ExportImportBankFinancingPrograms

TheExportImportBankoftheUnitedStates(ExImBank)istheofficialexportcreditagencyofthe UnitedStates.ExImBankassistsinfinancingtheexportofU.S.goodsandservicestointernational marketsthroughavarietyofmethods,includingdirectloans,loanguarantees,andothercredit enhancements.ExImBankdoesnotcompetewithprivatesectorlendersbutprovidesexportfinancing tofillgapsintradefinancing. TheEnvironmentalExportsprogramwasestablishedin1994toincreasesupportforexportsof environmentallybeneficialgoodsandservices.Today,itisahighlyactiveportfolioexceeding$3billion thatincludesfinancingforexportsofrenewableenergyequipment,energyefficiencytechnologies, wastewatertreatmentprojects,airpollutiontechnologies,wastemanagementservices,andother goodsandservices.Throughavarietyoffinancingprograms,ExImBankservesasanintermediary betweenU.S.exporters,lenders,andinternationalbuyers,helpingtomitigatetherisksofexportingto certainmarkets. DirectLoansandLoanGuaranteestoInternationalBuyers.ExImBankcanprovidedirectloansand loanguaranteestointernationalbuyers,enablingthemtopurchaseU.S.goodsandservicestheymay nototherwisebeabletofinance.BecausemanyU.S.bankshavebeenhesitanttolend,ExImBanks transactionsrecentlyhaveinvolvedmoredirectloansthanloanguarantees.Goingforward,itislikely thatExImBankwillhaveapreferenceforstructuringtransactionswithloanguarantees,giventhe addedadministrativeandprocessingburdensthatdirectloansimposeontheagency. Eligibility.ExImBankwillguaranteemediumandlongtermloanstointernationalcreditworthybuyers. Thisfinancingisavailabletosupportinternationalbuyersforthefollowing: PurchasesofU.S.capitalequipmentandservices Purchasesofrefurbishedequipment Software Certainbankingandlegalfees Certainlocalcostsandexpenses Militaryordefenseitemsgenerallyarenoteligible,noraresalestomilitarybuyers(withcertain exceptions).GoodseligibleforExImBankfinancingmustbeshippedfromtheUnitedStatestoan internationalbuyer. LoanSizeandTerms.Therearenosizerequirementsfordirectloansorloanguaranteesto internationalbuyers.ExImBanksloanguaranteewilltypicallycover85percentoftheU.S.contentof
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thetransaction.Theinternationalbuyerisrequiredtomakeapaymentofatleast15percentofthe supplycontract,forwhichpaymentcanbeborrowedfromalenderorfromtheexporter,orpaidwith cash. Repaymenttermsaredeterminedbyseveralvariables,includingtheborrowersfinancialcondition, commonrepaymenttermsforsuchproductsinthemarket,specificindustrypractices,industryand countryconditions,andusefullifeoftheproducts,amongotherthings.Repaymenttermsuptofive yearsaregenerallyavailableforexportsofcapitalequipmentandservices.Termsofupto10yearsmay beavailableforexportstolargescaleprojects. AspartofExImBanksgoaltocreatejobsthroughtheincreaseofrenewableenergyandenergy efficiencyexports,certainrenewableenergytransactionsareeligibleforenhancedterms.Forexample, certainrenewableenergyprojectsareeligibleforupto18yearrepaymentterms.Cleanenergyprojects alsoareeligibleforcapitalizedinterestduringconstructionandupto30percentlocalcostsupport. Forexample,in2009ExImBankmadea$102milliondirectloantoaU.S.windturbinemanufacturerto financetheexportof27windturbinesforawindfarminMexico.Thebankalsoapproveda$4.86 million,15yearloanguaranteetofinancetheexportofU.S.basedenvironmentalengineeringservices toageothermalpowerplantinTurkey. HowtoApply.Ifdiscussionsregardinganinternationalsalesorderareunderwayorthecontractorder hasbeenawarded,theinternationalborrowerorlendermaysubmitanapplicationtoExImBank.Pre qualifiedcommerciallendersmaintaindelegatedauthorityfromExIm,andthereforeoftencanexpedite transactions. Ifthecontracthasnotbeenawarded,thenalender,anexporter,oraninternationalborrowermay requestanonbindingletterofinterest(LOI)containingExImBanktermsforthespecifictransaction. TheLOIisprocessedwithinsevenworkingdays,isvalidforsixmonths,andcanberenewed.In