On May 16, 2018, Export-Import Bank of the United States (EXIM) Managing Director Sharyn Koenig spoke on a government interagency webinar “Get Paid!” educating exporters on how to increase competitiveness in foreign markets while ensuring that the receivables generated by international sales get paid. The session generated a lot of interest and discussion about how EXIM supports international sales for companies of all sizes. Here are some of the things U.S. exporters want to know about EXIM support.
My foreign buyers want credit terms, but I require letters of credit or cash in advance. I don’t want to lose these sales. Can EXIM help?
Letters of credit are secure payment terms, as the trade documents flow through commercial banks, which attach fees for the buyer and seller to process the documents and pay the exporter. Letters of credit may be “confirmed” by the exporter’s bank, taking the nonpayment risk away from the exporter. However, if the letter of credit is unconfirmed, the exporter has the risk of the buyer’s bank not paying, and EXIM can insure that risk. Of course, another option would be to forego the letter of credit completely and offer open account credit terms, also insurable by EXIM.
I need money to help grow my export business. How can EXIM help me?
EXIM’s Working Capital Loan Guarantee offers a guarantee to a lender so they will be more willing to lend your company money to purchase or manufacture goods and services destined for export. The collateral for the loan is the inventory itself, including WIP (work in process), as well as the foreign receivables generated from the sale of the products. You must be able to demonstrate that you can service the debt you are taking on, and therefore your company’s financial statements will be reviewed and the owner’s personal guarantees are required. EXIM’s guarantee is 90 percent, so the lender may require you to separately collateralize the remaining 10 percent. The interest rate is negotiated between you and the lender.
My company provides a service, so we don’t have an actual “product.” Can EXIM help me?
Of course! The requirement is the services be performed by U.S.-based personnel, either here in the U.S. or temporarily located in the host country. Progress billings must be in intervals no longer than 30 days, with payment terms allowed up to 60 days. Please note that EXIM does not cover contract repudiation (cancellation of the contract).
I have a very small business, with only eight employees. We have just started to export a U.S.-made product and our sales volume is only $75,000 a year right now. Am I too small for EXIM?
Absolutely not! EXIM has special policies for small businesses which have been in business for at least one full year and have a DUNS number and financial statements or tax returns. The coverage is 95 percent for both commercial and political risks, with no deductible. You pay the premiums only on what you ship, when you ship. This pay-as-you-go feature means that there are no lost premium dollars, and you are only paying premium on the gross invoice value of your actual shipments. And … there is no minimum premium! To qualify as a small business, you must meet the definition set forth by the Small Business Administration (SBA). In general, a manufacturer will qualify if the total number of employees in the company (including any parent, subsidiaries and affiliates) is fewer than 500 or fewer than 100 if the company is a distributor or wholesaler. To qualify for EXIM's small business policies, you must meet the SBA definition and have export credit sales of less than $7.5 million.
Does EXIM have any programs for veterans, women and minority- owned businesses?
EXIM Bank has a business development team devoted to veterans, women and minority-owned businesses which markets exclusively to those sectors. They provide hands-on training to small, veteran, woman and minority-owned companies that wish to export. In addition, they collaborate with trade associations and other federal agencies that have a minority trade focus to help inform audiences about EXIM financing and create opportunities for export-ready businesses.
Stay tuned for more articles addressing the questions we frequently hear from exporters. In the meantime, if you are interested in learning more about connecting with foreign buyers, click the link below and request a free consultation with your local EXIM representative.
