SBA EXPORT LOAN PROGRAMS

Patrick Hayes, Regional Manager SBA Export Solutions Group

U.S. Export Assistance Center 600 Superior Avenue, Suite 700

Cleveland, OH 44114 - 216-522-4731 patrick.hayes@sba.gov

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.

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.

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

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 - $500,000

0.25% 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.

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

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

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

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

Two Types of EWCP Loans

EWCP

Transaction Based Asset-Based

Transaction Based EWCP Self Liquidating Line of Credit

• 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

Export Order EWCP

Advance

Inventory

Finished Goods

Invoice Payment

Pay Down EWCP

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

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.

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

Two Types of EWCP Loans

EWCP

Transaction Based Asset-Based

Asset Based EWCP MAXIMIZING THE BORROWING BASE

ASSET-BASED FACILITY SBA EWCP GUARANTEE

Amount % Advance Collateral % Advance Collateral

Exportable Inventory

Raw Materials $200,000 40 $80,000 75 $150,000

Work-In-Progress 200,000 0 0 75 150,000

Finished Goods 600,000 50 300,000 75 450,000

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 70 420,000 90 540,000

Subtotal 1,000,000 420,000 900,000

Total Borrowing Base $2,000,000 $800,000 $1,650,000

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 “re-issued” 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

Thank You!

Patrick Hayes, Regional Manager SBA Export Solutions Group

U.S. Export Assistance Center 600 Superior Avenue, Suite 700

Cleveland, OH 44114 - 216-522-4731 patrick.hayes@sba.gov

Ex-Im Bank Trade Financing

Solutions for Export Success!

Our Financing Support Makes the Difference

Minimize risk Level the playing field Supplement commercial financing

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

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 Miami: 305-526-7436 New York: 212-809-2650 Chicago: 312-353-8093 Houston: 281-721-0470 Orange County, CA: 949-660-1341 San Francisco: 415-705-2280 Atlanta: 404-897-6082 Minneapolis: 612-348-1213 Seattle: 206-728-2264 Dallas-area: 214-551-4959 Detroit: 313-230-8832

Thank you!

Thomas P. Cummings National Director of Broker and

Bank Relations 212-809-2652

Mobile 917-690-2851 thomas.cummings@exim.gov

Rochester Credit Insurance Presentation

The way to sell more with higher profits and less risk

© Trade Credit Insurance Agency, LLC. 2012

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

Credit Insurance

Insures: – Domestic receivables – Foreign receivables – Both foreign and domestic receivables

Covers – Single buyers – Multiple buyers – All open account sales

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

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?

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

Advantages of Open Account Terms

Build trust Sell more Ease of business

Improve Financing

Banks are always more willing to lend against insured receivables

Lend against foreign accounts receivable

Protect against concentrations

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

INSURERS OFFERING SHORT TERM POLICIES

Government: – Ex-Im Bank

Private: – FCIA – AIG – Coface – Atradius – Euler – QBE – A few other firms

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

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

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

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

Thank You

Edward J. Arnold PhD Trade Credit Insurance Agency, LLC.

5373 Transit Road Williamsville, NY 14221

Tel: 716-932-7713 Cell: 716-481-9370 earnold@tciallc.com

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Medium-Term Buyer and Supplier Credits

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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

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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

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Medium Term Buyer Credits vs. Supplier Credits: Pros & Cons for Exporters

Buyer Credit Pros: Fewer

documentation/resource requirements

No responsibility to file claims, reporting

Buyer Credit Cons: Less control over

transaction Less economically feasible

for small transactions (under $2.5MM) due to higher costs for Buyer

Supplier Credit Pros: Maintain control over

transaction Can be more economically

feasible for small transactions

Supplier Credit Cons: Increased documentation

requirements Supplier to organize and

maintain transaction process

May take responsibility for claim filing, reporting

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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

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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

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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

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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) -

http://www.exim.gov/tools/country/country_limits.cfm

Up to 85% of eligible goods and services can be financed

Goods must be shipped from the U.S.

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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

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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

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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

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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

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Participating Entities

Foreign Buyer

U.S. Exporter (one or more)

Wells Fargo Global Banking

58

Buyer communicates need

for financing to supplier

1

2

Seller presents financial need to

Wells Fargo

Transaction Flowchart: Ex-Im M/T Buyer Credit

Ex-Im Bank Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

59

Bank provides conditional term sheet to buyer

4

Supplier provides

equipment lists and buyer

contact information

Transaction Flowchart: Ex-Im M/T Buyer Credit

Ex-Im Bank Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking 3

60

Buyer provides detailed financial information and sales contracts

5 WF contacts Ex-Im with basic buyer info to determine Ex-Im’s general

interest

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

6

Ex-Im Bank

61

WF submits application to Ex-Im for a medium term

facility

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

7

Ex-Im Bank

62

Ex-Im evaluates and provides WF with approval decision

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

8 9

WF provides notice of approval and

begins preparing legal doc’s

Ex-Im Bank

63

Buyer and WF enter into

Agreements 11

WF engages legal counsel to draft

credit agreement, note(s), opinions,

etc

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

10

Outside Law Firm

Ex-Im Bank

64

Buyers provide equipment

acceptances

13b

Suppliers ship equipment to buyer

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

12

13a

Suppliers submit documentation to bank for payments

Ex-Im Bank

65

WF pays exposure fees to Ex-Im Bank

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

14b

14a

WF pays suppliers for 85% of the contract value of the

shipments

Ex-Im Bank

66

WF bills at each installment

Transaction Flowchart: Ex-Im M/T Buyer Credit

Foreign Buyer

U.S. Exporter

Wells Fargo Global Banking

15

16

Buyer remits as billed

Ex-Im Bank

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Contact: Michael Dwiggins Vice President Structured Trade Finance Wells Fargo Global Banking 200 S. Biscayne Blvd., 14th Floor Miami, Florida 33131 Tel. (305) 789 5082 Cell (786) 423 7394