Trade Financing Solutions

Export-Import Bank

of the United States

Increasing Your Export Sales…

Increasing Your Export Sales…While Minimizing Risks!

AIM Quarterly Meeting

October 3, 2006

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Who We Are - What We DoWho We Are - What We Do

Ex-Im Bank is an independent agency of the United States

Established in 1934

Headquartered in Washington, DC

5 regional business development offices (New York, Miami, Chicago, Houston, Long Beach, CA)

Mission: Support the export of US-manufactured products and services, and to create and sustain US jobs

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business IS Our BusinessSmall Business IS Our Business 83% of transactions supported small

business exports in FY04For manufacturers main product

is working capital

Overall the main product offered is insurance

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Your Needs - Our Solutions

1. Inventory Financing

2. Short-Term Accounts Receivable Financing

3. Medium-Term Financing

4. Long-Term Financing

Working Capital Guarantee

Export Credit Insurance

Export Credit Insurance or Loan Guarantee

Loan Guarantee or Direct Loan

Pre-Export Financing

Post- Export Financing

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Working Capital Guarantee

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Working Capital Guarantee Working Capital Guarantee

Used by small & medium-size U.S. firms to fulfill international sales orders.

Ex-Im provides guarantee to lending Banks for working capital loans to U.S. exporters.

Funds must be used to make or buy US goods /services (raw materials, equipment, labor) to fulfill export orders. AND/OR to finance export receivables by posting performance bonds (stand-by L/C’s)

Exports must be shipped from US. Goods must have at least 50% content -services must be performed by US staff, (if less than 50%, loans can only be supported up to % of US content).

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Working Capital GuaranteeWorking Capital Guarantee Can be “transaction-specific” or “revolving”

No minimum or maximum amount, but exporter’s financial statements must support the size of the loan requested

Inventory & accounts receivable (L/C’s or insured receivables) are used as collateral

Advance loan amounts as high as 75% on inventory and 90% on eligible receivables

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Working Capital GuaranteeWorking Capital Guarantee Ex-Im offers 90% guarantee to lender including

principal & interest (100% if woman/minority-owned).

Fees: Application Fee is $100 for a final commitment. Ex-Im fee to lender is up to 1.5% of the loan total; lending bank may pass the fee on to the exporter

Interest rate negotiated by exporter & lender. Most loans are one year but can be up to three.

Owner(s) with more than 20% equity must pledge a personal guarantee

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Working Capital GuaranteeWorking Capital Guarantee How to Apply:

Preliminary Commitment Application: Call Sharyn Koenig (212) 809-2653

Delegated Authority Lender list go to: www.exim.gov view Lender Locater or Lender Referral List

“Additionality” must be addressed by lender: No “deep pockets” Why is Ex-Im needed for financing to materialize? Ex-Im “delegated lenders” can approve loan by their

loan committee and attach Ex-Im Bank’s guarantee without prior approval

Smaller loans available through SBA: call 1-800.U.ASK.SBA or visit www.sba.gov.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

WCG Increases Borrowing Power !

WCG Increases Borrowing Power !

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Export Credit Insurance

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Export Credit Insurance BenefitsRisk Protection: Protects your balance sheet against risks

associated with foreign buyer non-payment

Policies can cover a single sale, or your entire export portfolio and cover both commercial risk (Insolvency, bankruptcy,

protracted default) and political risk (War, revolution, insurrection, civil unrest, “transfer risk”)

Marketing Aid: Gives you freedom and confidence to offer buyer friendly payment terms, like open account to global buyers, and secure more international sales

Financing Aid: Lenders are more likely to advance against Ex-Im backed receivables which can yield you greater cash flow . Also, by budgeting premium costs and avoiding catastrophic bad debt expenses you stabilize your cash flow.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Export Credit InsuranceExport Credit Insurance

Risks Not Covered Disputes, unless and until they are resolved Cancellation of a sales contract Devaluation of a currency ( as a political risk )

