One of the best parts of working for the Export-Import Bank of the United States (EXIM) is meeting with small business owners to explore exporting opportunities for their companies. Since March 2020, those meetings have been virtual, but one thing has not changed. Whether in person or during a webinar, companies that are thinking about exporting, or have limited experience and want to expand their footprint, have similar concerns. Here is a sample of the questions we are frequently asked.
- My foreign buyers want credit terms but I require cash in advance. I don’t want to lose these sales. Can EXIM help?
Cash is king. Take it all day long if you can get it. But insisting on cash-in-advance is also a great way to give your competitors an advantage if they are offering open account credit terms. Read how one successful small business lost existing customers by selling on cash terms, how it won those customers back, and gained new business by word-of-mouth. Maybe cash isn't king after all.
- Expansion is great, but I need money to help grow my export business. How can EXIM help me?
EXIM’s Working Capital Loan Guarantee offers a guarantee to your lender so it will be more willing to lend you 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 accounts receivable generated from the sale of the products. Read how EXIM’s Working Capital Loan Guarantee benefits both businesses and their commercial lenders.
- My company provides a service, not a physical product. Can EXIM help me?
Yes. Many people think of exporting as selling hard goods worldwide. What is less well understood is that U.S. services, including finance, education, legal, software, entertainment, engineering, architecture, and many others, are in high demand worldwide. The service sector in the U.S. is driven primarily by small and medium-size businesses and thrives in an entrepreneurial environment. If your small business provides excellent service and is looking to grow, the world is waiting for you!
- I have a very small business, with only 8 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 companies that have been in business for at least a year and have a DUNS number and financial statements or tax returns. The policy coverage is up to 95 percent of the invoice value with no deductible. Plus, 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! No company and no deal are too small!
- Does EXIM have any programs for Veterans, Women, and Minority- owned businesses?
Yes, EXIM has a business development team dedicated to working with veteran, minority, and women-owned businesses that provides information and education to 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 and those that are interested in becoming export-ready.
- Are open account credit terms really necessary to grow my export business?
Small business exporter Chad Remp outlines four reasons to offer open account credit terms:
- The customer requires it
- Ease of doing business
- Customer loyalty
- Customers with open accounts order more
- What is export credit insurance and how does it help?
Export credit insurance is an insurance policy, like the policy you have on a house or a car. In this case, the policy provides coverage on the accounts receivable that are generated from international sales. With export credit insurance, you can offer foreign buyers open account credit terms, secure in the knowledge that the receivables are covered if the buyer does not pay for commercial (e.g. insolvency, bankruptcy) or political (e.g. war, currency transfer) reasons.
- I’ve done business with my international customer for many years and I trust them. Why should I insure them?
We hear this a lot and understand that the best relationships are built on trust. The reality is that companies run into difficulties, oftentimes due to external forces like an economic downturn or pandemic, and you may not know about it until it’s too late. Export credit insurance is not a sign of distrust, it is a prudent strategy to protect your company’s financial assets. Two small businesses share the experiences that motivated them to implement export credit insurance policies.
- I sell U.S.-built capital equipment and my foreign buyers need several years to pay for it. I can’t afford to carry the receivable for this long. What can I do?
EXIM has relationships with commercial lenders 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 lender in semi-annual installments. EXIM supports this transaction by protecting your commercial lender from nonpayment by your buyer.
- My 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?
Use of funds under EXIM’s 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, freeing up working capital for other priorities.
Want to learn more? EXIM specialists provide no cost consultations. Contact your local representative for additional information.