Export Finance

Many Ways to Finance Exports

The Export-Import Bank Offers Invaluable Programs

By Lisa Sasaki

If you are a small to mid-size company fresh into exporting, you will find new challenges. Different laws may change the rights or obligations of parties involved, how to underwrite buyer credit, and political and currency risks.  But perhaps the most important new challenge for your company is how to finance your export sales.  Well, the good news is, a range of export finance solutions is available.

In a typical bank line of credit, you might expect to see advance rates of 40-50 percent  on raw material/finished goods inventory and 75-85 percent advance rates on domestic accounts receivable less than 90 days.  Also, banks will generally exclude work in process (WIP) inventory and  foreign accounts receivable.  So, how is a company supposed to finance its export sales and grow its business? 

The Export-Import Bank plays a key role.  Among the many different types of programs it offers to support U.S. exporters, are the Working Capital Guarantee Program (WCGP) and Export Credit Insurance.

The WCGP helps U.S. exporters obtain loans to produce and acquire goods or services for export.  Ex-Im Bank provides pre-qualified lenders (delegated authority lenders) with a 90 percent guarantee to support lenders in making these loans.  To qualify, exporters should be domiciled in the U.S. and have a one-year operating history with a tangible positive net worth.   Products must have at least 50 percent U.S. content (and be shipped from the U.S.), and there can be no sales of military, defense or nuclear-related products and services or sales to military buyers.

Some of the benefits include:

• Increased sales and profits through exporting.
• Higher advance rates may be available, up to 75 percent against export-related inventory (including WIP), and up to 90 percent advance rates against export-related Accounts Receivable.
• Favorable collateral requirements supporting commercial and standby letters of credit, at least 25 percent non-cash export-related collateral.
• A help to companies that can perform but don't meet credit criteria by providing the delegated lender with additional support.

A second program to consider is Ex-Im Bank's short-term Export Credit Insurance.   Using credit insurance will allow your company to increase export sales by limiting your international risk, offering credit to your international buyers, and providing additional working capital funds.  Qualification requirements are similar to those for the WCGP.

Benefits to using short term Export Credit Insurance include:

• A reduction in the risk of buyer non-payment
• More competitive credit terms
• May allow your company to include foreign receivables in the borrowing base, thus increasing cash flow.

There are many opportunities for U.S. companies to expand sales abroad.  One of the major perceived roadblocks is obtaining financing for these sales. By doing a little homework and reviewing the programs like the two discussed here, you will probably find a way to secure financing so that your company can increase its export sales and grow its business. 

 Contact Ex-Im Bank or your Trade Finance Banker for more detailed information on these programs.

Lisa Sasaki, CTP  is a vice president in the International Trade Finance Department at Comerica Bank.  She is responsible for marketing International Trade Products/Services to U.S.-based companies that import, export or have foreign operations. Her marketing territory includes Southeast Michigan, the New England States, and New York.  She has expertise in assisting automotive related manufacturers including the Big 3 auto companies and many Tier 1/Tier 2  automotive suppliers.