essential export finance support
TRANSCRIPT
Essential Export Finance Supportduring COVID-19 by the Export-Import Bank of the U.S.
April 23, 2020 10:30 PST
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INTRODUCTIONS
Sharyn KoenigManaging Director,Eastern and Western Regions,Export-Import Bank of the U.S.
Steve FreshourVP Business Credit,Export-Import Bank of the U.S.
Patrick SchaeferSVP, Center for Global Trade and
Foreign Investment Los Angeles Area Chamber of
Commerce
OPENING REMARKS
Patrick SchaeferSVP, Center for Global Trade
and Foreign Investment Los Angeles Area Chamber of
Commerce
OPENING REMARKS
As the largest and most influential business association in Los Angeles County, the Los Angeles Area Chamber of Commerce is the voice of business in our region. We design and advance opportunities and solutions for a thriving regional economy that are inclusive and globally competitive.
The Chamber’s Center for Global Trade & Foreign Investment is widely recognized for its practical experience in developing global trade and investment programs and strategies and conducting trade & industry data research & analysis. These initiatives are designed to advance global trade and investment in the region, with a strong focus on export promotion, foreign direct investment and assisting local businesses build international relationships and expand their global reach.
Main Title of PresentationSub-heading
Name of PresenterTitle of Presenter
Date
Increasing Export Sales… While Minimizing Risks!
Sharyn H. Koenig
Managing Director,Eastern & Western Regions
EXIM is a U.S. federal government agency
WHO IS EXIM BANK?
Mission: Maintain and create U.S. jobs by supporting the growth of U.S. exports
Established in 1934 with HQ in Washington, DC
Regional Offices across the country
Supports all U.S.-based companies
WE ARE SMALL BUSINESS FOCUSED
About 90% of EXIM Bank transactions supported small business exporters
No company or transaction is too small
EXIM has supported sales of just a few thousand dollars
THREE WAYS EXIM CAN SUPPORT YOU
Insure your receivables generated by export sales
Provide access to pre-export working capital
Offer term loans to foreign buyers for capital equipment
SALES TERMS AS A SPECTRUM OF RISK
Cash in Advance
Letters of Credit (L/C)
Cash Against Documents
Open Account
Seller RiskHigh
Buyer RiskLow
Seller RiskLow
Sales Terms Buyer RiskHigh
EXPORT CREDIT INSURANCE
Sales Tool:
Be competitive by offering open account credit terms to foreign buyers
Risk Protection:
Protect against nonpayment by foreign buyers due to commercial risks and political risks
Generate Cash Flow:
Accounts receivable from export sales may be used as collateral to obtain immediate cash
An insurance policy covering receivables generated from export sales that protects against nonpayment by foreign buyers
Export credit insurance policies can cover a single buyer, some of your foreign buyers, or your entire export portfolio
RISKS COVERED
Commercial Risk
InsolvencyBankruptcyProtracted Default
Political Risk
War, Revolution, InsurrectionCurrency Transfer RiskCancellation of an Import or Export License
EXIM SOLUTION: EXPORT CREDIT INSURANCE
EXAMPLE: EXPRESS INSURANCE POLICY RATES
Sell to a private sector buyer on terms up to 60 days open accountPremium cost is $0.65 per $100 of the gross invoice value…
Gross invoice is covered to 95%……on a $30,000 sale, $28,500 is covered for a $195 premium!
