance Center Boston, MA Tel: (617)