Under the direction of Chairman and President Fred P. Hochberg, the Export-Import Bank of the United States is described as “an independent federal agency that supports and maintains U.S. jobs by filling gaps in private export financing at no cost to American taxpayers.” Ex-Im provides a variety of financing mechanisms such as working capital guarantees and export credit insurance to promote overseas sales of American goods and services.
In 2013 it generated more than $1 billion for U.S. taxpayers while approving more than $27 billion in total authorizations, according to Hochberg. “These authorizations supported an estimated $37.4 billion in U.S. export sales,” he reports, “and approximately 205,000 American jobs in communities across the country.”
The automotive industry, especially the aftermarket, has benefited in that over the past five years Ex-Im has directed nearly $2 billion to help facilitate exports of domestically produced completed cars and trucks along with parts, chemicals, services and equipment to international markets.
Q: I am just getting started in exporting. Where can I get assistance?
A: A wonderful website for exporting information is at www.export.gov. Furthermore, both the Department of Commerce (www.doc.gov), 800-872-8723, and the Small Business Administration (www.sba.gov), 800-827-5722, can help you get started. The Department of Commerce also has more than 100 U.S. Export Assistance Centers located nationwide to assist existing and potential exporters.
Q: Is Ex-Im located only at your headquarters in Washington, D.C.?
A: No. There are regional offices located strategically throughout the U.S.
Q: Where can a small business exporter find out more about your programs?
A: Regional offices are dedicated to small business exporters and are ready to provide assistance with working capital guarantees as well as the other services.
Q: I have a very small business with only eight employees. We have just started to export a U.S.-made product and our sales volume is only $75,000 a year right now. Am I too small for Ex-Im?
A: Absolutely not! Ex-Im Bank has a special policy for the definition set forth by the Small Business Administration. In general, you will qualify if the total number of employees in your company (including any parent firm, subsidiaries and affiliates) is less than 500 if your company is a manufacturer, or less than 100 if you are a distributor or wholesaler.
To qualify for the small business policy, you must meet the SBA definition and have export credit insurance. It has two benefits: It provides credit terms to foreign buyers, and it protects exporters against loss should a foreign buyer or other foreign debtor default for political or commercial reasons. Insurance policies may apply to shipments to one buyer or to many. Coverage available includes comprehensive (commercial and political) credit risks or only specific political risks. The insurance covers short-term (up to 360 days) as well as medium-term (one- to seven-year) sales.
Working capital loan guarantee: This product addresses the export financing needs of U.S. businesses producing goods and services for the U.S. export market by offering a 90 percent guarantee of principal and interest to the lender for export-related guarantees to banks, which, in turn, provide loans for working capital. It is therefore advisable to discuss your needs with your commercial bank before contacting Ex-Im Bank. You should have three years of financial statements, your most recent tax return, biographies of top management, company history, product description and a narrative of your export experience.
A personal guarantee from any owner(s) with 20 percent or more equity in the company is normally required, as is a purchase order from a country in which we are doing business. The list of eligible countries is called the credit insurance policy. Once your foreign receivables are credit-insured by Ex-Im Bank, the receivable becomes a domestic one, and carries the full faith and credit of the U.S. government. The proceeds (claim payments) of the insurance policy are assigned to your lender, so they know our claim payment comes to them.
We have many types of insurance policies: Multi-buyer and special incentives for export credit insurance policies to protect you against non-payment by your foreign buyers, allowing you to meet – or beat – your competitors by offering attractive terms to your buyers. The policies protect you against non-payment for both commercial and political risks, and will generally allow you to extend credit terms up to 180 days for consumer durables, and up to five years for capital equipment. The insurance premiums are low, and you may pass them off to your buyer.
Q: My foreign buyer wants me to invoice in the local currency instead of U.S. dollars. Can I still be protected against non-payment?