ELIGIBILITY CRITERIA
Exporters Must:
Be in business at least one year
Have DUNS number and financial statements or tax returns
Sell products that have 50+% U.S. content including labor
and overhead but not markup (some flexibility for
SBA-defined “small businesses”)
JUST A FEW RESTRICTIONS
No Military or Defense-related products or obligors (exceptions apply)Sell in one of over 180 countries where EXIM provides coverShip from U.S. port
WORKING CAPITAL LOAN GUARANTEE
Guarantees 90% of loan amount No minimum or maximum amounts
Supports advances against export-related inventory (including WIP) and foreign receivables
May be used to collateralize a stand-by L/C or performance bond
A guarantee to a commercial lender that makes a loan to an exporter to purchase or manufacture U.S. goods for export
FOREIGN BUYER FINANCING
EXIM-supported financing by U.S. commercial lenders to creditworthy foreign buyers for capital equipment and related services
Terms up to 5 years <$25 million
15% down payment required from buyer
100% commercial and political risk coverage on financed amount
Exporter receives payment in full after shipment
Minimum 3 years’ trade experience with buyer
Buyer provides reliable financial statements (audited if borrowing > $1M)
Buyer is able to service the debt
CONTACT A REGIONAL OFFICE NEAR YOU
Miami: 305-526-7436 New York: 212-809-2650Atlanta: 404-815-1497
Chicago: 312-353-8093Houston: 281-721-0470Minneapolis: 612-348-1213Dallas: 214-551-4959Detroit: 313-226-3067
Orange County: 949-660-1341San Diego: 858-467-7035Seattle: 206-728-2264
exim.gov
Irvine CA Regional Directors to assist you:
Paul Duncan Gregory Moore
(714) 337-4713 (562) 213-2529
Main Title of PresentationSub-heading
Name of PresenterTitle of Presenter
Date
Pre-Export Financing
Working Capital Guarantee Program
Steve Freshour, VP of Business Credit
Borrow against accounts receivable
Borrow against inventory
Bridge cash flow while you wait to convert inventory to cash
Grow your line with your business
WHAT IS AN ASSET-BASED CREDIT LINE?
WHO QUALIFIES?
Business operation in the U.S.
Goods must have at least 50% U.S. content and be shipped from the U.S.
Export-related receivables and potentially exportable inventory (indirect exports count)
Demonstrate reasonable assurance of repayment
Minimum 1 year time in business
Adequate capitalization
Adequate reporting capabilities
Manufacturers, wholesalers, distributers, service companies
LINES OF CREDIT
Transaction Specific
Transaction Specific Revolving
Revolving
• Multiple transactions or specifically identified ones
• May be committed for up to five years with annual reviews
ELIGIBLE COLLATERAL – EXPORT RELATED A/R
Export-Related A/R
• Up to 90% advance rate
• Remove if >60 days late, 90 days with insurance
• Sales on terms not to exceed 180 days
Retainage A/R have a 25% Rate
Receivables must be in U.S. Dollars
• A waiver can be requested. Unhedged foreign currency has a 70% advance rate.
INELIGIBLE COLLATERAL – EXPORT RELATED A/R
No intra-company receivables
No receivables from military organizations
No receivables from prohibited countries
No L/Cs until goods are shipped
ELIGIBLE EXPORT RELATED INVENTORY
May include raw materials; work-in-progress and finished goods
Must be located in the U.S.
Must be valued at lower of actual cost or market value
Advance rate up to 75%
Short-term relief measures for COVID-19 – all inventory that could potentially be exported
EXAMPLE BORROWING BASE
COLLATERAL FOR SERVICE COMPANIES
Disbursements allowed against contract related-costs
Contract and proceeds assigned to lender
Demonstrated ability to perform under contract
TERMS OF SALE
Cash payment prior to shipping
Irrevocable L/C (can be confirmed)
Receivables insured with export credit insurance (EXIM or other comparable insurance)
Uninsured, open account
Documentary collections
USE OF FINANCING
L/Cs, BID AND PERFORMANCE BONDS
Commercial or Standby
• Collateralized at 25%
• Term cannot exceed loan term
Warranty Letters of Credit
• Lender must extend other credit
• 100% collateralized; 25% must be in cash
• Maximum Amount: 20% of loan up to $1,500,000
• Term cannot exceed loan term
RESTRICTIONS ON USE OF FUNDS
No disbursements without export orders unless pre-approved; sampling is required (temporarily lifted with COVID-19)Inventory less than or equal to 75% of outstanding loan on revolving linesPurchase of fixed assetsMilitary exportsOff-cover countriesAcquisitions
EXPORTER BENEFITS
Increase sales/profits
Expand collateral base
• Export-related inventory, including raw materials and WIP
⎻Supports Standby L/Cs, Bid and Performance Bonds
• Export-related accounts receivable
DELEGATED AUTHORITY ACTIVITY
Over 90% of our transactions are done by Delegated Authority Lenders
Lenders are not required to have to EXIM approval before closing
Locate a lender using our Working Capital Lender Locater https://www.exim.gov/tools-for-exporters/delegated-authority-lenders
FOR MORE INFORMATION…
Business Credit Division
Mario Ramirez Smaro KarakatsanisDirector Director202.565.3785 [email protected] [email protected]