EXIM supports small businesses through Export Credit Insurance (ECI) which enables eligible U.S. exporters to protect against the risk of international buyer nonpayment and be able to offer more favorable open account terms to these buyers rather than requiring them to pay-in-advance, open letters of credit, or by other costly methods. There’s also a short-term insurance policy offered by EXIM that directly supports financial institutions serving U.S. exporters. The policy, Financial Institution Buyer Credit Insurance (FIBC), insures a revolving line of credit or reimbursement agreement made by a financial institution to a single international buyer which can then use either facility to make purchases from multiple U.S. exporters.
The EXIM applicant for FIBC is a financial institution rather than a U.S. exporter, and the primary relationship under an FIBC policy is between the financial institution and an international buyer. After EXIM’s underwriting department reviews and approves a qualified FIBC application, the financial institution will directly pay the invoice amount(s) to the U.S. exporter(s) for the purchase of goods and either extend a short-term credit line to an international buyer, or more commonly, offer reimbursement loans that function as the financial institution’s reimbursement of an international buyer’s payments to the U.S. exporter(s). For the U.S. exporter(s), either arrangement mirrors a desirable cash-in-advance sale. The financial institution benefits from interest charges and other fees paid by the international buyer and is insured against loan or credit line nonpayment due to commercial and political risks – the same risks that ECI policies cover. The international buyer benefits from much longer invoice credit terms (up to 180 days or potentially longer for capital equipment) to pay back the financial institution at U.S. interest rates.
FIBC policies are non-cancellable by EXIM, meaning that if EXIM goes “off-cover” in a country and no longer provides support there, a policy will not be cancelled. Also, policies offer 90% coverage for non-sovereign obligors or guarantees, and there’s no policy deductible. Policy premium rates depend upon the country and the creditworthiness of the buyer – rough estimates can be obtained from this nonbinding FIBC Fee Calculator and an EXIM trade finance specialist can provide a more precise estimate and additional information about FIBC through a free consultation request.
Products such as FIBC exemplify how EXIM’s financing support can minimize risk and level the playing field for U.S. financial institutions as well as U.S. exporters.
