1 How to Finance Export Receivables By Michael D. Farstad Export Finance Lender
2 Table of Contents New Products Working Capital Supply Chain Finance Guarantee Program Global Credit Express Loan Guarantee Finance Lease Guarantee Direct Loan
3 New Products Ex-Im Bank is offering new products to enable more U.S. small and mid-sized businesses to be competitive internationally and create more jobs by exporting more goods and services to more customers in more countries. The new products provide a faster, simpler insurance application process; project financing for small-scale renewable projects; increase liquidity for smallbusiness suppliers of goods and services to U.S. exporters; and ensure access to private-sector insurance to cover the risks of nonpayment by foreign buyers.
4 New Products: Global Credit Express The Global Credit Express program is specially designed to deliver short-term working capital loans directly to creditworthy small business exporters. Through this new program, exporters like you may be eligible for a 6- or 12-month revolving line of credit of up to $500,000. Global Credit Express adds liquidity to the U.S. small business export market by financing the business of exporting rather than specific export transactions. This is a pilot program currently offered through a select number of Originating Financial Institutions (lenders) nationwide.
5 New products: Express Insurance Express Insurance simplifies small business exporters' access to credit insurance on their short-term export receivables. It also makes it easier for them to obtain financing of those receivables. A streamlined online application provides a policy quote and credit decisions up to $300,000 on foreign buyers within five workdays or less (requests exceeding $300,000 will require additional time).
6 New Products: Renewable Express Renewable Express helps U.S. exporters of solar-energy equipment, technology and services by providing streamlined financing of their exports to small solar-energy projects in international markets. Ex-Im Bank can consider project financing for small renewable-energy producers seeking loans of $3 million to $10 million in as few as 60 days.
7 New Products: Supply Chain The Bank's supply-chain guarantee strengthens the supply chain by helping U.S. suppliers to expand their sales to U.S. customers that export. It increases liquidity for small-business suppliers by enabling participating lenders to purchase suppliers' accounts receivable that are due from U.S. exporters. It increases cash flow for small-business suppliers by ensuring the prompt payment of these receivables and lowering the cost of credit.
8 New Products: Reinsurance Ex-Im Bank's reinsurance ensures that U.S. small-business exporters can obtain private-sector insurance to cover the risks of nonpayment of foreign receivables. Participating private-sector insurers are eligible for reinsurance from Ex-Im Bank for short-term export-credit insurance policies supporting U.S. exports on repayment terms of 180 days or less (exceptionally up to 360 days). Ex-Im Bank's reinsurance mitigates the risks for private insurers and enables them to expand their underwriting capacity for these credits.
9 Working Capital We know that in order for you to begin exporting internationally, you'll need access to a dependable source of working capital that provides financial stability while you expand exports. Our working capital financing does that by enabling small business exporters like you to obtain loans which facilitate the exports of goods or services made by commercial lenders and backed by our guarantee. These loans provide you the liquidity and confidence to accept new international contracts, grow your export sales, and compete more effectively in the international marketplace.
10 Working capital: How do we do it? Our Working Capital Guarantee encourages commercial lenders to make working capital loans by providing them with a 90% loan backing guarantee, which decreases their risk. With Ex-Im Bank our Delegated Authority Lenders - lending partners with whom we have agreements - can expedite your loan process by evaluating your eligibility against our requirements, and offer our guarantee before we transact with the lender. You'll get the loan you need when you need it. As a small business exporter, you'll enjoy leveraged assets from an expanded borrowing base along with higher advance rates, and Ex-Im Bank's Working Capital Guarantee can cover both multiple export sales or individual contracts.
