EXIM Bank Trade Financing Solutions for Export Success!

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1 EXIM Bank Trade Financing Solutions for Export Success! 2017 NAITA International Trade Leadership Series August 24, 2017

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3 Who Is EximBank What Do They Do Photo / Graphic Photo / Graphic EXIM Bank is an independent agency of the U.S. Government Established in 1934 Headquartered in Washington, D.C Regional Export Finance Centers: Eastern: Miami, New York, Atlanta Central: Chicago, Detroit, Minneapolis, Houston, Dallas Western: Orange County CA, San Francisco, Seattle, San Diego Mission: Support U.S. exports in order to create and sustain U.S. jobs

4 Exim Supports Small Business FY2016 Authorized over $2.6B to support U.S. small businesses 52% of total ($5B ) 2635 small business transactions Nearly 90% of total (2899) 52,000 jobs supported 1.4 million in past 8 years

5 Exim Financing Support Makes the Difference Minimize risk Level the playing field Supplement commercial financing

6 Growing Your Sales and Minimizing Risk Exporter s Need Funds to Fulfill Orders Exim Bank Solution Working Capital Guarantee Extension of Credit Foreign Buyer Financing Credit Insurance: Foreign Accounts Receivables Medium and Long Term Insurance and Loan Guarantees

7 Products: Risk Protection International sales are challenging enough without the added risk of not receiving payment for your goods or services. EXIM s export credit insurance provides payment coverage for both commercial and political risks. Moreover, your business can count on EXIM to protect your export sales to a single buyer or multiple buyers. Extend Credit to Buyers EXIM s export credit insurance enables your company to offer competitive open account terms instead of requiring your foreign buyers to pay cash-in-advance, use credit cards, or secure letters of credit. Furthermore, your insured foreign receivables may be assigned to a commercial lender, thereby increasing your company s borrowing base and accelerating its cash flow. Working Capital An EXIM guaranteed credit line may provide the vital funds you need to fulfill new orders. These funds may be used to purchase finished products, raw materials, and supplies as well as cover labor and overhead costs. This guaranteed credit line may even cover standby letters of credit used as performance bonds or bid bonds. Term Financing EXIM can provide your foreign buyers with term financing at competitive interest rates and longer repayment terms. Foreign buyers can use these funds to buy U.S.-made capital goods and services, helping your business go global.

8 How Exim Products Support You Obtain pre-export working capital loans to support the export of U.S. made goods and services Offer competitive credit terms to your foreign buyers Reduce your risk Arrange term financing at U.S. interest rates for your foreign buyers

9 Eligibility Requirements Exporters must : be in business at least one year (unless otherwise noted), have financial statements or tax returns, have a DUNS number For Working Capital and Short-Term insurance, exported products and services must be: 50-plus% U.S. content, including labor, excluding mark-up (cost basis) For Medium-Term Insurance and Guarantees, exported products and services must be : 85-plus% U.S. content, including labor, excluding mark-up (cost basis) for full support of the transaction

10 Exim Products Cover the Spectrum Pre-Export Financing Post-Export Financing Working Capital Guarantee - Export Credit Insurance - Loan Guarantee - Direct Loan

11 Solution #1 :Working Capital Guarantee This is a guarantee to a commercial lender which makes a loan to an exporter to purchase or manufacture U.S. goods and services for export Loan proceeds may also be used to collateralize a standby-by letter of credit to be used as a performance bond (25% collateralization required)

12 Working Capital Guarantee Assists small and mid-size companies in obtaining working capital to produce or purchase US goods and services for export Provides a 90% guarantee of repayment (principal and interest) on loans to exporters May be set up as Transaction-Specific or a Revolving Line of Credit No minimum or maximum amounts Loan supports advances made against export-related inventory (including WIP) and foreign receivables: -Up to 75% advance rate on inventory, and up to 90% on foreign receivables

13 Working Capital Guarantee Asset-Based: fully collateralized Personal guarantees are required of owner(s) Cost: $100 application fee Up to 1.75% facility fee Reduced fee if: Exports sales structured under L/Cs and/or secured by export credit insurance; exporter s financial ratios are within its industry median A lower fee may be negotiated with a Delegated Authority Lender (see list on Interest rate is determined by the lender

14 Working Capital Guarantee

15 Trade Terms as a Spectrum of Risk Seller Risk High Trade Terms Open Account Buyer Risk Low Cash Against Documents and other Documentary Collections Usance / Deferred Letters of Credit Sight Letters of Credit Low Payment in Advance High

16 Solution 2: Export Credit Insurance Benefits: RISK PROTECTION: Protects US exporters against non-payment by foreign buyers due to Commercial Risks & Political Risks (see next slide) SALES 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 a lender

17 Risks Covered Commercial Risks Insolvency Bankruptcy Protracted Default Note: commercial disputes are not covered Political Risk Transfer Risk War, revolution, insurrection, expropriation Cancellation of an import or export license

18 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 Exporter Policies: Multi-Buyer or Single-Buyer

19 Short Term Export Credit Insurance Policies for Small Business*: Express Insurance 95 % cover, no deductible, pay-as-you-go, EXIM Bank obtains and reviews all credit info on buyers, maximum of 10 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

20 Small Business Express Insurance In addition to small business eligibility definition: 10 buyers or less (on credit terms) Not currently insured by EXIM Bank or any private sector insurer for foreign accounts receivable

21 Small Business Express Insurance: Key Features 95% coverage for non-payment due to commercial insolvency/bankruptcy/default) and political (war, revolution, transfer risk ) risks Insuring existing buyers is optional No deductible! No application fee! EXIM Bank pre-approves all credit limits requested and obtains credit information on your buyers at no additional cost to you 5 business day buyer approval turnaround on credit limits of $300,000 or less (longer turnaround on higher amounts) No minimum sales volume or premium pay only on the gross invoice value of what you ship, when you ship!

