SBA EXPORT LOAN PROGRAMS

Transcription

1 SBA EXPORT LOAN PROGRAMS Patrick Hayes, Regional Manager SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH

2 SBA Export Loan Products Export Express Up to $500,000. Term loans and/or lines of credit for export purposes streamlined processing procedures. International Trade Loan Up to $5 Million: now with a 90% guaranty. Term loans for facilities, equipment, and working capital that will enhance export ability. Refinancing of existing debt is also available. Export Working Capital Program (EWCP) Up to $5 Million; 90% guaranty for short term loans and lines of credit for export purposes.

3 Export Express The maximum loan amount under SBA Export Express is $500,000 - Loans and Lines of Credit. Eligibility: applicant in business for at least 12 months proceeds are to be used to develop or expand their export (direct and indirect) markets Borrower can provide estimate of exports for next 12 months. Approved banks make their own credit decision, use their own forms and receive a 90% SBA guaranty up to $350,000 and 75% on loans over $350,000 to $500,000.

4 Export Express Proceeds may be used for any of the following purposes: transaction-specific financing of export deals, including standby letters of credit general lines of credit for export purposes export development activities such as brochure translation or participation in a trade mission term loans for permanent working capital, machinery and equipment, or real estate

5 SBA Export Express Fees Gross loan Amount 12 months or less More than 12 months $150,000 or less 0.25% of guaranteed portion* 2% of guaranteed portion* $150,001 - $500, % of guaranteed portion 3% of guaranteed portion *This fee is waived on loans under $150,000 if approved before September 30, 2014 Export Express loan recipients also receive a 25% discount on their Ex-Im Bank Small Business/Express Credit Insurance premiums.

6 International Trade Loan (ITL) The maximum loan is $5 million with a maximum SBA guarantee portion of $4.5 million. Lender gets a 90% guaranty. The loan proceeds will significantly expand an existing export market or develop new export markets; or The applicant business has been adversely affected by import competition AND Upgrading facilities or equipment will improve the applicant s competitive position

7 International Trade Loans (ITL) Use of Proceeds : Facilities Equipment Working Capital Debt refinancing is allowed. Business plan/application must document eligibility requirements (i.e. export projections or evidence of adverse impact). ITL can be combined with a separate EWCP loan. Maximum working capital allowed is $4 million

8 Export Working Capital Program Eligibility Company meets SBA size standards Based on NAICS or Alternative Size Standard NAICS -Manufacturing: under 500 employees o can be as high as 1,500 employees Alternative Size Standard: Net worth less than $15 million and net profit less than $5 million (last 2 year average) Ex-Im Bank has no restrictions for size. In business 12 months or proven expertise No U.S. content requirement; Military sales allowable Other SBA eligibility provisions Criminal history, previous loss to govt. etc

9 EWCP Use of Proceeds Asset Based and Transaction Based Working Capital for production of export goods and services Financing of existing export receivables and export inventory Portions of the EWCP loan may be used to fund standby Letters of Credit when required as: Bid Bonds Performance Bonds Advance Payment Guaranties

10 Two Types of EWCP Loans EWCP Transaction Based Asset-Based

11 Transaction Based EWCP Self Liquidating Line of Credit Pay Down EWCP Export Order EWCP Advance Invoice Payment Inventory Finished Goods Transaction Based EWCPs can be utilized for single export orders or multiple orders on a revolving basis. No funds are disbursed until there is an export order in place. Funds are used by the borrower to produce goods for a specific export order. SBA requires secure payment method from foreign buyer which will be directed to pay down the EWCP

12 Transaction Based EWCP Use of Proceeds To acquire/produce goods or services for export. EWCP funds can be used to finance up to 100% of exporter s direct cost associated with a specific export transaction, not to exceed 90% of the overall export sale amount. Example - Small business exporter lands a $1 Million export sale. The production costs for the exported item is $700,000 bank can therefore advance the entire $700,000 under the EWCP program. To support Standby Letters of Credit used as performance and bid bonds

13 Transaction Based EWCP Indirect Exports Applicants who produce products or services that enter into the export channel, but do not directly export their products, are eligible for EWCP financing Manufacturers using an Export Trading Company Suppliers to other domestic manufacturers Requires certification from domestic customer that goods are in fact being exported.