If a default occurs, and the buyer asserts that it was due to a government devaluation of the currency, we will view that as a commercial loss as opposed to a political loss.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Just A Few RestrictionsJust A Few Restrictions

Military Exports (exceptions apply)

Restricted Countries (political or economic)

Foreign Content

Buyer’s Creditworthiness (more later!)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Military RestrictionsMilitary Restrictions

No Defense Articles or Services

Three Exceptions1. Humanitarian purposes

2. Drug interdiction

3. Dual use items

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Eligible CountriesEligible Countries

Ex-Im Bank conducts business in many countries throughout the world

Restrictions may apply for political or economic conditions

1st step - check the Country Limitation Schedule (CLS) at www.exim.gov

X means support is not available.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Export Credit InsuranceExport Credit Insurance

Eligible Products Goods produced in and shipped from the US

Services performed by US-based personnel

For ST, products must be at least 51% US content, including labor but excluding mark-up

For MT, products must be at least 85% US content, including labor but excluding mark-up

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ProvidersProviders

How to Apply for Credit Risk Insurance. Ex-Im Bank regional offices and registered

insurance brokers can provide assistance with export credit insurance applications.

Insurance brokers can provide the required information to Ex-Im Bank and assist with the documentation.

Go to www.exim.gov click on Insurance Brokers to find a list of EXIM registered providers of credit risk insurance

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Export Credit Insurance Policies

Policy by Buyer Type

1. Small BusinessMulti-Buyer Basis

2. Small business single-Buyer Basis

3. Multi Buyer Basis

4. Single-Buyer Basis

Policy By Term Type

1. Short-Term Policies (up to 180 or 360 day terms)

2. Medium-Term Policies(capital equipment / 1-5 year terms)

Other:Special Policies

1. Small Business 2. Environmental 3. Services 4. Leases

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Short – Term Products

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Short-TermShort-Term

There are four basic types of short-term export credit insurance Small business- multi buyer ( under 5 million

export credit sales)

Small business- single buyer Regular business multi-buyer (over 5 million

export credit sales)

Regular business single buyer

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit Insurance:All Multi-Buyer Policies

ST Export Credit Insurance:All Multi-Buyer Policies

Exporter is required to insure all export sales made on credit terms (except for specified exclusions) to all markets where Ex-Im Bank provides coverage. (See Country Limitation Schedule (CLS) at www.exim.gov)

Policy is issued for period of one year and is renewable annually. Policy covers all eligible shipments made during the policy period.

Coverage begins when goods placed en route to the buyer.

Discretionary credit limits mean fewer pre-approvals

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit Insurance Small Business Policy

Eligibility: Exporter must Qualify as SBA “small business” www.sba.gov

Be in business 1 year with financial statements Have export credit sales under $5 million

Coverage: 95% commercial and 100% political risk coverage No deductible No minimum annual premium Fixed rate schedule (see next slide) “Pay-as-you-go” monthly shipment / premium reporting

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Small Business Multi-Buyer Premium Rates

ST Small Business Multi-Buyer Premium Rates

Term

SovereignBuyer

FinancialInstitutions

PrivateBuyer

Sight L/Cs $0.04 $0.04 N/A

1-60 days $0.19 $0.24 $0.65

61-120 $0.32 $0.39 $1.06

121-180 $0.41 $0.50 $1.35

181-270 $0.51 $0.63 $1.70

271-360 $0.62 $0.77 $2.08

Per each $100 of invoiced amount

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit InsuranceMulti-Buyer Policy

Eligibility Experienced exporters with over $5 million in

annual export credit sales

Coverage: 90% commercial and 100% political risk coverage OR

95% coverage for both types of risk First-loss deductible applies No minimum annual premium Variable premium rates- calculated on portfolio risk

(country mix and length of credit terms) “Pay-as-you-go” monthly shipment / premium reporting

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit InsuranceMulti-Buyer Policy

ST Export Credit InsuranceMulti-Buyer Policy

Discretionary Credit Limits (DCL’s)

A DCL is a limit that enables the exporter to extend credit terms, up to a specified amount, without prior Ex-Im Bank approval. To use this limit, specified credit information on the buyer justifying the credit amount to be extended must be obtained prior to shipment

(*The DCL may be superceded by a “special condition” on the Country Limitation

Schedule (CLS) - check the CLS carefully)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit InsuranceMulti-Buyer Policy

ST Export Credit InsuranceMulti-Buyer Policy

DCL approval (two-types) is based onexporter’s credit experience & procedures.

