Although it may be flying under the radar for many aftermarket executives, exploring the financial programs available through the Export-Import Bank of the United States (Ex-Im) could help you gain a foothold in the international sales arena.
“A lot of people are unfamiliar with the Ex-Im Bank and the programs they offer,” reports Steve Hughes, chairman of the Auto Care Association’s International Trade Committee.
If you find the idea of global trade intriguing yet intimidating, “It would be a benefit for all aftermarket companies interested in exporting their products to get more information on this agency,” he says.
When pitching potential overseas buyers, “You can be aggressive in your sales stance,” says an Ex-Im executive who works closely with automotive-oriented clients, requesting anonymity because he is not officially authorized to speak publicly about the independent, self-sustaining federal agency – which has been attracting increased Congressional scrutiny from both sides of the aisle.
“We’re in the background of the transaction making sure everyone gets paid,” the executive explains. Ex-Im’s involvement can be especially helpful for sealing a deal if you’re meeting with a prospective international customer at a trade show, for example, and questions arise about credit and payment guarantees.
“Most people don’t realize how small our transactions can be,” the executive points out. Insurance policies are available for contracts in the $25,000 to $50,000 range and above, plus there are options for providing “working capital that can cover multiple export orders.”
“For many U.S. exporters, a lack of access to financing can stand in the way of sales growth. Commercial lenders do not always have the capacity or willingness to provide loans for higher-risk markets or transactions,” says James G. Burrows, Ex-Im’s senior vice president for small business.
“Ex-Im can work with a company’s lender to help secure financing,” he says. “The funds may be used to pay for materials, equipment, supplies, labor and other inputs to fulfill export orders; post standby letters of credit to serve as bid bonds, performance bonds, or payment guarantees; and purchase finished products for export.”
If you remain rather wary about venturing into global sales, Burrows suggests that “Canada is an ideal marketplace for U.S. businesses looking to export for the first time, or who have received inquiries from Canadian customers and have remained hesitant about starting their export journey.”
Primarily selling its lines of OEM and aftermarket engine components into Canada, Mexico and Europe along with several other nations, the Cleveland-based A.J. Rose Manufacturing Co. has been an agency client since 2008.
“The Ex-Im insures our receivables to our primary lender. It allows us to have a higher line of credit, which is great,” says CFO Douglas E. Krzywicki. “It’s definitely a financial tool to provide security and raise your ability to borrow funds.” Some 20 jobs are supported by the export initiatives.
International trade currently accounts for “25 percent of our sales and growing,” he says, citing a recently inaugurated joint-venture 49,000 sq. ft. manufacturing site in India.
“We have hundreds and hundreds of parts depending on the engine, and we make parts for every engine out there,” Krzywicki says. “The Ex-Im line we established has proved to be a cost-effective mechanism to provide cash flow availability under our current financing arrangement. This facility has allowed us to grow our export business without an impact to our operating-line availability.”
Competitive edge
“We are a small manufacturer successfully competing in the global market,” according to Richard Laurenzi, president of Prospect Machine Products (PMP) in Prospect, Conn. “Thanks to Ex-Im’s support we managed to expand our business overseas and added jobs at home.”
Mexico, Italy, Brazil and China are key destinations for PMP’s line of precision “deep-draw” metal stampings formed into complex shapes for automotive structuring, bearings, sensors and other applications.
Hoffman International of Piscataway, N.J. delivers trucks and numerous other varieties of specialized vehicles, parts, maintenance expertise and on-the-ground localized training as a global one-stop source of construction equipment for projects in 80 countries, especially in sub-Saharan Africa, the Middle East and Russia.
“Ex-Im is very important because we have many smaller companies pulling larger companies into overseas deals. We buy from 25 manufacturers and sub-vendors for just our latest deal, and you can imagine how many vendors they have,” says Musya Tumanyan, the company’s senior vice president who has been in the export business for 40 years.
