New & Existing Business

Import/Export Financing

Export financing represents a key factor in closing international sales and in the overall success of a company’s international trade efforts. Contract negotiation and closure are important, but at the end of the day, your company must get paid.
Exporters naturally want to get paid as quickly as possible, while importers usually prefer to delay payment until they have received or resold the goods. Because of the intense competition within export markets, being able to offer attractive payment terms customary in the trade remains crucial.
Several financing options exist and exporters need to be aware of them to ensure that they choose the most acceptable one to both the buyer and the seller. In many cases, government assistance in export financing for small- and medium-sized businesses can increase a firm’s options.

Overseas Private Investment Corporation (OPIC)

The Overseas Private Investment Corporation (OPIC) was established as a development agency of the U.S. government in 1971. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing the risks associated with foreign direct investment, and supports U.S. foreign policy. OPIC provides financing to ventures involving significant equity and/or management participation by U.S. businesses. Loans to qualifying businesses can be tailored to meet the specific needs of overseas operations.
OPIC can provide medium- and long-term financing in countries where conventional financial institutions often are reluctant or unable to lend on such a basis. Since OPIC’s programs support private sector investments in financially viable projects, OPIC does not offer concessionary terms usually associated with government-to-government lending; nor does it typically offer financing of export sales unrelated to long-term investments in overseas business. OPIC will not participate in projects that can secure adequate financing from commercial sources.

Financing Criteria

OPIC views each project as unique and assesses each transaction individually. Generally, OPIC tries to identify three sources of repayment and therefore may use a combination of available project cash flow, sponsor support and collateral to reach a sound financing structure with a prudent security package. The pricing of each loan for a project is dependent on the number of sources of repayment available to OPIC.

Corporate or Project Financing?

In corporate finance transactions, OPIC makes a loan to the U.S. sponsor of an overseas project. OPIC would look to the ability of the U.S. company; rather than to a project company, to repay the loan and to offer collateral. Project financing, on the other hand, looks to the cash flows generated by a specific project for repayment of the loan. There must be adequate cash flow to pay all operational costs and to service all debt. It is expected that collateral will be provided to secure the loan.

Corporate Finance Loans

Corporate finance-style loans are available to fund an overseas investment, including permanent working capital, fixed assets, and expansion of facilities. This is expressly intended to provide long-term support for creditworthy U.S. small businesses wishing to make investments overseas when the overseas project is not intended to be the sole source of repayment. The borrower generally should own at least 25 percent of the overseas investment. The minimum amount for a corporate finance-style loan is $100,000. Term of the loan is determined in relation to the attributes of the project, with a 3-7 year range being typical.

Project Finance Loans

Project finance-style loans are used to fund an overseas investment, including permanent working capital, fixed assets, and expansion of facilities. This product is expressly intended to provide support for creditworthy operations overseas that have the projected cash flow to repay the loan. The minimum amount for a project finance-style loan is $100,000. The term of the loan is also determined in relation to the attributes of the project being financed, with a 3-15 year range available.

Anticipated Costs of Financing

Pricing is commensurate with risk. Risk of a project can be mitigated by having multiple sources of repayment available to the lender. Each project will have different characteristics that will be considered
OPIC and the borrower need to work together to assemble an adequate collateral/security package for each transaction. The objective will be to structure an appropriate collateral/security package as expeditiously and inexpensively as possible. Certain types of collateral (e.g. U.S. based collateral) will decrease both the time and costs involved.

Eligibility

All projects seeking OPIC financing must be commercially and financially sound. They must be within the demonstrated competence of the proposed management, which must have a proven record of success in the same or a closely related business, as well as a significant financial risk in the enterprise. The borrower of a corporate finance-style loan must be an OPIC-eligible U.S. business or the overseas subsidiary of such a business. The borrower of a project finance-style loan is typically an overseas entity that is at least 25 percent owned by an OPIC-eligible U.S. business.

Application Process

OPIC encourages small business sponsors to call 202-336-8745 to discuss the parameters of a project with a finance officer prior to beginning to complete a financing application package.

Contact

Overseas Private Investment Corporation
1100 New York Avenue, NW
Washington, D.C. 20527
Attn: Small Business Center
800-225-5722
www.opic.gov

Overseas Private Investment Corporation (OPIC) Political Risk Insurance

Risk in today’s increasingly global marketplace can take many different forms. Managing that risk is paramount to the ultimate success or failure of any international activity. Whether it is the expropriation or nationalization of assets or losses that result from politically motivated violence such as civil or international wars, these risks affect businesses across the globe every day. OPIC Political Risk Insurance provides the peace of mind necessary to pursue opportunities in emerging markets.