exceptionalcases,ExImBankwillacceptanapplicationforapreliminarycommitment(PC).APCisa nonbindingexpressionofinterestfromExImBankthattheborrower'sneeds,asoutlinedinthe application,generallymeetExImBanksfinancingrequirements. ThefeesassociatedwithapplyingforanExImloanorloanguaranteearethesame.ExImchargesa nominalapplicationprocessingfeeforlettersofinterest($100)andforpreliminarycommitments(.001 percentofthefinancedamount).ExImBankalsorequirestheapplicanttopayanexposurefee,which isidenticaltotheCreditSubsidyCostreferenceintheDOELoanGuaranteePrograms.However,thisfee isnotasproblematicforborrowersbecauseExImBankdoesallowtheborrowertofinancethe exposurefee,payableoverthelifeoftheloan(notupfrontatclosing,asrequiredatDOE). WorkingCapitalFinancingSupporttoU.S.Exporters.Domesticmanufacturersoftenneedworking capitalfinancingtosupporttheexpansionorestablishmentoftheirbusinesses.IncaseswhereaU.S. companywillbeexportinggoods,ExImBankwillguaranteealoanissuedbyaprequalifiedcommercial lenderforworkingcapitalfinancing.Thisfinancingmaybeusedto:
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purchasefinishedproductsforexport; payforrawmaterials,equipment,supplies,labor,andoverheadneedtoproducegoodsfor export; financeforeignreceivables;and coverstandbylettersofcreditservingasbidbonds,performancebonds,orpayment guarantees. Eligibility.Exportersmust(i)belocatedintheUnitedStates;(ii)haveatleastaoneyearoperating history;and(iii)haveapositivenetworth.Forapplicantswhomeetthesecriteria,ExImBankwill typicallyguarantee90to95percentofabankloan(includingprincipalandinterest)usedforworking capital.Theguaranteedamount,however,dependsonwhethertheexportedgoodmeetsthethreshold U.S.contentrequirements. Eligibleexportsmust(i)beshippedfromtheU.S.toaforeignbuyer;(ii)containatleast50percentU.S. content;and(iii)anyservicebasedexportsmustbeperformedbyU.S.basedpersonnel.Thecriteriafor determiningeligibleU.S.contentaredifferentdependingonwhetheranapplicant/exporterisasmall businessoranonsmallbusiness. Forsmallbusinesses,applicableU.S.contentincludesdirectcosts(e.g.,labor,materials,and directoverhead)aswellasindirectcosts(e.g.,domesticmarketing,research,anddevelopment) associatedwiththeproductionoftheexportedgood. Fornonsmallbusinesses,onlydirectcostsassociatedwiththeexportedgoodareeligible. ExImBankalsorelaxessomerequirementsforsmallbusinessesrelativetowhereexportedgoodsare originallymanufactured. Forsmallbusinesses,iftheproductortheaggregateofexportedproductsinasingleinvoice meetsthe50percentU.Scontenteligibilitythreshold,theentiregrossinvoicevalue(salesprice) istypicallyeligibleforcoverage.Thismeansthatdomesticprocessingofaforeignmanufactured goodiseligibleforExImBanksupport,aslongastheU.S.addedcontentexceedsthe50 percentthreshold. Fornonsmallbusinesses,allproductsitemizedontheinvoicemustbeproducedor manufacturedintheU.S.Therefore,evenifthenonsmallbusinessaddsvaluetothegoodthat exceedsthe50percentU.S.contentthreshold,thevalueofthoseexportedgoodsisnoteligible forExImsupport. Regardlessofanapplicantssize,anyvalueaddedtothegoodafterexportfromtheU.S.,including foreignimportduties,taxes,orfreight,isexcluded. LoanSizesandTerms.ExImBankdoesnotimposeanyminimumormaximumfinancingamount requirements.Asashorttermfinancingmechanism,guaranteedworkingcapitalloantermstypically
