LOGISTICS, TRADE AND TRANSPORTATION SYMPOSIUM Export Financing February 26, 2014 Gulfport, MS

UNDERSTANDING: EXPORT RISKS PAYMENT METHODS RISKS SHIPPING TERM RISKS RISK MITIGATION TECHNIQUES FINANCING OPTIONS

FINANCING THE TRADE CYCLE What is the trade cycle? Define the time frame Analyze cash flow Consider financing options

EXPORT FINANCING FINANCING OPTIONS –WORKING CAPITAL PROGRAMS: Ex-Im Bank and SBA –FOREIGN RECEIVABLES FINANCING: Ex-Im Bank and Private Insurers –LC’S AND BANKER’S ACCEPTANCES

EX-IM BANK & SBA PROGRAMS PRE-EXPORT: WORKING CAPITAL (Raw materials to accounts receivable financing) POST-EXPORT: INSURED FOREIGN RECEIVABLES FINANCING

PRE AND POST EXPORT FINANCING Borrower: Domestic Exporter Eligibility: 50% US content or added value required Mitigation: Covers Exporter performance risk Advance Rates: Export related A/R advance rate up to 90% Inventory must be pre-sold advance rate up to 75% Coverage: Covers 90% of the loan’s principal and accrued interest Borrower: Domestic Exporter Eligibility: 50% US content or added value required Mitigation: Protects against foreign buyer commercial and political risks Advance Rates: Export related A/R advance rate up to 95% Coverage: Covers 95% commercial and 100% political risk coverage on financed receivable Expand international sales and market share Expand collateral base Allows customer to obtain supplier discounts Improves cash flow Mitigates foreign commercial and political risks for the Exporter and/or the Bank Working Capital Guarantee (Pre-Export Financing) Export Credit Insurance (Post-Export Financing) Benefits

Working Capital Guarantee Borrowing Base

WHAT IS A BA?: A time draft drawn by a company on a bank, which the bank has accepted. MAY BE CREATED UNDER LETTERS OF CREDIT OR CLEAN MAY BE HELD OR DISCOUNTED BENEFITS OF USING BA’s TERMS FOR THE BUYER SELLER PAID AT SIGHT, IF DISCOUNTED LOWER/MORE COMPETITIVE INTEREST RATE MARKET PENETRATION BANKER’S ACCEPTANCES (BA’s)

EXAMPLE: Assume an exporter receives a letter of credit for $100,000 in his favor opened by his foreign buyer with the terms of the draft being 90 Days Sight and confirmed by his bank. When documents are presented by the exporter and found to be in order, the bank will accept the draft, which is the bank’s promise to pay at maturity. If the exporter has negotiated to have the BA discounted with all discount charges for the exporter’s account, the bank will calculate that interest charge and deduct it from the amount of the acceptance before they credit the funds to his account. In our example assume a 90 day BA rate of 2.6%. $100,000 X.026 divided by 360 days X 90 days equals $650 for the interest charge. Thus the exporter would receive $99,350 into his account. If the interest charge was for the foreign buyer, the exporter would receive $100,000 at the time of discounting and the foreign buyer’s account would be debited for $100,650 at the maturity date. It should be noted that the negotiation of the discount charges is not an all or nothing situation. The two parties could agree to split the cost 50/50 as both will be benefiting or by some other combination that totals 100%, such as 70/30 or 40/60. Remember, it is a negotiated part of the transaction. BANKER’S ACCEPTANCE (BA’s)

ASSESS AND ADDRESS YOUR WORKING CAPITAL NEED UP FRONT: –MEET WITH YOU BANK TO EXPLORE YOUR PAYMENT AND FINANCING OPTIONS BEFORE YOU MAKE A SALE –LEARN HOW LC’s WORK (Sight, Time, Transferable, BA’s) –DEVELOP AN UNDERSTANDING OF GOVERNMENT EXPORT FINANCE PROGRAMS EX-IM BANK OF THE U.S. SMALL BUSINESS ADMINISTRATION (SBA) –CONSIDER CREDIT INSURANCE & ACCOUNTS RECEIVABLE FINANCING –MAKE SURE YOU CAN BUY OR PRODUCE THE PRODUCT BEFORE YOU SELL IT. FINANCING NEEDS SUMMARY

REGIONS BANK GLOBAL TRADE FINANCE P. O. DRAWER 2527 MOBILE, AL FOR ADDITIONAL INFORMATION, CONTACT... GLENN SIGLER PH (251) FAX (251) CELL (251)