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 is Part II of the things U.S. exporters want to know about EXIM support for small businesses.
I sell US-originated capital equipment and my foreign buyers want several years to pay for it. I cannot afford to carry the receivable for this long. What can I do?
EXIM has relationships with commercial banks that are willing to finance the buyer for you. Once the commercial lender verifies that your buyer is creditworthy for the amount of the sale, and you present the shipping documents to the lender, they cash you out and create a promissory note between themselves and your buyer, under which your buyer pays the bank in semi-annual installments. EXIM supports this transaction by protecting your commercial lender from nonpayment by your buyer.
My bank excludes receivables generated by international sales from my borrowing base. Is there a way to convince my bank to include them?
The bank excludes your foreign receivables because they are uncollectable in the event that your buyer defaults. With an export credit insurance policy from EXIM, your receivables from international sales are protected from nonpayment by international buyers. The proceeds of the insurance policy are assigned to the lender, so if a buyer does not pay and a claim is paid, proceeds of that claim are paid to your lender.
My foreign buyer is requiring that I open a stand-by letter of credit for 10 percent of the contract price as a performance bond. That’s a sizeable amount of cash for a small company. Is there anything EXIM can do to help?
Yes! EXIM’s Working Capital Loan Guarantee provides a guarantee to the commercial lender that is making you a loan to support export sales. Allowable use of funds under the Working Capital Loan Guarantee includes bid and performance bonds and you only need to collateralize the loan at 25 percent of the face value of the stand-by letter of credit. So if your buyer wants you to open a letter of credit for $100,000, you need only collateralize $25,000 of the $100,000.
My foreign distributors have been clients for years. We give them open account credit terms and don’t feel the need to insure them. Once in a while, however, they need a shipment which puts them over the credit limit we have established for them and we worry that the buyer may default. What can we do?
There are two things to think about. First, EXIM’s single-buyer export credit insurance policy covers single or multiple shipments to one buyer, for a specific dollar amount and during a set period of time (up to 12 months) which you specify. Second, we strongly encourage you to insure all of your open account credit term receivables. Our best clients are companies that had long-term, trusted relationships with foreign buyers who one day could not pay. Unless you have visibility into their books, you don’t really know what’s happening with their financials. Export credit insurance is not a sign of distrust, it is a prudent strategy to protect your company’s financial assets.
My foreign buyer is requesting payment in his local currency instead of U.S. dollars. Can I still be protected against nonpayment?
Under EXIM’s export credit insurance policies, you may invoice in several hard currencies without prior approval including Canadian dollars, British pound sterling, Japanese yen, French francs, German deutschemarks, Swiss francs and Euros. Pre-approval is required to invoice in other currencies.
Do you have more questions to ask? Click the link below and request a free consultation with your local EXIM representative to discuss EXIM programs and resources to grow your export business.