Many of OPIC’s current insurance clients are small businesses, and more than half of all identified suppliers to OPIC-backed projects are also small businesses. Although all of OPIC’s insurance products are available to small businesses, OPIC has specifically tailored several products to meet small business needs. One of these products, the Small Business Contract, offers benefits such as streamlined coverage and discounted premium rates, and is available only to small business investors.

Small Business Center Finance Program

Loan amounts for overseas investments range from $100,000 to $10 million with terms from 3-15 years. Interest rates are capped at 7 percent above the Direct Loan Discount Rate set by the U.S. Treasury. There may be a one-time facility fee of up to 2 percent and an annual maintenance fee not to exceed 1 percent of the outstanding balance of the loan. While the eligible U.S. small business must own at least 25 percent of the overseas project, OPIC may be able to finance up to 65 percent of the total project costs.

OPIC also has introduced a streamlined process to provide political risk insurance protection to U.S. companies receiving loans through OPIC’s Small Business Center (SBC). In an effort to better meet the growing needs of U.S. small business as they expand into overseas markets, OPIC offers political risk insurance at a reduced rate as part of its small business loan program. OPIC offers “wrap” insurance on equity investments to eligible U.S. equity sponsors or U.S. corporate borrowers for up to $6 million of their equity investments. Pricing will be based on a one-time fee for the life of the OPIC loan up to 15 years.

Eligibility

Eligible small businesses are defined as all companies, both service and industrial, with annual sales of less than $250 million (taking into account the consolidated sales of the parent company); and entities with no revenues per se, such as individual private investors or newly formed companies with net worth or stockholders’ equity of less than $67 million.

Application Process

Interested small business owners and qualified private investors may contact OPIC to determine how to access these programs.

Contact

Overseas Private Investment Corporation
1100 New York Avenue, NW
Washington, D.C. 20527
Attn: Small Business Center
800-225-5722
www.opic.gov

Export-Import Bank of the United States Export Credit Insurance

This export credit insurance policy is a special product for small, financially viable businesses that are new to exporting, or have only occasionally exported. It can help increase an exporter’s international sales by extending competitive credit terms while minimizing risks.

It also is valuable as a risk mitigation tool to insure receivables against nonpayment by international buyers; as a marketing tool to extend competitive credit terms to international buyers, and as a financing aid to help arrange attractive financing with the exporter’s lender by using insured foreign receivables as additional collateral.

The insurance covers commercial losses due to insolvency, bankruptcy and default at 95%; and political losses due to war, revolution, cancellation of an import or export license, currency inconvertibility at 100%. There is no first-loss deductible.

Rates, Payments and Credit Limits

Premiums are paid according to a rate schedule and depend on the credit term extended and the buyer type. Shipments are reported, and premium is paid on a monthly basis. A one-time, refundable advance premium of $500 is required to issue this policy.

Credit limits in the policy allow the exporter to extend insured credit without prior approval from Ex-Im Bank. The exporter must obtain credit information on the buyer to show its creditworthiness. Limits are granted in accordance with the exporter’s experience. Ex-Im Bank must pre-approve amounts over the credits limit in the policy and in certain countries. Subject to approval, policy proceeds (claim payments) may be assigned to a financial institution to arrange receivables financing or add insured foreign accounts receivable to the borrowing base.

Eligibility

The program covers exports of U.S. goods and services with at least 51% U.S. content, including labor but excluding mark-up. All shipments must be on credit terms to all eligible countries during the policy period, generally one year. Repayment terms are 180 days — up to 360 days for qualifying transactions. A special program is in place for small business exporters of specified environmentally related products and services. Excluded from coverage are confirmed letters of credit, cash-in-advance sales, and certain military and defense-related items.

Application Process

Application may be made by any small business exporter as defined by the Small Business Administration, including any parent company, subsidiaries, or affiliates. The business must have at least one year operating history and a positive net worth and have export credit sales not exceeding $5 million (average from preceding two years).