11 Working capital: Benefits With our guarantee in place, your business can start putting these working capital loans to work, purchasing raw materials or supplies while supporting related overhead. You'll also be able to use them to issue standby letters of credit serving as a bid or performance bond and for financing foreign receivables. Loan terms are typically for one, but can extend up to three, years, and the working capital line can be used on a single transaction or revolving basis. There is no minimum or maximum transaction amount. Fulfills export sales orders and converts your export-related inventory and accounts receivable into cash Expands your access to financing and encourages lenders to grant exporter loans Enhances value of your existing collateral base
12 Working capital: Benefits, continued Offers generous advance rates (up to 90% for export-related accounts receivables and up to 75% for export-related inventory, including work-in-process) Provides a 25% discount on multi-buyer insurance premiums and lowers Working Capitol Facility fee Collateral requirement to issue standby letters of credit is only 25%, instead of the standard 100% cash collateral generally required in the private sector. On a case by case basis the collateral requirement may be lowered by 10% Covering warranty letters of credit up to 20% of the working capitol loan amount or $1.5 million, whichever is lower, for a term of 12 months.
13 Working capital: Borrowing Capacity Our generous advance rates mean you can borrow more with less: On export-related inventory, enjoy an up to 75% advance rate (including work-in-process). On foreign accounts receivable, enjoy an up to 90% advance rate. On a case-by-case basis, for standby letters of credit issued under our guaranteed loan, collateral will be required for only 10% of the value of the letter of credit. Use Ex-Im Bank to maximize your borrowing base. Indirect Exports We also support indirect exports, meaning that companies producing goods or services sold to U.S. companies and subsequently exported, are also eligible to apply for working capital loans guaranteed by Ex- Im Bank
14 Working Capital: Fees/Interest Rates The following fees come with our Working Capital Guarantee: An application Processing Fee - $100 for a final commitment. Our Up-front Facility Fee equals 1.75% of the total loan amount, based on a one-year loan. Loans of up to six months carry a facility fee of 0.875% of the total loan amount; those meeting certain criteria may qualify for a lower 1.25% Facility Fee. Interest rate and other application fees charged by the commercial lender. Collateral We secure these guaranteed working capital loans by export-related accounts receivable and inventory (including work-in-process) tied to an export order. For letters of credit issued under the guaranteed loan, we only require collateral for 25% of the face value of the letter. On a per case basis, the collateral requirement may be reduced to 10% of the face value of the letter of credit.
15 Working capital: Is my business eligible? In order to qualify for our Working Capital Guarantee Program, a small business exporter: Must be located in the United States. Must have at least one-year operating history and a positive net worth. Must have services performed by U.S.-based employees. Must have products shipped from the U.S. to a foreign buyer. Generally, each product must have more than 50% U.S content based on all direct and indirect costs. Review Ex-Im Bank content policy or more information. Ex-Im Bank cannot support exports of military or defense products and services (with some exceptions), nor can we support purchases made by military buyers. Coverage: Ex-Im Bank generally guarantees 90% of the bank loan, including principal and interest.
16 Supply Chain Finance Guarantee Program Increasing Capital for U.S. Businesses The Ex-Im Bank Supply Chain Finance Guarantee, offered to lenders, benefits U.S. exporters and their suppliers through accounts receivable financing. It is designed to inject liquidity in the marketplace and provide suppliers, particularly small businesses, with access to capital faster and at a lower cost. Suppliers can sell their accounts receivable to a lender to obtain early payment of invoices at a discounted rate. This helps them obtain cash quickly (often at lower rates that reflect the credit of the buyer) and increase liquidity to fulfill new orders.
17 Supply Chain Finance Guarantee Program Increasing Capital for U.S. Businesses Exporters have the option to extend payment terms and obtain a working capital benefit without imposing undue financial hardship on their suppliers. The Ex-Im Bank guarantee, which bears the full faith and credit of the United States, is provided directly to the lender. Ex-Im Bank provides a 90% guarantee of an eligible invoice while the lender bears 10% risk. This arrangement allows the lender to efficiently maintain their relationships directly with the exporters and suppliers without Ex-Im Bank involvement.