Credit DCL: NEW buyers. Requires exporter to obtain current (dated within 12 months), favorable credit information on buyer (generally credit agency report and/or written trade references) before making shipment.

Ledger DCL: EXISTING buyers. Allows exporter to use buyers prior history as basis for future shipments, if prior payments were made promptly , and were similar amounts and terms.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Special Buyer Credit Limits (SBCL)

ST Special Buyer Credit Limits (SBCL) Eligibility

For single buyers needing credit limits above DCL Exporters may apply for revolving (12 month max.) credit

limits and may apply to renew before expiry May request changes (credit limit/terms) any time SBCL’s supercede DCL’s, but not the Country Limit

Schedule (CLS)!

Coverage: Insures single or multiple shipments to ONE buyer No deductible Risk-based premium rates listed on www.exim.gov Min. premiums vary based on buyer/exporter type $1,000 minimum for “small business” Equal commercial & political risk coverage:

90% for private sector obligors 95% for L/C transactions 98% for bulk agricultural products 100% for sovereign obligors

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Export Credit InsuranceSingle-Buyer Policy

ST Export Credit InsuranceSingle-Buyer Policy

Application Process Submit the application along with credit / financial

information on the buyer. If approved, Ex-Im Bank issues a formal “commitment

notice” locking us in for 60 days To purchase coverage, exporter pays the full premium, up-

front There is no application fee.

This is a GREAT marketing tool, as an exporter can quote a NEW buyer open account terms, making it “subject to credit approval”. The buyer will only know it is credit insured if told by the exporter, or if a claim is filed and Ex-Im Bank initiates collection efforts.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Short-Term Policies: Claims InformationShort-Term Policies: Claims Information

Claims may be filed no earlier than 90 days after the due date and no later than 240 days after the due date (that’s between the 3rd and the 8th month after default).

Ex-Im Bank will pay completely documented

claims within 60 days.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Medium – Term Products

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Medium-Term SupportMedium-Term Support

For buyer financing of capital equipment:

Loans under $10 million with 1 to 5 year repayment terms (7 years in rare exceptions)

15% downpayment required; Ex-Im Bank supports 100% of the remaining 85%.

Two MT products are available:

Guarantees: Available only to lender issuing “buyer credit”

Insurance: Medium-Term Single-Buyer Policy available to exporter OR lender

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Medium-Term GuaranteesMedium-Term Guarantees Available to lenders with an active Master Guarantee

Agreement with Ex-Im Bank

Lender “loans” money to a foreign buyer to purchase US goods/services

The lender “cashes out” the exporter and creates a PN between it and the buyer. The guarantee is in place to protect the lender against the buyer’s default

Fees are a commitment fee of 1/8th of 1% plus the exposure fee as calculated on fee calculator (www.exim.gov)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Medium-Term InsuranceMedium-Term Insurance Exporter OR lender extend credit terms to buyer

Ex-Im Bank insures the exporter/lender against non-payment by the foreign buyer

Fees are calculated using Ex-Im Bank’s exposure fee calculator on Ex-Im Bank’s website (www.exim.gov)

Ex-Im Bank publishes Medium-Term Credit Standards for guidelines on evaluating a buyer’s creditworthiness. (www.exim.gov)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

How To Access Ex-Im ProductsHow To Access Ex-Im Products Banks

Lender Locater Lender Referral List

Working Capital Program Lenders with delegated Authority

Credit Risk Insurance Insurance Brokers

Ex-Im Bank Regional Office Sharyn Koenig, Sr. Bus. Dev. Officer VA Region Tel: (212) 809-2653 sharyn.koenig@exim.gov