Contact

Houston Regional Office
Export-Import Bank
1880 South Dairy Ashford II, Suite 585
Houston, TX 77077
281-721-0470
www.exim.gov

Export-Import Bank of the United States Fixed-Rate Term Financing for International Buyers

Ex-Im Bank assists exporters by guaranteeing term financing to creditworthy international buyers, both private and public sector, for purchases of U.S. goods and services. With Ex-Im Bank’s loan guarantee, international buyers are able to obtain competitive term financing from lenders when financing is otherwise not available or there are no economically viable interest rates on terms over one to two years.
Among the benefits of this program are its flexible financing options and repayment terms, available medium- and long-term financing, no limits on transaction size and coverage of all commercial and political risks for international buyers.
There is no minimum or maximum limit to the size of the export sale that may be financed with Ex-Im Bank’s loan. However, transactions normally involve amounts over $10 million.
The total level of Ex-Im Bank support will be the lesser of 85% of the value of all eligible goods and services in the U.S. supply contract or 100% of the U.S. content in all eligible goods and services in the U.S. supply contract. Ex-Im Bank requires the buyer to make a cash payment to the exporter equal to at least 15% of the U.S. supply contract. The 15% cash payment can either be borrowed from a lender or the exporter at market terms, or be from the buyer’s own funds.

Eligibility

Ex-Im Bank’s loan to an international buyer is generally used for financing purchases of U.S. capital equipment and services, and exports to large-scale projects. Financing may also be available for refurbished equipment, software, certain banking and legal fees and certain local costs and expenses.
Military or defense items are generally not eligible nor are sales to military buyers (with certain exceptions). Goods eligible for Ex-Im Bank financing must meet Ex-Im Bank’s foreign content requirements and must be shipped from the United States to an international buyer. Exports financed by direct loans are normally subject to U.S. flag vessel requirements.
Ex-Im Bank can do business in most markets. However, it may be limited or unable to offer financing in certain countries and under certain terms. Prior to approving certain transactions, Ex-Im Bank will take into account the economic impact of a particular transaction and the environmental effects.

Application Process

Generally, the repayment term of a transaction is determined by numerous variables including but not limited to the borrower’s financial condition, the common repayment terms the market gives such products, specific industry practices, industry and country conditions, useful life, OECD and Berne Union agreements, and the matching of terms offered by other foreign government-sponsored financing. Repayment terms are generally in excess of seven years.

Contact

Export-Import Bank of the United States – Houston Regional Office
1880 South Dairy Ashford II, Suite 585
Houston, TX 77077
281-721-0470
www.exim.gov

Export-Import Bank of the United States Working Capital Guarantees

Ex-Im Bank’s working capital financing enables U.S. exporters to obtain loans to produce or buy goods or services for export. These working capital loans, made by commercial lenders and backed by the Ex-Im guarantee, provide exporters with the liquidity to accept new business, grow international sales and compete more effectively in the international marketplace. The program helps fulfill export sales orders, turn export-related inventory and accounts receivable into cash and expand access to financing

Product Description

Exporters may use the guaranteed financing to purchase finished products for export; pay for raw materials, equipment, supplies, labor and overhead to produce goods and/or provide services for export; cover standby letters of credit serving as bid bonds, performance bonds, or payment guarantees and finance foreign receivables.

Ex-Im Bank assumes 90% of the bank loan, including principal and interest. For qualified loans to minority-, woman-owned or rural businesses, Ex-Im Bank can increase its guarantee coverage to 100%.
Pre-qualified commercial lender partners can expedite the loan process without prior Ex-Im Bank approval. Most of Ex-Im Bank’s working capital guarantees are provided through these lenders. Typically, loan terms are for one year but can be up to three years. The loan can be either transaction-specific or revolving.
These guaranteed working capital loans are secured by export-related accounts receivable and inventory (including work-on-process) tied to an export order. For letters of credit issued under the guaranteed loan, Ex-Im Bank only requires collateral for 25% of the value of the letter of credit.
Exporters can borrow up to 75% advance rate (including work-in-process) on inventory and up to 90 percent advance rate on foreign accounts receivable. For loans not meeting these criteria and for smaller financing needs, the Small Business Administration (SBA) may be consulted.

Eligibility

Eligible exporters must be located in the U.S., have at least a one-year operating history and a positive net worth. Eligible exports must be shipped from the U.S. Products must have at least 50% U.S. content. (If less than 50%, then Ex-Im Bank can only support the export up to the percent of the U.S. content.). Services must be performed by U.S.-based personnel. Military or defense items are generally not eligible, nor are sales to military buyers (with certain exceptions).

