By James Burrows
Senior Vice President, Office of Small Business, EXIM
Boosting sales. Increasing revenue. Supporting jobs. These are all challenges that U.S. companies face, especially those who sell their goods and services around the world. The Export-Import Bank of the United States (EXIM), with a mission of supporting U.S. jobs by facilitating exports, can assist U.S. manufacturers in overcoming these obstacles and growing their businesses with competitive financing solutions on both ends of the transaction that support the exporter and the buyer.
EXIM is an independent federal agency that enables U.S. businesses of all sizes to compete successfully and win sales in more than 180 countries. When private-sector financing is unavailable, EXIM can fill the gap, helping level the playing field to enable U.S. businesses and workers to compete effectively in the fierce global marketplace. In doing so, EXIM partners with, but does not compete with, banks, credit unions, and other lenders to empower U.S. businesses to increase their exports.
For American manufacturers, this support can be critical. EXIM assists by allowing companies of all sizes to extend credit to buyers and access vital working capital, which are major barriers to global growth for many companies. Manufacturing is essential to the nation — and to EXIM, comprising half of the agency’s customer base in terms of total support. In addition, more than 90 percent of EXIM’s transactions directly support small businesses, which means no deal is too small.
EXIM’s Extensive Support for Manufacturers
EXIM is a long-standing global leader and innovator in the development of competitive export credit financing solutions. The agency provides these key tools for U.S. manufacturers:
• Export credit insurance, an insurance policy that covers a business’ foreign accounts receivable against commercial and political risks. It assures U.S. companies that their bottom line will be protected should a foreign customer fail to pay. If a foreign buyer defaults due to an unforeseen bankruptcy or foreign political issue, EXIM will reimburse the business for up to 95 percent of its sales invoice.
• Working capital loan guarantees, which provides a line of essential credit from lenders to fulfill sales orders and take on new international business. With EXIM’s guarantee, U.S. companies can borrow more with the same collateral as well as secure performance and bid bonds without tying up significant funds. Essentially, EXIM works with lenders to provide a loan guarantee that backs the borrower’s debt in the event something goes awry. Further, under the agency’s COVID-19 relief measures, EXIM can provide for an increased guarantee coverage option to 95 percent under the Working Capital Guarantee Program for a limited time.
• COVID-19 relief measures, which have been implemented since the onset of the COVID-19 (coronavirus) pandemic to assist U.S. exporters and financial institutions, including U.S. small businesses. These measures, with provisions for both export credit insurance and working capital facilities, include waivers, deadline extensions, streamlined processing, and enhanced flexibility.
Benefits of EXIM’s Financing Solutions
EXIM’s financing facilities enable buyers of U.S. goods and services to make selections based on the quality of the offerings, rather than on financing terms. Working with EXIM, U.S. companies can further grow their international customer base, showcase the quality of “Made in the USA” goods and services, monetize their valuable intellectual properties, and support U.S. jobs while significantly reducing the risk of nonpayment on international sales.
The benefits of EXIM’s export financing and risk mitigation solutions through include:
• Open account credit terms: Export credit insurance allows businesses to extend open account credit terms to foreign buyers. Requiring payment in advance can deter sales, but with EXIM support, U.S. manufacturers can confidently provide payment terms of up to 180 days. Buyers tend to buy more when offered terms since cash-in-advance can adversely affect their cash flow.
• Protection against buyer nonpayment: Export credit insurance reduces the risk of U.S. companies not getting paid due to commercial and political risks. Getting paid is often cited as the primary reason why companies are wary of exporting. Policies can cover a single buyer, select buyers, or an entire portfolio.
• Expanded borrowing capacity: EXIM-insured foreign accounts receivable can be assigned to a lender, improving a company’s liquidity and easing cash flow constraints.
• Access to vital export funding: EXIM provides a 90 percent loan guarantee that encourages lenders to provide credit to manufacturers. The funds can be used to fulfill sales orders as well as cover labor and overhead costs. EXIM also can help obtain standby letters of credit to be used as performance or bid bonds.
• Term financing: EXIM guarantees financing to creditworthy foreign buyers for purchases of U.S. capital goods and services. With this support, the U.S. companies get paid in full upon shipment. Meanwhile, foreign buyers have better access to lender loans, typically with lower interest rates and longer repayment terms.
EXIM Success Story
Competitive Engineering Inc. (CEI) of Tucson, Arizona, has leveraged EXIM’s working capital loan guarantee to expand its international sales while sustaining local jobs and creating additional ones.
A small business of 73 employees, CEI manufactures precision components for a variety of customers, particularly in the aerospace and data-storage industries. When the company needed to improve cash flow to support its growing export business in 2005, CEI turned to EXIM’s working capital loan guarantee to find a lender that would include foreign accounts receivable as collateral in its borrowing base.
CEI uses the EXIM-guaranteed working capital to cover inventory and purchase of materials while maintaining its cash flow while awaiting payment of foreign accounts receivable. This capacity has enabled the company to remain competitive and sustain exports to major buyers in Mexico and the Philippines.
Over the past five years, EXIM has assisted nearly $55 million of CEI’s exports, which account for approximately 40 percent of the company’s revenues. As a result, CEI has been able to remain competitive and increase revenue — leading to the creation of an additional 10 jobs in the past two years.
“EXIM’s support has been critical to CEI’s continued success,” said CEI President Don Martin, who founded the company with his wife, Charlotte, in 1987. “Exports constitute a significant portion of our business, and we need our foreign accounts receivable to be included as collateral. EXIM’s program has given us access to the working capital we need to sustain our exports and the jobs of our hard-working employees.”
To learn more about what EXIM can do for you, set up a free consultation at grow.exim.gov/if_sept_2020.
James Burrows, Senior Vice President, EXIM Office of Small Business
Mr. Burrows has more than 30 years of professional experience in both the public and private sectors of the U.S. financial services industry, including commercial banking, retail banking, and investment banking. Burrows joined EXIM as the Vice President of Small Business in October 2012 and was promoted to the Senior Vice President in 2013. Burrows has also held management positions at both large and regional commercial banks.