6/6/2017 | James G. Burrows

 

In today’s economy, access to global markets is essential for middle market enterprises. Businesses are increasingly spreading their risks across regions to seize growth opportunities.

The Export-Import Bank of the United States (EXIM) equips U.S.-based exporters with the protection and liquidity to enter new markets and diversify their portfolio of customers. When U.S. companies or their customers are unable to access export financing from the private sector, EXIM fills the gap by furnishing U.S. businesses with the tools necessary to compete for international sales.

EXIM: Risk Less. Export More.
EXIM is the official export credit agency of the United States. It is an independent, self-sustaining federal agency with a mission of supporting jobs by financing the export of American goods and services – at no cost to taxpayers. An array of financing options is tailored to the needs of exporters – small, medium and large—and no transaction is too large or too small. The Bank supports American business exporters in more than 185 countries.

Middle market U.S. companies selling internationally can rely on EXIM to:

  • Unlock working capital to receive advances against export-related inventory and accounts receivable;
  • Mitigate the risk of foreign buyer nonpayment, empowering firms to offer competitive credit terms; and
  • Make term financing possible for its buyers of capital goods and services. 

Obtaining a Line of Credit 
For many U.S. exporters, a lack of access to financing can stand in the way of sales growth. Commercial lenders do not always have the capacity or willingness to provide loans for higher risk markets or transactions. 

EXIM can work with a company’s lender to help secure financing. The funds may be used to pay for materials, equipment, supplies, labor, and other inputs to fulfill export orders; post standby letters of credit to serve as bid bonds, performance bonds, or payment guarantees; and purchase finished products for export.

The Bank provides a 90% loan-backing guarantee, decreasing repayment risk and increasing the lender’s willingness to extend a loan. In fact, qualified EXIM lenders can expedite the loan process by committing EXIM’s guarantee without prior approval. Companies benefit from the fast turnaround and are also able to borrow more with the same collateral. 

Houston-based Quantum Reservoir Impact (QRI) specializes in reservoir management consulting and has been using EXIM’s working capital loan guarantee since 2010 to grow its international sales. QRI’s $10 million credit line through a private-sector lender supports $50 million in sales to Mexico and Kuwait. At the same time, EXIM’s guarantees minimized nonpayment risk for the lender. The financing has supported approximately 100 jobs so far and is expected to lead to the creation of another 30.

Protecting Against Nonpayment
In addition to lender support, EXIM’s Export Credit Insurance empowers U.S. companies to win international sales while minimizing the financial risk of exporting. EXIM insures a company’s foreign accounts receivable against commercial (e.g., bankruptcy) and political (e.g., sanctions) risks in overseas markets. In this manner, U.S. exporters are assured their bottom line will be protected should their foreign customers fail to pay.  

The coverage also allows exporters to extend credit term up to 360 days to their buyers. Due to the fear of not getting paid, many companies typically require pre-payment or resort to using costly, time-consuming letters of credit. EXIM insurance policies are flexible enough to cover an entire export portfolio, a handful of foreign buyers, or just a single buyer. Additionally, most policies come with the added benefit of only paying premiums upon shipments and do not have a first-loss deductible. 

Financing for Your Foreign Buyers  
The Bank also insures or guarantees term loans extended by lenders to creditworthy international buyers for purchases of U.S. capital goods or services. Due to this support, U.S. companies have more opportunities to compete for sales in markets worldwide. 

An example to illustrate the benefits of EXIM’s medium-term financing (one to five years) is Mathews Company. This family-owned manufacturer in Crystal Lake, Illinois, had the opportunity to sell a continuous flow grain dryer to a buyer in Mexico that needed term-financing. EXIM played a key role in closing the sale by backing a lender loan to the Mexican company. With EXIM financing, their customer did not need to pay cash in advance, get an expensive letter of credit or even provide a high down payment. 

EXIM covers 100 percent of commercial and political risks on the financed amount after a down payment is made by the buyer. Lenders are more likely to provide a loan to the buyer and often with lower interest rates due to EXIM’s support.

A long-term transaction (5 to 12 years) enabled Acrow Bridge of New Jersey to boost their exports. They turned to EXIM when private financing was unavailable for their buyer. EXIM guaranteed a $73 million loan supporting 144 bridges to Zambia. Thanks to the availability of this support, Acrow’s proposals were chosen over bids submitted by its European and Asian competitors. 

Increase Your Export Sales
The international middle market is ripe with potential and U.S.-based companies are well suited to expand their export reach. EXIM’s finance products can enable these companies to venture into new markets, increase sales with existing customers, and boost jobs at home.  

Register to obtain a free trade finance consultation.