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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
• 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.
Working Capital
WCG Increases Borrowing Power
Credit InsuranceRisk 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”
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.
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
Credit InsuranceFew 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!)
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
Credit Insurance
Policy by Buyer Type
1. Small Business Multi-Buyer Basis
2. Small business single-Buyer Basis
3. Multi Buyer Basis
4. Single-Buyer Basis
Policy By Term Type
1. Short-Term Policies (up to 180 or 360 day terms)
2. Medium-Term Policies (capital equipment / 1-5 year terms)
Other: Special Policies1. Small Business 2. Environmental 3. Services 4. Leases
How To Access Ex-Im Products• Banks
– Lender Locater Lender 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 [email protected]