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“Resources for Export Markets” SME Conference 2014 Embassy of Malaysia October 15, 2014 Dennis R. Chrisbaum Director, International Trade Finance U.S. Small Business Administration Washington, D.C. Exporters Questions. How do I get paid? How can I reduce my payment risk? - PowerPoint PPT Presentation

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PowerPoint Presentation

Resources for Export Markets

SME Conference 2014Embassy of MalaysiaOctober 15, 2014

Dennis R. ChrisbaumDirector, International Trade FinanceU.S. Small Business AdministrationWashington, D.C.

Exporters QuestionsHow do I get paid?How can I reduce my payment risk?Are funds available to help me explore international markets?How can I finance my export transactions?How can I finance my business expansion?International Methods of Payments: Their Impact on Financing Needs1. Who sets the method of payment?

2. Competitive pressures, customer relations, regional preferences and, sometimes, regulations

3. Method of payment will determine the financing needed for a transaction

Financing Export Development & OrdersPre-Order Pre-shipment Shipment Post-Shipment PERFORMANCE RISK FINANCIAL RISKTrade ShowsProduction costs ReceivablesCertificationsMaterial financingTranslationsLaborProduct adjustmentsPackaging Buyer financing

Bid BondsPerformance bonds

What Might an SME Exporter Need?Working Capital for Export Development:Attend trade showsSecure CE mark, international patent or trademarkMeet potential business partners Vet potential buyers, agents or distributors and purchase foreign credit reportsIn-country promotionsTranslation of website/product literature and other marketing costsProfile:to $350,000 with 90% guaranty$500,000 with 75% guaranty Processed by SBA-approved Export Express lendersWorking capital: 7 years; Fix assets: up to 25 years

Required: Entering or expanding in foreign marketIn business for at least 12 months (can be waived by lender if the applicants key personnel have export expertise and successful business experience and lender does conventional underwriting, not relying on credit scoring)Solution: SBA Export ExpressProceeds may be used for any export development activity, such as:

1) export development including participation in a foreign trade show or translation services,

2) export transactions, including export purchase orders and foreign accounts receivables;

3) issuance of standby letters of credit that serve as performance bonds, completion bonds, and advance payment guarantees, and

4) fixed assets for equipment or real estate.

Solution: SBA Export Express

Working Capital to Produce Export Orders:Inventory, materials, labor, other production costsForeign accounts receivable insuranceInsurance and freight costsBank fees related to the transactionsStandby-letters of credit to guarantee bid, performance, or advance paymentsWhat Might an SME Exporter Need?

Solution: CAPLine Working Capital Line of CreditLoan guarantee for 85% on lines of credit up to $150,000, and 75% of higher amounts up to $5,000,000.Small businesses may use the lines to provide credit terms to customers and to finance inventory.Advantage to businesses and lenders: Small business borrowers can pledge both domestic and foreign accounts receivable and inventory using one line of credit.Foreign accounts receivable must be covered by credit insurance.Guarantee is available for manufacturers, wholesalers, export trading companies, and service providers.Solution: Export Working Capital Program - EWCP90% guarantee on loans/lines of credit up to $5,000,000 For small businesses that can generate export sales and need additional working capital.Must be used for export transactions only, including 100% of exporters costs of the transaction from purchase order to collections; can fund the entire transaction cycleCan be structured to fund:single or multiple transactions or as an asset-based line of credit with advances made against a borrowing base of export inventory and foreign accounts receivable.

Export Working Capital ProgramAdvance rates:75% against inventory, WIPup to 90% again insured A/RSBA: no US content requirement no prohibition on military sales only Small Business applicantsGuaranty fee: of 1% on guaranteed amount, 12 monthsExim Bank:51% US content, no military sales, any size applicantBid & Performance Bonds; Advance Payment GuaranteesStandby letters of credit issued by a commercial bank can serve as a performance or bid bond or as an advance payment guaranty.Funding support for Standby Letters of Credit can be provided by the following guaranty loan programs:Export Express Export Working Capital Guarantee EWCP (SBA)Working Capital Guarantee Program (Exim Bank)The guarantee serves as an incentive to the bank to issue the standby letter of credit with less than full, 100% cash collateral.

SBA Export Expressto $500,000Guaranteed loan7 years maximum working capital2. Ex-Im Banks Global Credit Expressto $500,000Direct loan, if credit is not available elsewhereSix month or 12 month term

3. SBAs Working Capital CAPLineto $5 millionOne line to support domestic and foreign salesTen year maximum

4. SBAs Export Working Capitalto $5 million Exim Banks Working Capitalover $5 millionGuaranteed loan, export transactions onlyUsually for 1 year, 3 year maximum

Export Working Capital SolutionsTerm Loan for fixed assets:Machinery or equipment to expand production in order to meet foreign demandRetooling expenses necessary for metric production or to meet other standardsPermanent working capitalReal estate needed as a result of expanding export salesWhat Might an Experienced Exporter Need?International Trade LoanA loan guarantee for 90% of a term loan up to $5,000,000To acquire, construct, renovate, modernize, improve, or expand facilities and equipment in the United States to produce goods or services involved in international trade. Eligible borrowers are in a position to expand existing export markets or develop new ones.May also be used by a U.S. company that has been adversely affected by import competition and require financing to modernize or improve operations to become more competitive.Maximum term: ten years for working capital; 25 years for real estate acquisition.May be used for on-shoring production, if also expanding exports

Small Business DefinitionManufacturers (