Export-Import Bank of the United States
The Export-Import Bank (Ex-Im Bank) of the United States is an independent U.S. Government agency that helps finance the overseas sales of U.S. goods and services. In the last 65 years, Ex-Im Bank has supported more than $300 billion in U.S. exports.
Ex-Im Bank's mission is to provide US exporters with “cutting–edge” financing solutions to increase sales and expand business. It extends working capital loans to U.S. exporters, provides loans and guarantees the repayment of loans to foreign purchasers of U.S. goods and services. Ex-Im Bank also provides credit insurance that protects U.S. exporters against the risks of non-payment by foreign buyers for political or commercial reasons.
Ex-Im bank focuses on: increasing the export of environmental goods and services, which are in strong demand among the developing nations; and extending the bank’s support programs to the maximum number of U.S. small businesses. It finances export of all types of goods or services, including commodities, as long as they are not military-related (certain exceptions exist).
The Ex-Im Bank does not compete with commercial lenders, but assumes the risks they cannot take exposure to. The Ex-Im bank also extends financial support to creditworthy private and sovereign foreign buyers when private financing is unavailable. To qualify for Ex-Im Bank support, the product or service must have at least 50 percent U.S. content and must not affect the U.S. economy adversely.
Export Financing Solutions
1. Working Capital Guarantees: Enable small and medium sized US companies to obtain loans to produce goods or provide a service for export.
3. Guarantee of Commercial Loans to Foreign Buyers: Covers the principal and interest against both political and commercial risks of buyer non-payment
Ex-Im Bank Support Programs
The Ex-Im bank has various programs listed below:
Ex-Im bank has created special programs for small business exporters that provide them critical financial support. The bank offers attractive financing and credit terms that in turn help the exporters expand their businesses. In 1999, the bank supported almost 2000 small businesses and nearly $17 billion in exports.
Ex-Im Bank extends an Insurance Program to its exporters. Under this program, the exporter can extend open account terms, the most attractive payment option, to its foreign customers.Using this, the exporter gets 95% of the credit in case of default due to commercial reasons and 100% credit in case of default due to political reasons. With the Ex-Im Bank insurance, the exporter may obtain financing from commercial banks. Commercial banks typically charge interest rates 1.5%-2.5% over the LIBOR, which is currently at levels of 5%. So the rate for the customer will be in the range of 6.5% to 7.5%, as compared to interest rates of 30%-40% in certain South American countries. The cost of the insurance depends primarily on the amount of credit required, term of the credit and the type of buyer. Without any minimum transaction size, Ex-Im Bank presently has about 1100 exporters taking advantage of their Insurance Program.
The Ex-Im bank also offers Medium-Term Export Credit Insurance for small business exporters. Here the bank covers 100% commercial and political risks for a period of 1-7 years. The medium term credit is to be backed by a promissory note that is valid and enforceable in the customer’s country and the customer must make a 15% cash payment to the exporter. The bank gives a sample format of the promissory note to ensure its validity.The bank also extends medium term loan guarantees to US banks to finance US exports.
Working Capital Guarantee Program encourages commercial lenders to make loans to U.S. export-related businesses.It helps small and medium-sized businesses that have exporting potential but require funds to buy or produce goods, and/or to provide services, for export.The loan can also be used to rotate an existing line of credit. Ex-Im Bank's working capital guarantee covers 90 percent of the loan's principal and accrued interest.
Trade Association Partners program (TAPP)
In an effort to reach many more exporters the Ex-Im Bank has partnered with city and state organizations, trade associations, lenders, and others that either have exporting customers or exporting members. The Trade Association Partners Program is an effort to reach small businesses exporters and provide them with financial support. TAPP is a network of associations that inform the member companies of the small business financial program offered by Ex-Im bank. The interested companies are forwarded to Ex-Im bank for a one-on-one consulting.The financial assistance is in the form of insurance and loan programs that offers protection to US exporter against foreign credit risk and an opportunity to expand their business. The member associations receive benefits such as free training; opportunity to host Ex-Im Bank training seminars; and discount admission to Ex-Im bank annual conference etc.