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Five Questions To Ask When Requesting Medium-Term Financing
August 09, 2016 Patricia Brewer

After months of negotiation, you finally have a contract to sell capital goods to a buyer in Mexico. During negotiations, it becomes clear that your buyer will need financing with a five-year repayment term. Unfortunately, your firm doesn’t have enough cash on hand to complete the project, and certainly not finance it for that long.

Then you hear about the EXIM Bank Medium-Term Loan Guarantee. It is specifically designed to provide medium-term loan guarantees (up to five years) and export credit insurance to support export sales for U.S.-made goods. If the deal ranges from $350,000 to $10 million and has a repayment term of five years or less, your request qualifies as medium-term and EXIMs Bank’s Trade Finance and Insurance Division (TFID) may be able to help. Below are the five top questions an applicant should know when considering submitting a medium-term application:

  1. Who submits the application?

Although an exporter can submit an application on their own, we highly recommend partnering with an experienced banker or broker who can walk you through the application process and submit the application on your behalf. There is no cost to the exporter.

  1. How do you find a banker or broker?

The EXIM Bank website (exim.gov) makes this easy by providing a Lender Locator and Broker Locator. However, if you want to talk to an EXIM representative first, you can request a consultation with one of our regional directors by calling 800-565-3946 and pressing option #1.

  1. What information do you need to complete the application?

Your application details your buyer’s history, background and experience and is reviewed by EXIM analysts who determine whether the buyer has a “reasonable assurance of repayment.”  The more information you provide the better so the analyst can establish that your buyer has the means and ability to repay a debt. The application builds the picture of a buyer who is financially sound, responsible with their debts and financial obligations and honors contracts.

Begin by telling EXIM the story about how your business relationship began. How did your deal originate? How did you meet your buyer? What does their purchase history look like? Plus, your prior experience with your buyer is an important indicator of their future performance. .

Include basic business information on your buyer by submitting trade and credit references and credit reports. References and credit reports are external sources of data that outline overall debt and repayment history and provide EXIM analysts with a broader picture of your buyer’s business reputation.

Next, include an operations summary explaining your buyer’s business. Tell us when they were founded, who started the company and how operations grew. This crucial information builds on the repayment history and shows how your buyer managed growth—during good times and bad. Combining these facts with the payment experience helps the analyst determine reasonable assurance of repayment.

You application is incomplete without three years of financial statements and an interim statement of the current fiscal year, if available. The statements provide a picture of your buyer’s current financial health and their ability to repay new debt.

Finally, define your transaction’s structure. Will you request semi-annual payments over a five year period?  Who are the guarantors and when does equipment ship to the buyer? This nuts-and-bolts data is the foundation of your application and feeds into risk calculations and estimated fees.

  1. How much will the financing cost?

The exporter pays nothing. Transactions includes an exposure fee, which is a risk-based fee charged on each guarantee and insurance approval. The amount of the exposure fee varies according your buyer and represents the unique risks associated with your transaction. The fee can be paid up front or financed within the request. To calculate an estimated exposure fee, input the buyer’s country and repayment terms into the fee calculator on the EXIM website. EXIM Bank has staff members available to answer your exposure fee questions. To determine indicative fees for your transaction, go here.

  1. How is the application submitted?

Trade Finance Insurance Division (TFID) process all medium-term financing requests in Exim Online, EXIM Bank’s interactive web-based application processing system. You can submit a paper application but processing will be slower because all the information has to be entered into Exim Online.  To submit an application, register your company with EXIM Online. The Bank's Online has several advantages for exporters including the ability to track your application during the review process within a secure digital environment.

You’ve done the hard work designing and marketing your product to your foreign buyer. The next step to complete the sale is determining your buyer’s financing needs. If you understand the process, partners, cost and application requirements for medium-term financing, you become not only a valued supplier to an overseas buyer but an asset for future growth.

Export financing can be complicated, especially when taking into consideration all the variables of countries and companies. If exporting is part of your company’s growth plan, understanding exposure fees help you guide your buyer to completing the sale. Make EXIM your partner and call on us for at 202-565-3946; or if you have questions about the exposure fee request a FREE Export Finance Consultation with one of our regional directors located throughout the U.S.

If you’re new to the world of exporting and would like to start receiving the latest resources, advice and information on entering new markets, you can sign up for our Export Finance Solutions blog.

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