Ex-Im Bank Trade Financing

Solutions for Export Success!

Global Business Club of Mid-Michigan

February 16, 2017

The Export-Import Bank of the United States

is the official Export Credit Agency of the U.S. ▪ Mission: To assist in financing U.S. exports, in order to help create

and sustain U.S. jobs

▪ Businesses (exporters) come to us when….they need help to mitigate the risk of nonpayment by foreign buyers Export Credit Insurance facilitates: – Increase in exports by offering open account terms – Increase in access to working capital loans

▪ Headquartered in Washington, D.C. www.EXIM.gov or (800) 565.3946 [EXIM] Regional Office: Detroit, MI. Ed Ekel (313) 226-3067 eduard.ekel@exim.gov

No transaction is too small, and we have especially attractive products for SB (SBA def.)

Ask audience: small business vs. large, experienced (not for certain seminars) or not, logistics and compliance vs. finance and sales This is sales support finance: CFO and Sales interested

EXIM fills gaps, there are some restrictions due to ECA role. CLS, US content and ship from

US. Also no defense, reasonable assuredness of repayment, and 3 years of (US = OK) operating experience required (DUNS, + net worth). Self-sustaining. Strong pros: small transactions, riskier buyers and countries – due to our mission

Commercial and political risk. (But not disputes: rely on KYC, down-payment, inspection

prior to shipment etc.) EXIM is part of team with DoC, SBA, VAGTC, E-DEC, MSU, MEDC, SBD Centers,

Automation Alley, banks and insurance brokers etc. Trade.gov. Export.gov. Don’t go into practical aspects of program (coverage, deductibles, cost, turnaround time,

credit requirements, reporting, claims) but: “cheap and easy/quick” especially Express Policy

Other programs as well (M/T (15%, lien, docs), WCGP, project finance etc.)

Eligibility Requirements Exporters must : be in business at least three years (unless otherwise noted),

have financial statements or tax returns, have a DUNS #

Exported Products / Services must be, for Short-Term products (Global Credit Express, Working capital and ST insurance) :

50-plus% U.S. content, including labor, excluding mark-up (cost basis)

Exported Products / Services must be, for Medium-Term products ( MT Insurance and Guarantees) :

85-plus% U.S. content, including labor, excluding mark-up (cost basis) for full support of the transaction

Small Business IS Our Business

FY 14: Approximately $5 billion in small

business authorizations Nearly 90% of Ex-Im Bank transactions

support small business exporters No transaction is too small !

Our Products Cover the Spectrum

Pre-Export Financing

Post-Export Financing

1.Working Capital Gtee

2. Global Credit Express (pilot)

3. Insurance 4. Guarantees

5. Direct Loans

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)

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

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 www.exim.gov)

Interest rate is determined by the lender

Working Capital Guarantee

Solution 2: Global Credit Express: A Pilot Program

• A direct loan from Ex-Im Bank to an exporter for pre-export working capital

• Maximum loan amount $500,000 • Tenor of 6 OR 12 months • To qualify: • FICO SBSS score of at least 170 • In business 3 years, exporting for 1 year • Ex-Im Bank U.S. content requirements

apply

Trade Terms as a Spectrum of Risk

Seller Risk Trade Terms Buyer Risk High Low

Low High

Open Account

Cash Against Documents and other Documentary Collections

Deferred Letters of Credit

Sight Letters of Credit

Payment in Advance

Solution 3: 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

Risks Covered

Commercial Risks Insolvency Bankruptcy Protracted default

Political Risks

Transfer risk

War, revolution, insurrection, expropriation

Cancellation of an import or export license

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

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

Small Business Express Insurance: Eligibility

In addition to “small business” eligibility definition:

▪20 buyers or less (on credit terms) ▪Not currently insured by Ex-Im Bank or any private sector insurer for foreign accounts receivable

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! * Ex-Im 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!

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 $162.50 in premium!

▪AND… if you use insurance with a working

capital guarantee from either Ex-Im Bank OR the SBA, you get a 25% rate reduction on your premiums!

Small Business Multi-Buyer Policy

Coverage: 95% commercial and 95% political Exporter must qualify as “small business”

by SBA definition, and No more than $7.5 million in export credit sales over the past 2 years 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-you-ship,” no minimum premium requirement Buyer credit limits endorsed to policy (requires minimal pre-approvals

by Ex-Im Bank)

Small Business Multi-Buyer Premium Rates (on July 22, 2013)

Term

Sovereign Financial

Institutions Private

Sight L/Cs $0.03 $0.03 N/A

1-60 days $0.16 $0.20 $0.55 61-120 $0.27 $0.33 $0.90 121-180 $0.35 $0.43 $1.15 181-270 $0.43 $0.54 $1.45 271-360 $0.53 $0.65 $1.77

Per $100 of the gross invoice amount 25% rate reduction if used with Ex-Im Bank / SBA

Working Capital Guarantee product!

Standard Multi-Buyer Policy For experienced exporters with over 500 employees and /or $7.5mm 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 Ex-Im Bank)

Short-Term Single-Buyer Insurance Policy

Buyer-specific 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 www.exim.gov) 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)

Solutions 4 and 5: 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)

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

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 www.exim.gov

X means support is not available.

Contact a Regional Office Near You EASTERN: Miami: 305-526-7436 New York: 212-809-2650 Atlanta: 404-815-1497 CENTRAL: Chicago: 212-353-8081 Houston: 281-721-0470 Minneapolis: 612-348-1213 Detroit: 313-226-3067 Dallas-area: 214-551-4959 WESTERN: LA-area: 949-660-1341 San Francisco: 415-705-2280 Seattle: 206-728-2264

Export-Import Bank of the United States

Ed Ekel Regional Director

Detroit

313-226-3067

Eduard.Ekel@exim.gov