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lastforoneyearbutcancoveruptothreeyears.Theloanscanbeeithertransactionspecificor revolving. ExImBankalsooffershigheradvanceratessothatexporterscanincreasetheirborrowingcapacity.For example,exporterscanborrowbasedona75percentadvancerateontheirinventory(includingwork inprocess),anduptoa90percentadvancerateforforeignaccountsreceivables. Guaranteedworkingcapitalloansaresecuredbyexportrelatedaccountsreceivablesandinventory (includingworkinprocess)tiedtoanexportorder.Forlettersofcreditissuedundertheguaranteed loan,ExImBankonlyrequirescollateralfor25percentofthefacevalueoftheletterofcredit.Ona casebycasebasis,thecollateralrequirementmaybereducedto10percentofthefacevalueofthe letterofcredit. HowtoApply.Exportersmayapplyforaworkingcapitalguaranteeeitherthroughaprequalified commerciallenderordirectlytoExImBankforapreliminarycommitment.Prequalifiedcommercial lenderpartnershavealreadyobtainedExImBanksdelegatedauthority,whichexpeditestheloan processbecausethelendercancommitExImBanksguaranteebyusingsuchdelegatedauthority. MostofExImBanksworkingcapitalguaranteesareprovidedthroughtheseprequalifiedlenders. ExportCreditInsurance.ExImBanksexportcreditinsuranceenablesexporterstolimitrisksassociated withnonpaymentfrominternationalbuyers,extendcompetitivecredittermstointernationalbuyers, andimprovecashflows. Fortheriskofbuyernonpayment,itprovidescoverageforexportersforavarietyofcommercialrisks (e.g.,bankruptcy)andcertainpoliticalrisks(e.g.,warortheinconvertibilityofcurrency).ExImBanks creditinsurancecanreplacetheneedforcashinadvancetermsandlettersofcredit,andguarantees accountsreceivablessothatlenderswillbemorelikelytoprovideadvancesagainstthesereceivables, andtherebyincreaseworkingcapitalcashflows. Eligibility.ExImBankcaninsureexportstomarkets,butmaybelimitedorunabletoofferfinancingin certaincountries.Theeligibilityrequirementsforshorttermandmediumterminsuranceproductsare asfollows: ShortTermInsuranceProductsmustbeshippedfromtheUnitedStatesandhaveatleast50 percentU.S.content(excludingmarkup).ThesameU.S.contentrulesasdiscussedpreviously fortheworkingcapitalguaranteeapplyforshortterminsurance. MediumTermInsuranceExImBankwillinsureupto85percentofthenetU.S.contract value.Ifthereislessthan85percentU.S.contentinthecontractvalue(i.e.,foreigncontentis morethan15percent),ExImBankwillsupportonlytheamountoftheU.S.portion. AvailablePoliciesandBenefits.ExImBankoffersavarietyofinsurancepoliciestoenhanceU.S. exportersaccesstointernationalmarkets,andtoprotectbothexportersandlendersfromthevarious
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risksassociatedwithexporting.Shortterminsurancepoliciescoverawiderangeofgoods,raw materials,spareparts,components,capitalgoods,andbulkagriculturalcommodities.Shorttermcredit insurancepoliciesoftencanreplacebankfinancingandpaymentwithlettersofcredit,enabling exporterstoofferExImBankguaranteedcredittotheircustomers.Insomecases,thisoffersthe exporteracompetitiveadvantageoverotherswhomaybecompetingforthosesales. Mediumterminsurancealsoisavailableforexportersandlenderswhowanttoprotectlongerterm financingtointernationalbuyers.Mediumtermpoliciescancovercapitalequipmentorservices,inone orevenaseriesofshipments.Belowareseveralexamplesofavailablepolicies. MultiBuyerPolicy:Thispolicyallowsexporterstoinsureallsalestoeligibleinternationalbuyers onopenaccountcreditterms.Thissimplifiesandstreamlinessalesforexportersinthatina singlepolicytheyreceive9095percentcommercialand95100percentpoliticalcoverage againstbuyerpaymentdefaults.Forqualifyingsmallbusinessesthathaveexportcreditsalesof lessthan$5million,enhancedtermsareavailable. SingleBuyerPolicy:Thispolicyprovidescreditprotectionforshorttermcreditsalesmadebyan exportertoasingleinternationalbuyerduringa12monthperiod.Itprovides90percent coverageagainstbuyerpaymentdefaultswithnofirstlossdeductible,andincreasesan exportersborrowingbasebyallowingfortheassignmentofanexportersreceivablestoa lender. BankLetterofCreditPolicy:ThispolicyprotectsU.S.basedbanksagainstlosses(i.e.,thefailure ofaforeignissuingbanktomakepaymentsorreimbursements)onirrevocablelettersofcredit openedtofinanceU.S.exports. Formoreinformation,pleasecontactaWSGRSeniorAdvisor: TaiteMcDonald(202.973.8937) tmcdonald@wsgr.com SaraHochman(202.973.8882) shochman@wsgr.com

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