Forms of Short-term Financing/Ex-Im Bank Financing (Export-Import Bank of the US)
|Unit 7.1-Forms of Short-term Financing||
Introduction | Preparing to Borrow | Vendor Financing | Documentary Collections | Bank Check | Personal Resources | Bank Financing | Export Credit Insurance | Guarantees | Ex-Im Bank Financing | SBA | Equity Investment | Earnings Requirments | Working Capital | Collateral | Resource Management | Primary Differences | Factoring | Forfaiting | Summary | Resources | Activities | Assessment
Ex-Im Bank Financing (Export-Import Bank of the US)
Ex-Im Bank programs follow certain policies designed to create US jobs and adhere to US trade policies and regulations. In addition, Ex-Im Bank programs cover a variety of needs, including pre-export and post-export assistance. They also offer short, medium and long-term guarantee insurance and direct loan programs.
Because of its policy constraints, Ex-Im Bank has certain restrictions on utilizing its programs that may prevent some companies from getting support. To insure the creation of jobs in the US, all products must be shipped overseas from the US and support may be limited by the US content of the products. The final manufacturing stage must be in the US and some programs require shipment on US vessels, with few exceptions. No product can be shipped to a military buyer. Aside from these restrictions, however, support is still available for a variety of trade transactions under numerous programs within Ex-Im Bank.
Ex-Im Bank's programs cover a variety of needs, including pre-export assistance, which is offered through pre-shipment insurance and a working capital loan guarantee program. Post-shipment assistance is provided through short, medium, and long-term programs. All Ex-Im Bank's short-term export programs are insurance programs. These include programs to protect sales to an individual buyer (single-buyer insurance) or many buyers at the same time (multi-buyer insurance), including programs designed specifically for small businesses (the small business program and the environmental program). All goods covered under these programs must have at least 50% US content.
Working Capital Guarantee Program (WCGP)
This program gives US exporters access to working capital loans from commercial financial institutions by providing 90 percent repayment guarantees to lenders on short-term loans secured by inventory and foreign receivables. Ex-Im Bank allows exporters to obtain the necessary working capital to purchase inventory, build products, arrange bid and performance bonds, and extend terms to overseas buyers. This program provides the means for small and medium-sized companies to pursue exports more aggressively. A working capital guarantee can be issued for a specific transaction or a series of transactions in the form of a line of credit.
Delegated Authority Program
This program was created to accelerate the process of obtaining a working capital guarantee. Applicants can directly interact with commercial lenders who are extended this privilege without having to approach Ex-Im Bank. There are five levels of Delegated Authority Lenders, each with specific loan limits per exporter. The lowest lender level is limited to making loans of $1 million per exporter, while the highest is able to make loans of up to $10 million per exporter and an aggregate of $150 million. The program permits the lenders to commit Ex-Im Bank to a loan with minimal documentation and provides for the lender to split the guarantee fees with Ex-Im Bank.
Priority Lender Program
Under the Priority Lender Program, a qualified bank is assured faster turnaround for loans of up to $5 million. Qualification for this status requires completion of Ex-Im Bank training programs, completion of at least two working capital loans, and submission of a report every year. This Ex-Im Bank program guarantees its priority lenders that it will make a decision on a pending loan within 10 business days for standard transactions.
Ex-Im Bank offers short-term insurance to cover risks incurred during the pre-shipment (during the assembly or manufacturing) period for export transactions. This period is normally limited to 180 days but can be extended depending on certain factors. This type of insurance covers the exporter against the possibility of a buyer canceling his/her purchase agreement or a foreign government canceling the buyer's import license.