14 EWCP - Collateral Self-liquidating loan First lien on all assets being financed Typically inventory, WIP and A/R Personal guarantees of all owners of 20% or more. Other collateral on a case-by-case basis

15 Two Types of EWCP Loans EWCP Transaction Based Asset-Based

16 Asset Based EWCP MAXIMIZING THE BORROWING BASE ASSET-BASED FACILITY SBA EWCP GUARANTEE Amount % Advance Collateral % Advance Collateral Exportable Inventory Raw Materials $200, $80, $150,000 Work-In-Progress 200, ,000 Finished Goods 600, , ,000 Subtotal $1,000,000 $380,000 $750,000 Foreign Accounts Receivable Open Account $400,000 0 $0 90 $360,000 L/C Backed A/R 600, , ,000 Subtotal 1,000, , ,000 Total Borrowing Base $2,000,000 $800,000 $1,650,000

17 EWCP Fees One time guaranty fee of ¼ of 1% of the guaranteed portion for loans with a 12 month or less maturity. Deals initially booked for 12 months or less can be reissued for ¼ of 1% the following year 52 basis point on-going fee paid by lender Business and lender negotiate Interest rate and fees (there is no restriction on the fees), lender is required to disclose this information to SBA

18 Thank You! Patrick Hayes, Regional Manager SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH

19 Ex-Im Bank Trade Financing Solutions for Export Success!

20 Our Financing Support Makes the Difference Minimize risk Level the playing field Supplement commercial financing

21 Export Credit Insurance Benefits: RISK PROTECTION: Protects US exporters against non-payment by foreign buyers due to Commercial Risks & Political Risks (see next slide) MARKETING TOOL: Allows exporters to offer competitive credit terms to foreign buyers Generally up to 180 days, some products may qualify for 360 day terms FINANCING AID: obtain additional financing Insured foreign receivables may be added to your borrowing base by assignment of policy proceeds (claim payments) to lender

22 Risks Covered Commercial Risks Insolvency Bankruptcy Protracted default Political Risks Transfer risk War, revolution, insurrection, expropriation Cancellation of an import or export license

23 Short-Term Export Credit Insurance Coverage Parameters: Up to 180 days, exceptionally 1 year 95%, 98% or 100% coverage, depending on policy selected, products exported, and buyer classification Insures both commercial and political risks Lender Policies: Bank Letter of Credit Financial Institution Buyer Credit Financial Institution Supplier Credit Exporter Policies: Multi-Buyer or Single-Buyer

24 Short-Term Export Credit Insurance Policies for Small Business*: Express Insurance 95 % cover, no deductible, pay-as-you-go, Ex-Im Bank obtains and reviews all credit info on buyers, maximum of 20 buyers Multi-Buyer 95 % cover, no deductible, pay-as-you-go, some buyer approval authority may be given to exporter Single-Buyer 90% cover, no deductible * SBA definition

25 Medium-Term Financing Generally used for buyer financing of capital equipment: 85% financed, 15% cash down payment Repayment up to 5 years, exceptionally 7 years Amounts of $10 million or less Financing can be accomplished through the following Ex-Im products: Lender guarantees Credit Insurance Direct Loans (few)

26 Just A Few Restrictions No Military or Defense-related products or obligors (exceptions apply) U.S. Content (ST: 50+%; MT: 85% U.S.) Restricted Countries (CLS) Economic Impact Shipping Additionality

27 Restricted Countries Ex-Im Bank conducts business in many countries throughout the world Restrictions may apply for political or economic conditions Check the Country Limitation Schedule (CLS) at X means support is not available.

28 Contact a Regional Office Near You Miami: New York: Chicago: Houston: Orange County, CA: San Francisco: Atlanta: Minneapolis: Seattle: Dallas-area: Detroit:

29 Thank you! Thomas P. Cummings National Director of Broker and Bank Relations Mobile

30 Rochester Credit Insurance Presentation The way to sell more with higher profits and less risk Trade Credit Insurance Agency, LLC. 2012

31 Credit Insurance Insurance against non-payment risk Commercial risk Political risk Typically covers 90% of a receivable Popular in Europe and gaining in popularity in the US and the rest of the world

32 Credit Insurance Insures: Domestic receivables Foreign receivables Both foreign and domestic receivables Covers Single buyers Multiple buyers All open account sales

33 SHORT-TERM CREDIT INSURANCE(<180 days) Benefits for your customers: 1. Protection against non-payment 2. Expand sales by offering better payment terms 3. Obtain short-term financing 4. Access to great credit information

34 Protection against non-payment Sleep better knowing you will get paid Provides comfort in dealing with larger dollar amounts Are all the assets on your balance sheet insured?