18 Supply Chain Finance Guarantee Program: Benefits Benefits to the Small Business Supplier: Converts accounts receivable into cash and improves liquidity position Obtains better rate based on the credit rating of the exporter Benefits to the Exporter: Allows flexibility in extending the terms for accounts payable Provides an additional source of working capital funding - which is not treated as debt on their balance sheet
19 Supply Chain Finance Guarantee Program: How it works Lender and Ex-Im Bank establish this guarantee Ex-Im Bank works with the existing supply chain finance platform of the lender. Exporter receives invoices from suppliers. Exporter sends a list of approved invoices to the lender electronically. Lender validates the list to verify the invoices that are eligible for discount and payment. ~ Supplier selects the invoices for accelerated payment. All discounted invoices are paid by the lender to the supplier via ACH.
20 Supply Chain Finance Guarantee Program: How it works
21 Supply Chain Finance Guarantee Program: Exporter Eligibility Exporter Eligibility Must be a U.S. - domiciled company that exports U.S. goods and services. Exported products must meet Ex-Im Bank's Supply Chain Finance content policy requirements..
22 Supply Chain Finance Guarantee Program: Supplier Eligibility Supplier Eligibility Company must be U.S. - domiciled and supply goods/services to eligible U.S. exporters. At least 50% of the invoices' value must be from suppliers that meet the SBA small business definition see
23 Supply Chain Finance Guarantee Program: Lender Eligibility Lender Eligibility Lender must have an existing supply chain finance platform which is subject to Ex-Im Bank due diligence and approval.
24 Loan Guarantee Medium and Long-Term Loan Guarantee Ex-Im Bank's guarantees help you secure competitive financing for your international buyers. We guarantee term financing--generally up to 10 years--to creditworthy international buyers in both the private and public sector, and finance your local costs up to 30%. With our guarantee, international buyers get competitive term financing--that may previously have been unavailable-- from lenders.
25 Loan Guarantee: How will these guarantees help my business? Ex-Im Bank's Medium and Long-Term Guarantees provides: Risk mitigation for a transaction with a particular buyer. Financing for international buyers of U.S. capital goods and related services. More secure entry to emerging markets.
26 Loan Guarantee: How will these guarantees help my business? Ex-Im Bank's Medium and Long-Term Guarantees provides: Flexible lender financing options, backed by our guarantee, for buyers of U.S. capital goods and related services for long-term projects as well as medium-term, and flexible repayment terms. Coverage for 100% of commercial and political risks. No limits on transaction size. Our guarantee to the lender is unconditional and transferable. We cover local costs up to 30% and ancillary services such as financial, legal or bank fees may be included.
27 Loan Guarantee: Eligibility Requirements Ex-Im Bank finances only the U.S content. Please review Ex-Im Content Policy for more information. Ex-Im Bank can do business in most markets. However, we may be limited or unable to offer financing in certain countries and under certain terms. (See Country Information - Country Limitation Schedule). Products must be shipped from the U.S. to a foreign buyer. There is no minimum or maximum limit to the size of the export sale that may be financed with Ex-Im Bank's loan guarantee.
28 Loan Guarantee: Eligibility Requirements Ex-Im Bank cannot support exports of military or defense products and services (with some exceptions), nor can we support purchases made by military buyers. Ex-Im Bank's guarantee of a lender's loan to an international buyer is generally used for financing purchases of U.S. capital equipment and services. Prior to approving certain transactions, Ex-Im Bank will consider the economic impact of a particular transaction (see Ex-Im Bank policies - Economic Impact) and the environmental effects (see Ex-Im Bank policies - Environment).