A: Yes! Under Ex-Im Bank’s guarantees, you may invoice in several hard currencies without our prior approval; these include Canadian dollars, British pound sterling, Japanese yen, French francs, German deutschemarks, Swiss francs, and, of course, Euros. If you wish to invoice in a different currency, or a third-country currency, you will need to get us to pre-approve it and endorse it to your policy.
Q: My foreign buyer has opened a letter of credit to buy my products, but I have never heard of the issuing bank. How can you help me?
A: Letters of credit…or better yet, contact the insurance broker at no additional cost. However, we highly recommend that you first guarantee to your bank so they will be more willing to lend you money to purchase or manufacture U.S. goods and services destined for export. The collateral for the loan is the inventory itself, including WIP (work in progress) as well as the foreign receivables generated from the sale of the products.
You must be able to demonstrate that you can service the debt you are taking on, and therefore your company financial statements will be reviewed and the owner’s personal guarantees are required. Ex-Im Bank’s guarantee is 90 percent, so the lender may require you to separately collateralize the remaining 10 percent. The interest rate is negotiated between you and the lender.
Q: I have a sizeable export business going, and I have known my foreign distributors for many years. We give them open account terms and don’t feel the need to insure them. Once in a while, however, they need a shipment that would put them over their internal credit limit that we have established for them, and we get worried that the buyer is going to default. What can I do?
A: You can use Ex-Im Bank’s export credit insurance policy, which protects you at 95 percent for specified political risks. Sovereign buyers (those which have the Central Bank or Ministry of Finance guarantee) are covered at 100 percent. Remember though, that valid claims will require that the buyer make the local currency deposit within three months after the due date.
Q: I sell to my subsidiary in another country, and I am concerned that they will not be able to get hard currency out of the country. How can you help me?
A: Sales to subsidiaries and affiliates are eligible for Ex-Im Bank’s political-only medium-term insurance policy. Medium-term insurance can generally be obtained faster, since a policy is issued instead of a guarantee. If necessary, a claim will be paid if all the conditions to the policy have been met. The guarantee is an unconditional promise to pay the lender in case of buyer default so it typically takes longer to process.
Q: I sell U.S.-made capital equipment and my foreign buyers want several years to pay for it. I cannot afford to carry the receivable for this long. What can I do? If my bank is talking about financing my foreign buyers for me through Ex-Im, what does this mean and how much will it cost me?
A: Many commercial banks that partner with Ex-Im Bank are willing to finance the buyer for you. The export insurance policies and special buyer credit limits through working capital guarantee transactions may be approved very quickly by using a lender that has delegate authority. These banks can approve transactions within their own credit committee without having to present them to Ex-Im Bank for processing. These “DA” transactions are typically approved within three weeks.
Q: Is Ex-Im financing available only for large exporters?
A: No. We finance businesses of all sizes. Ex-Im Bank has no minimum or maximum limits on the transaction amount.
Q: Do the exported products have to be American-made and shipped from the U.S.?
A: Products must be shipped from the United States because our mission is to support USA jobs. In general, we support sales of products with U.S. content greater than 50 percent, but we also support some that do not. U.S. content requirements are liberal and take into account that exporters want to further liberalize the U.S. content requirement to be more competitive with other ECAs (export credit agencies), while labor unions are concerned about exporting jobs. For short-term transactions (credit terms up to 180 days), products and services must contain at least 50.1 percent U.S. content, including labor but excluding mark-up. For medium-term transactions (generally sales of capital equipment with repayment terms between one and five years), the U.S. content requirement is 85 percent for Ex-Im Bank to support the entire transaction.
Do you have any programs for veterans, women and minority-owned businesses?
A: Ex-Im Bank has a business development team devoted to veterans, women and minority-owned businesses that markets exclusively to those sectors. They provide hands-on training to small, veteran-, woman- and minority-owned companies that wish to export.
Q: Do you offer special assistance to “underserved” businesses?
A: Yes. We have a specific group aimed at supporting minority- and woman-owned businesses. For more information, call 202-565-3417.
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