35 Expand sales by offering better payment terms Increase sales by offering better sales terms Increase sales by offering higher credit limits Use credit insurance as a way to vet existing customers and prospects

36 Advantages of Open Account Terms Build trust Sell more Ease of business

37 Improve Financing Banks are always more willing to lend against insured receivables Lend against foreign accounts receivable Protect against concentrations

38 Access to great credit information Some insurers have very useful information about your customers and prospects They can continuously monitor your customers for potential problems and help you avoid a loss Companies that integrate their credit insurance policy with their credit procedures utilize credit insurance to the max

39 INSURERS OFFERING SHORT TERM POLICIES Government: Ex-Im Bank Private: FCIA AIG Coface Atradius Euler QBE A few other firms

40 European Credit Insurers Have a tremendous amount of information on companies all over the world Typically will underwrite most of your buyers individually Require only the name, address, telephone numbers, and credit limit requested May provide discretionary limits for smaller customers

41 Others Rely more heavily on the experience of your credit department than on your customers Often will underwrite only your top customers and offer large discretionary limits to cover smaller buyers May offer non-cancelable coverage on the buyers they underwrite Often have a deductable

42 THE COST OF SHORT-TERM CREDIT INSURANCE: Premium rates: Usually based on a percent of sales Sales volume, terms, country risk, credit limits, and spread of risk determine pricing

43 Using an Insurance Broker Works as a resource to answer policy questions. Brings competition into the process of quoting credit insurance making sure you get the policy that suits your needs for the best price. Acts as your advocate in the case of a claim. Provides both you and the bank with the comfort, knowledge, and understanding of your policy to maximize its value. Does not add to your cost but results in savings

44 Thank You Edward J. Arnold PhD Trade Credit Insurance Agency, LLC Transit Road Williamsville, NY Tel: Cell:

45 Medium-Term Buyer and Supplier Credits 45

46 Medium Term Buyer Credits vs. Supplier Credits: Basics Buyer Credits: Bank Negotiates terms directly with Buyer Bank documents loan directly with buyer Bank secures risk mitigation, pays premium Bank takes no reliance on exporter for claims or collection efforts Supplier Credits: Exporter extends credit to Buyer Exporter secures risk mitigation, pays premium Exporter enters into documentation with Buyer and Bank Exporter assigns risk mitigation to Bank, endorses notes Exporter assists with collection efforts and claims if necessary 46

47 Medium Term Buyer Credits vs. Supplier Credits: Documentation Buyer Credits: P-Notes from Borrower to Bank Credit/Loan Agreement between Bank and Buyer (normally requires outside counsel) Risk mitigation runs to Bank Supplier Credits: P-Notes from Borrower to Exporter, endorsed to Bank Note Purchase Agreement between Bank and Exporter (internal doc s / counsel) Risk mitigation runs to exporter assignment or Loss Payee endorsement to Bank 47

48 Medium Term Buyer Credits vs. Supplier Credits: Pros & Cons for Exporters Buyer Credit Pros: Fewer documentation/resource requirements No responsibility to file claims, reporting Supplier Credit Pros: Maintain control over transaction Can be more economically feasible for small transactions Buyer Credit Cons: Less control over transaction Less economically feasible for small transactions (under $2.5MM) due to higher costs for Buyer Supplier Credit Cons: Increased documentation requirements Supplier to organize and maintain transaction process May take responsibility for claim filing, reporting 48

49 Benefits of Medium Term Buyer Credits The Exporter Sales tool Risk transfer to Lender Improved cash flow, financing tool Transaction details between Buyer and Bank The Buyer Attractive Terms lower interest rates, increased loan tenors, and reduced covenant requirements relative to local financing Usually unsecured Creates a new source of credit often without reducing local credit lines. Multiple U.S. suppliers can be included in one transaction Upfront fees can be financed 49

50 Typical Characteristics of a Medium Term Buyer Credit Contract values over $5MM Sophisticated Buyers, or commercial bank Guarantee Multiple U.S. suppliers in a transaction Buyer is able to provide audited financial statements Buyer located in a market with WF presence Buyer is willing to pay upfront fees for application work and legal fees 50

