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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 [email protected]
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 [email protected]
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 [email protected]
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 [email protected]
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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
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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
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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
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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