Application Process

An exporter may apply to Ex-Im Bank for working capital financing in two ways: An exporter may apply through a lender that has been granted a guarantee from Ex-Im Bank. Most lenders that have established a working relationship with Ex-Im Bank have been granted discretionary pre-approved credit authority known as delegated authority.
An exporter may apply directly to Ex-Im Bank for a preliminary commitment to a guarantee. A preliminary commitment is a nonbinding expression of interest from Ex-Im Bank that the borrower’s needs, as outlined in the application, generally meet Ex-Im Bank’s requirements.
Fees include $100 for a final commitment; an up-front facility fee of 1.5% of the total loan amount, based on a one-year loan. (For loans of up to six months, the facility fee is 0.75% of the total loan amount); and interest rate and application fees as charged by the commercial lender.

Contact

Houston Regional Office
1880 South Dairy Ashford II, Suite 585
Houston, TX 77077
281-721-0470
www.exim.gov

SBA Export Working Capital Loan Program (EWCP)

Many small businesses invest the time and resources to develop export leads, only to find that they can’t secure the credit to close the sales. The SBA offers a program to address that problem. The Export Working Capital Loan (EWCP) program can be used for pre-export financing of labor and materials, financing the receivables generated from these sales and standby letters of credit used as performance bonds or payment guarantees.
Under the program, the SBA backs up a business loan request with its repayment guaranty. The SBA guarantees up to $1.5 million or 90 percent of the loan amount, whichever is less; offers exporters preliminary commitments that encourage lenders to provide credit; and offers a simplified application.
SBA offers the competitive rates and terms small businesses need to compete globally. Applicants negotiate terms with the lender. Rates may be fixed or variable. Loan maturities are generally for 12 months, but can be up to 36 months. A borrower may reapply for a new guarantee.
Collateral may include export inventory, foreign receivables and assignment of contract and letter-of-credit proceeds. Personal guarantees are required of anyone that owns 20% or more of the applicant business.

Eligibility

The program is aimed at serving small businesses that need transaction-specific financing and have been in business operation, though not necessarily in exporting, for at least 12 months at the time of application.

Application Process

The first stop should be the nearest U.S. Export Assistance Center or SBA District Office. Each center offers a full range of export programs and services under one roof. Experts from the SBA, the U.S. Department of Commerce, the Export-Import Bank of the United States, and other public and private partners are available to answer questions.
Complete Details & EWCP Loan Application

Contact

U.S. Small Business Administration
Oklahoma City District Office
Federal Building
301 NW 6th St, Ste. 116
Oklahoma City, OK 73102
405-609-8000
www.sba.gov/ok

SBA Export Express Loan Program

Established in 1998, the “Export Express Loan Program”: http://www.sba.gov/services/financialassistance/SpecialPurposeLoans/exportexpress/index.html assists small exporters with their financial needs, providing them with loans for revolving credit lines and other export-related expenses not funded under SBA’s EWCP. These expenses include professional export marketing advice or services, foreign business travel, and participation in foreign trade shows.
The SBA guaranty encourages lenders to make loans to small business exporters that they might not make on their own. The SBA’s Export Express guaranty is 85 percent for loans up to $150,000 and 75 percent for loans more than $150,000 up to a maximum loan amount of $250,000. The maximum loan amount under Export Express is $250,000.

The SBA Export Express Program also includes technical assistance in the form of marketing, management and planning assistance. Technical assistance is provided by SBA’s U.S. Export Assistance Centers, in cooperation with SBA’s network of resource partners, including the Small Business Development Centers (SBDCs) and Service Corps of Retired Executives (SCORE).
On approval of an SBA Export Express loan, a U.S. Export Assistance Center representative will contact the borrower to offer appropriate assistance. This assistance may include training offered through the SBA’s Export Trade Assistance Partnership, SBDC International Trade Center, SCORE, District Export Council, or Export Legal Assistance Network.

Eligibility

SBA Export Express loans are available to persons who meet the normal requirements for an SBA business loan guaranty. Loan applicants must also demonstrate that the loan proceeds will enable them to enter a new export market or expand an existing export market, and- have been in business operation, though not necessarily in exporting, for at least 12 months.

Application Process

SBA Export Express lenders use streamlined and expedited loan review and approval procedures to process SBA guaranteed loans. The lender uses its own loan analyses, loan procedures and loan documentation. Completed loan applications are submitted for approval to the SBA’s processing center in Sacramento, California. The SBA provides the lender with a response, typically within 36 hours.
Complete Program Details

Contact

U.S. Small Business Administration
Oklahoma City District Office
Federal Building
301 NW 6th St, Ste. 116
Oklahoma City, OK 73102
405-609-8000
www.sba.gov/ok