“We don’t want to send anything, even spare parts, to a country without some kind of assurance” that payment will be forthcoming, she says, and 95 percent of Hoffman’s customers are overseas purchasers. The most recent major deal, supporting 65 existing jobs and creating 41 new ones, is a $45-million project in Cameroon involving more than 150 vehicles.
“We send field engineers all over, and we just had a guy who came back from Cameroon because he was training the customers on the equipment. When they’re confused they ask us for technical support. The countries want to train their young local people on the equipment for a good profession. A lot of our competitors can’t provide the training, but we do.”
Additional sales destinations include Egypt, Peru, India, Vietnam and Turkey – made possible by an ongoing Ex-Im relationship dating back to a decade ago. “I need reasonable coverage to start moving on a project; you don’t drive a car without coverage,” Tumanyan points out.
“I’m not comfortable with a Vietnamese customer or a Turkey customer – look what’s happening there,” she observes, referring to recent Turkish unrest. “Vietnam was in a war with us, but now they’re good customers.”
Tumanyan explains that “the Bank’s insurance gives me peace at night. Financing is critical to our business, and Ex-Im Bank saved the company during the recession. The insurance allowed us to offer credit terms to our customers – that was the competitive edge.”
In 2009 Hoffman’s existing private-sector financing source ceased to provide the necessary services. “When the financial house dropped me like a ton of bricks, I was able to get coverage through Ex-Im in one week,” Tumanyan recounts.
“It’s not free, but it’s cheap,” she notes, lauding the application processes, policies, pricing and performance of Ex-Im’s personnel. “I wouldn’t say it’s easy, but it’s manageable. The people are very professional there. It’s not a problem finding short-term coverage – that’s not difficult. You just go to the website, find a broker, and the broker helps to navigate through the paperwork.”
Along with marketing extensive amounts of equipment, Hoffman’s averages $3 million to $4 million in annual overseas parts sales, about 10 percent of the company’s yearly revenues. “Sometimes our customers source their parts locally because currency is very volatile, but we can provide technical assistance that goes beyond that 10 percent. You want to help your customers – that’s very important,” says Tumanyan.
“Lubricants, fluids and tires they can buy locally – even in developing countries – but they come to us for sophisticated parts, and when they’re confused they ask us for technical support,” she reports.
A spear in the quiver
The global marketing efforts of Heavy Equipment Resources of Florida (HERO-FL) in Jacksonville include parts, rebuilt engines and transmissions along with complete vehicles. With Ex-Im assistance sales are targeted to Ghana, Nigeria, South Africa, Botswana, Zambia, Tanzania and Namibia.
“Nobody is going to trust anybody to send anything to Africa and wonder when they’re going to get paid,” says Founder and President Leslie Smith. “I was concerned about the risks of doing business in some parts of Africa, so we could do nothing more than cash and carry. A lot of times they just don’t have the cash. We began to use the Bank’s export credit insurance to provide competitive terms to buyers, and sales increased.”
The Dredging Supply Co. (DSC) of Reserve, La., with locations also in Mississippi, Michigan and Pennsylvania, has been digging into a host of Ex-Im programs such as Working Capital, Export Credit Insurance, Medium-Term Financing and Direct Loan.
From 2013 through 2017, Ex-Im has supported $56.5 million of the company’s international sales in 45 nations, including Nigeria, Cambodia, Russia, Colombia, Mexico, Canada, Bangladesh and India.
“Even when Ex-Im support isn’t a prerequisite for a sale, Ex-Im still helps DSC compete with dredge manufacturers in other countries,” says Vice President and CFO Kevin E. Dolan.
“It’s basically a spear in the quiver. The customer knows we have working capital and that we have a working relationship with Ex-Im,” he notes.
We work with the customer and the Bank. We’re the people the customer knows,” says Dolan, “and our customer wants a familiar face at their side.”
Selling customized dredges costing $300,000 to $10 million apiece, equipped with Caterpillar and General Electric engines, “we do a lot of parts sales that our customers install themselves, or we send our guys overseas to install them,” he says. “We’re able to get all the parts that our customers need.”
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