22 Small Business Express Insurance: Rates Rates are charged according to the length of the credit term you extend and the buyer type: for a sale to a private sector buyer on terms up to 60 days open account - $0.65 per $100. of the gross invoice value on a $25,000 sale, that s only $ in premium! AND if you use insurance with a working capital guarantee from either EXIM Bank OR the SBA, you get a 25% rate reduction on your premiums!

23 Small Business Multi-Buyer Policy Coverage: 95% commercial and 95% political Exporter must qualify as small business by SBA definition, and Average export credit sales over the past 3 years must be less than $7.5million In same line of business for at least 3 years (No material adverse issues) Must insure ALL export credit sales (L/C, CIA, CAD, SDDP, and Canadian sales may excluded) No deductible, no application fee, no advance premium required, pay-as-youship, no minimum premium requirement Buyer credit limits endorsed to policy (requires minimal pre-approvals by EXIM Bank)

24 Small Business Multi-Buyer Premium Rates on February 19, 2016 Term Sovereign Financial Institutions Private Sight L/Cs $0.03 $0.03 N/A 1-60 days $0.16 $0.20 $ $0.27 $0.33 $ $0.35 $0.43 $ $0.43 $0.54 $ $0.53 $0.65 $1.77 Per $100 of the gross invoice amount 25% rate reduction if used with EXIM Bank / SBA Working Capital Guarantee product!

25 Standard Business Multi-Buyer Policy For experienced exporters with over 500 employees and /or $7.5 million in annual export credit sales Must insure ALL export credit sales (L/C, CIA, CAD, SDDP and Canadian sales may be excluded) On a case-by-case basis, exporter may request to exclude certain countries and/or buyers ( Reasonable Spread of Risk ) Coverage: 95% for both commercial and political risks No minimum premium, pay-as-you-ship Buyer credit limits endorsed to policy (requires minimal pre-approvals by EXIM Bank)

26 Short-Term Single Buyer Insurance Policy Insures a single sale or multiple sales to one buyer 90% coverage, both commercial and political; 98% for bulk agricultural transactions 95% for letter of credit transaction Maximum policy period: 1 year No deductible, No application fee Premium based on country, type of buyer, and length of credit term extended (see rates on Charged on sales volume (not credit limit) Pay-After-You-Ship premiums Reduced $500 minimum premium for small business exporters ($2500. minimum premium for non-small business)

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28 Enhanced Assignment Exclusively for qualified small businesses any policy type as long as exporter meets criteria Adds exporter performance risk protection to lender Lender must obtain specific documents Lender can file a claim Policy Assignments Standard Assignment Lender is named loss payee Allows exporter to borrow from lender against insured A/R Only the exporter can file the claim In event of buyer default and claim approval, Exim pays claim proceeds to lender

29 Insurance Brokers Importance of working with an insurance broker Lender policies as well as exporter policies Up to date on standards Knowledgeable on procedures Better screening of potential transactions Focus on manageable scenarios Ensures proper use of policy and filing of successful claims Importance of dealing directly with one point of contact Atlanta Regional Office as a resource for small business exporter other interests, other than credit insurance

30 The Take-Away Short Term Export Credit Insurance for clients is a leverage tool Express Insurance, Single buyer and Multi-buyer Policies are inexpensive, easy to apply for and put in place, and serve three purposes of common interest Risk mitigation tool Marketing tool Financing tool

31 Solutions 3 & 4: Medium-Term Financing Generally used for buyer financing of capital equipment 85% financed, 15% cash down payment by the buyer (may be financed by a lender Repayment up to 5 years, exceptionally 7 years Amounts of $10 million or less Financing can be accomplished through the following EXIM Bank products: Lender guarantees Credit Insurance Direct Loans (few)

32 Solutions 3 & 4: Long-Term Financing Generally used for buyer financing of very large items (aircraft), and project finance Over 7 year repayment or over $10 million 15% down payment: 85% financed amount Financing can be accomplished through the following EXIM Bank products: Lender guarantees Direct Loans

33 Just A Few Restrictions No Military or Defense-related products nor obligors (exceptions apply) U.S. Content (ST: 50+%; MT: 85% U.S.) Restricted Countries (CLS) Economic Impact Shipping Additionality

34 Restricted Countries EXIM Bank conducts business in 180+ countries throughout the world. Restrictions may apply for political and/or economic conditions. Check the Country Limitation Schedule (CLS) at X means support is not available

35 EximBank What is the Status? Photo / Graphic Photo / Graphic EXIM Bank has been operating since 2015 without a full board meaning no transactions in excess or $10 Million have been approved. Current backlog of pending transaction is approximately $32 Billion Nominations have been submitted to Congress and are awaiting confirmation Results: Reduced revenue returned to U.S. Treasury and fewer jobs supported 2016 $284MM & 52M jobs 2015 $432MM & 109M jobs 2014 $675MM & 164M jobs

36 Photo Glenn Sigler Trade Finance Consultant Alabama International Trade Center Tuscaloosa, AL Ph: (205) Cell: (251) (EXIM) 2015 Export-Import Bank of the United States