29 Loan Guarantee: Coverage and Costs Coverage This coverage is available for medium-term and long-term transactions. Ex-Im Bank provides an 85% guarantee (a 15% down payment is required from the buyer). Principle and accrued interest are included. Costs Letter of Interest processing fee - $100 Preliminary Commitment application fee - 0.1% of 1% of financed amount A commitment fee of 0.125%, based on unused portions of the loan An exposure fee based on risk (variable; see Exposure Fee Calculator) Interest rate negotiated between lender and borrower
30 Global Credit Express Demonstrating Ex-Im Bank's ongoing commitment to small business exporters is the Global Credit Express program, specially designed to deliver short-term working capital loans directly to creditworthy small business exporters. Through this new program, exporters like you may be eligible for a 6- or 12-month revolving line of credit of up to $500,000. Global Credit Express adds liquidity to the U.S. small business export market by financing the business of exporting rather than specific export transactions. This is a pilot program currently offered through a select number of originators nationwide.
31 Global Credit Express: Benefits Provides working capitol to fund your business's export activities Supports your direct exports of U.S.-made goods and services, as well as those which you export indirectly by selling to other U.S. exporters Offers streamlined processing and quick turn-around on loan applications Provides fixed-rate financing at a relatively low interest cost Requires no dedicated borrowing base or monthly reporting requirements
32 Global Credit Express: How it works The originator works with you to prepare and submit your preliminary loan application to Ex-Im Bank. If you meet Ex-Im's eligibility criteria, a full application package (with supporting documents) is submitted to Ex-Im Bank. The loan approval process is generally 5 business days after submission of a completed application package. Ex-Im Bank makes these loans directly to you.
33 Global Credit Express: Eligibility In order to be eligible for a Global Credit Express loan, you must: Meet the Small Business Administration's definition of a "small business" -- you may refer to Have a minimum of three years of revenue producing operations and one year of exporting experience. Have an existing relationship with or have been solicited by an originator participating in the pilot program.
34 Global Credit Express: Eligibility, continued In order to be eligible for a Global Credit Express loan, you must: Have a favorable reference from the originator, or current bank of account. Have no tax liens or judgments. Export goods which are made in the U.S. and/or export a service which is performed by U.S.-based personnel. Meet a minimum Fair Isaac small business credit score (FICO), and successfully pass a due diligence credit evaluation and principal's background check.
35 Global Credit Express: Fees and Loan Terms An application fee of up to $500 is payable to the originator when you apply and a referral fee of up to $2,000 is payable at closing Ex-Im Bank's exposure fee is 2.0% of the maximum loan amount Standard legal fee of $2500 plus actual closing costs of up to $500 payable at closing The interest rate is fixed at CIRR (Commercial Interest Reference Rate) % Loan term of either 6 or 12 months Loans may not exceed $500,000; the actual loan amount is based on eligible export orders, proof of past export transactions and a ratio of net current assets Collateral will be either a first or second perfected security interest in the general assets of your company A personal guarantee is required of any principal with at least a 20% ownership interest
36 Finance Lease Guarantee Ex-Im Bank supports competitive medium-term financing structured as finance leases in addition to financing structured as installment loans. Support of lease financing is important since some foreign buyers of U.S. capital goods prefer lease financing as an alternative to traditional installment loans. Ex-Im Bank will guarantee lease financing of U.S. goods and services to creditworthy international lessees, both private and public sector, when financing is otherwise not available or applicable interest rates are not economically viable.
37 Finance Lease Guarantee: Standardized Documents In order to provide accessible guarantee support for lease financing, Ex-Im Bank has created standardized guarantee documentation designed to meet the special requirements of this type of export finance. The MT Master Guarantee Agreement - Finance Lease provides equivalent Ex-Im Bank support for medium-term finance leases as is provided for traditional loan financing using Ex-Im Bank's MT Master Guarantee Agreement. Both Master Guarantee Agreements are compatible with the operational efficiencies of Ex-Im Bank's Medium-Term Electronic Compliance Program.