51 Export-Import Bank The Export Import Bank Of the U.S. or Ex-Im Bank Official US Export Credit Agency or ECA Founded in 1934 Offers the Full Faith and Credit of the US highest rating Purpose: To support job growth by facilitating the financing of U.S. exports of goods and services Available to all size exporters and all size transactions 51

52 Ex-Im Basic Transaction Requirements Buyer must offer a reasonable assurance of repayment Buyer must be located in an open country see Country Limitations Schedule (CLS) - Up to 85% of eligible goods and services can be financed Goods must be shipped from the U.S. 52

53 Ex-Im Medium Term Buyer Credits: Product Types Programs covering exports of capital equipment on payment terms out to 5 years, and occasionally longer: a) Medium Term Credit Insurance b) Medium Term Guarantee under the Master Guarantee framework c) Special programs for medical equipment d) Special programs for environmental exports/projects 53

54 Ex-Im Medium Term Buyer Credit Insurance Key Parameters: Bank is named Insured under the Policy Can t exceed more than $10 million in financed amount Ex-Im not a party to Credit Agreement between Bank and Buyer 100% Political and Commercial Risk Cover, no deductible Repayment terms from 1-5 years, occasionally longer Premium rate based upon length of terms, country rating, shipping period, buyer credit rating Requires 15% minimum downpayment Can include used equipment Some Local Costs are eligible 54

55 Ex-Im Medium Term Guarantee Key Parameters: Required for financed amounts in excess of $10MM (Guarantees can be used for amounts < $10MM) Generally available only to commercial banks under a Master Guarantee Agreement Only available for buyer credits For amounts > $10MM, Ex-Im drafts and is party to Credit Agreement between Bank and Buyer Similar coverage, terms, content requirements to Credit Insurance More automated process 55

56 Ex-Im Transaction Size Qualifiers Up to $10MM of financed amount: Medium Term Insurance or Medium Term Guarantee Over $10MM of financed amount: Medium Term Guarantee Only Maximum Repayment Terms for Various Transaction Sizes: a) Less than $80M 2 years b) $80M - $174,999 3 years c) $175M - $299,999 4 years d) $350,000 or more 5 years *Sales to dealers or others for resale are limited to a max. term of 2 years 56

57 Participating Entities Foreign Buyer U.S. Exporter (one or more) Wells Fargo Global Banking 57

58 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer Buyer communicates need for financing to supplier 1 U.S. Exporter 2 Seller presents financial need to Wells Fargo Wells Fargo Global Banking 58

59 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer Bank provides conditional term sheet to buyer 4 U.S. Exporter 3 Supplier provides equipment lists and buyer contact information Wells Fargo Global Banking 59

60 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank U.S. Exporter WF contacts Ex-Im with basic buyer info to determine Ex-Im s general interest Buyer provides detailed financial information and sales contracts 6 Foreign Buyer 5 Wells Fargo Global Banking 60

61 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer U.S. Exporter 7 WF submits application to Ex-Im for a medium term facility Wells Fargo Global Banking 61

62 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer Ex-Im evaluates and provides WF with approval decision 8 WF provides notice of approval and begins preparing legal doc s 9 U.S. Exporter Wells Fargo Global Banking 62

63 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer U.S. Exporter WF engages legal counsel to draft credit agreement, note(s), opinions, etc Buyer and WF enter into Agreements Wells Fargo Global Banking Outside Law Firm 63

64 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer Suppliers ship equipment to buyer 12 Buyers provide equipment acceptances 13 b U.S. Exporter 13 a Suppliers submit documentation to bank for payments Wells Fargo Global Banking 64

65 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer 14 b WF pays exposure fees to Ex-Im Bank U.S. Exporter 14 a WF pays suppliers for 85% of the contract value of the shipments Wells Fargo Global Banking 65

66 Transaction Flowchart: Ex-Im M/T Buyer Credit Ex-Im Bank Foreign Buyer WF bills at each installment Buyer remits as billed U.S. Exporter Wells Fargo Global Banking 66

67 Contact: Michael Dwiggins Vice President Structured Trade Finance Wells Fargo Global Banking 200 S. Biscayne Blvd., 14 th Floor Miami, Florida Tel. (305) Cell (786)