38 Finance Lease Guarantee: Benefits Enables International lessees to obtain finance leases from lessors Flexible financing options and repayment terms Transaction size up to $10 million (financed portion, excluding exposure fee) Coverage is the lesser of 85% of the contract value or the actual U.S. content amount
39 Finance Lease Guarantee: Eligible Leases Only finance leases ( as defined under International Accounting Standards) are eligible for Ex-Im Bank guarantee support. Under IAS 17, a lease is classified as a finance lease if it transfers substantially all the risks and benefits of ownership to the lessee. Full payout leases (i.e., those with no residual value) and transactions that are essentially "conditional sales" contracts often qualify as finance leases. Ex-Im Bank does not prescribe a particular form of lease agreement for use with the MT MGA - Finance Lease, but has instituted procedures for granting approval of the lessor's lease agreement forms, provided that the lease agreement contains certain provisions required by Ex-Im Bank. 1 To obtain Ex-Im Bank approval of a lease agreement, the applicant (generally the lessor) must submit a copy of the lease agreement form together with a legal opinion covering specified matters under the law of the relevant jurisdiction. 2 If Ex-Im Bank approves a lease agreement form for use with the MGA - Finance Lease in a specific country, that lease agreement form may be used for subsequent lease guarantee transactions in that country for up to three years without further Ex- Im Bank review.
40 Finance Lease Guarantee: Eligible Transactions In general, Ex-Im Bank guarantees leases of U.S. capital equipment and related services. Financing may also be available for r efurbished equipment, software, certain banking and legal fees (see Financing Fees for Ancillary Services) and certain local costs and expenses (see Ex-Im Bank Policies - Local Cost). Military or defense items are generally not eligible nor are transactions involving military lessees, with certain exceptions (see Ex-Im Bank Policies - Military). Goods eligible for Ex-Im Bank financing must meet Ex-Im Bank's foreign content requirements (see Ex-Im Bank Policies - Foreign Content).
41 Finance Lease Guarantee: Eligible Transactions Ex-Im Bank can do business in most markets. However, we may be limited or unable to offer financing in certain countries and under certain terms (see Country Limitation Schedule). Prior to approving certain transactions, Ex-Im Bank will take into account the economic impact of a particular transaction (see Ex-Im Bank policies - Economic Impact) and the environmental effects (see Ex-Im Bank policies - Environment).
42 Finance Lease Guarantee: Financing Terms Ex-Im Bank requires the lessee to make a cash payment (which may be financed by the lessor) equal to at least 15% of the Net Contract Price. Generally, the repayment term of a transaction is determined by numerous variables including but not limited to the borrower's financial condition, the common repayment terms the market gives such products, specific industry practices, industry and country conditions, useful life, OECD and Berne Union agreements, and the matching of terms offered by other foreign governmentsponsored financing. Repayment terms up to five years are generally available for exports of capital equipment and services.
43 Finance Lease Guarantee: Financing Terms Periodic rent payments under the lease may be calculated either on the basis of equal principal amortization or using a mortgagestyle amortization (equal payments). Rent may be payable monthly, quarterly or semiannually.
44 Finance Lease Guarantee: Medium-Term Credit Standards To qualify for Ex-Im Bank's medium-term financing, borrowers must meet certain credit standards, depending on the size of the transaction, the nature of the buyer, and the goods and services being financed. If a buyer does not meet these standards, the use of guarantors and other credit enhancements may be used to qualify (see Medium-Term Credit Standards.)
45 Finance Lease Guarantee: Application The lessor must have in place a Medium-Term Master Guarantee Agreement - Finance Lease in order to apply for a finance lease guarantee (see Application and Forms). Since the lessor takes title to the goods and services being leased, the lessor is generally the entity that submits the application for a guarantee of a specific lease transaction. If the contract has not been awarded, then a lessor, an exporter or an international lessee may request a nonbinding letter of interest (LI) containing Ex-Im Bank terms for the specific transaction. The LI is processed within seven working days, is valid for six months, and can be renewed.
46 Finance Lease Guarantee: Fees Letter of Interest Application Processing Fee - $100 ($50 for online applications). Commitment Fee % per annum on the undisbursed balance of the guaranteed portion of the finance lease. Ex-Im Bank Exposure Fee - Varies, depending upon tenor, country risk, and buyer credit risk (see Exposure Fee Calculator).
47 Finance Lease Guarantee: Fees The required provisions are set forth in Schedule B-6 to the MT MGA - Finance Lease. The form of the legal opinion is prescribed in Annex E to the MT MGA - Finance Lease. Net Contract Price is equal to the aggregate price of all goods and services in the supply contract less the price of any goods and services that are not eligible or are excluded from Ex-Im Bank support and less any Local Costs included in the U.S. supply contract.
48 Direct Loan Fixed-Rate Term Financing for International Buyers Ex-Im Bank's direct loans help you secure competitive financing for your international buyers. We provide fixed-rate financing-- up to 12 years in general and up to 18 years for renewable energy projects--to creditworthy international buyers in both the private and public sector, and finance your local costs up to 30%. With our direct loan, international buyers get competitive term financing that may previously have been unavailable.
49 Financing of ancillary services and fees (legal, financial, bank, etc.) Direct Loan: How will these loans help my business? Ex-Im Bank's Direct Loans provide: Financing for international buyers of U.S. goods and services. No limits on transaction size. Fixed-rate financing with interest rate set at the Commercial Interest Reference Rate (CIRR). (See Commercial Interest Reference Rate CIRR). Coverage for 100% of commercial and political risks. Financing of up to 30% of local costs in addition to the U.S. exports.
50 Direct Loan: Eligibility Requirements Ex-Im Bank finances only the U.S content. Please review Ex-Im Content Policy for more information. Ex-Im Bank can do business in most markets. However, we may be limited or unable to offer financing in certain countries and under certain terms. (See Country Information - Country Limitation Schedule). Products must be shipped from the U.S. to a foreign buyer. There is no minimum or maximum limit to the size of the export sale that may be financed with Ex-Im Bank's direct loan.
51 Direct Loan: Eligibility Requirements Ex-Im Bank cannot support exports of military or defense products and services (with some exceptions), nor can we support purchases made by military buyers. All direct loans are subject to U.S. flag shipping requirements. (See Shipping Policy MARAD). Ex-Im Bank's direct loan to an international buyer is generally used for financing purchases of U.S. capital equipment and services. Prior to approving certain transactions, Ex-Im Bank will consider the economic impact of a particular transaction (see Ex- Im Bank policies - Economic Impact) and the environmental effects (see Ex-Im Bank policies -Environment).
52 Direct Loan: Coverage This coverage is available for medium-term and long-term transactions. The total level of Ex-Im Bank support will be the lesser of 85% of the value of all eligible goods and services in the U.S. supply contract or 100% of the U.S. content in all eligible goods and services in the U.S. supply contract.
53 Direct Loan: Fees Fees Letter of Interest processing fee - $100 A commitment fee of 0.5%, based on unused portions of the loan An exposure fee based on risk (variable; see Exposure Fee Calculator) Interest rate fixed at Commercial Interest Reference Rate (CIRR)
54 Direct Loan: Repayment Terms Repayment Terms Generally, the repayment term of a transaction is determined by numerous variables, including, but not limited to, the borrower's financial condition, the common repayment terms the market gives such products, specific industry practices, industry and country conditions, useful life, OECD and Berne Union agreements, and the matching of terms offered by other foreign governmentsponsored financing. Repayment terms are generally in excess of seven years.
55 Direct Loan: Application Final Commitment (AP): If the contract has been awarded, only the international borrower may submit the final commitment (AP) application. Letter of Interest (LI): If the contract has not been awarded, then an exporter, an international borrower, or a lender may request a nonbinding letter of interest (LI) containing Ex-Im Bank terms for the specific transaction. The LI is processed within seven working days, is valid for six months, and can be renewed. Preliminary Commitment (PC): In exceptional cases, Ex-Im Bank will accept an application for a preliminary commitment (PC). A PC is a nonbinding expression of interest from Ex-Im Bank that the borrower's needs, as outlined in the application, generally meet Ex-Im Bank's financing requirements.
56 Thank You! Question and Answer!