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Transcript of Government Export Financing Programs. Ex-Im Bank is an independent agency of the U.S. government. ...
Government Export Financing Programs
Ex-Im Bank is an independent agency of the U.S. government.
The overall purpose of which is to:- Aid in financing - Facilitate trade between the United States
and other countries
Export-Import Bank Export-Import Bank of the United Statesof the United States
Ex-Im Bank has three main functions:1. Provide guarantees and export credit
insurance so that exporters and their bankers give credit to foreign buyers
2. Provide competitive financing to foreign buyers
3. Negotiate with other countries to reduce the level of subsidy in export credits
Export-Import Bank Export-Import Bank of the United States (cont.)of the United States (cont.)
OECD guidelines on export credits: A minimum of 15 percent of the contract price to be paid in
cash Maximum repayment term of eight and a half years, with
exceptions for poor countries Minimum interest rates for set periods of up to five, eight and
a half, and ten years Gradual abolition of subsidized interest rates and adjustment
of discount rates for aid loans to better reflect market realities The establishment of related conditions for certain sectors,
including agriculture, that are not covered by the guidelines
Export-Import Bank Export-Import Bank of the United States (cont.)of the United States (cont.)
Ex-Im Bank’s financing programs: Working capital loan guarantees for U.S. exporters Credit insurance Guarantees of commercial loans to foreign buyers Direct loans to foreign purchasers
Ex-Im Bank Ex-Im Bank
Criticism of Ex-Im Bank: Loans/loan guarantees for projects that harm the
environment The bank’s assistance is largely provided to a small
number of large U.S. firms such as Boeing, Bechtel. Loans to foreign companies have contributed to harm
domestic industries.
Ex-Im Bank (cont.) Ex-Im Bank (cont.)
Foreign content policy: Items must be shipped from the United States and the foreign content (cost of foreign components incorporated in the item in the United States) must be less than 50 percent of the total cost to produce the item.
Repayment terms: Repayment usually begins about six months after shipment or project completion, and payments of principal and interest must be made semiannually.
Ex-Im Bank Criteria for Loans Ex-Im Bank Criteria for Loans and Loan Guaranteesand Loan Guarantees
Scope of coverage: Ex-Im Bank’s loans, guarantees, and intermediate-term insurance cover 85 percent contract price. The foreign buyer is required to make a 15 percent cash payment.
Interest rates and shipping: Interest rates and maximum maturity terms are subject to OECD guidelines.
Ex-Im Bank Criteria for Loans Ex-Im Bank Criteria for Loans and Loan Guarantees (cont.)and Loan Guarantees (cont.)
This enables exporters to meet critical pre-export financing needs, such as inventory build up or marketing.
Ex-Im Bank will guarantee 90 percent of the loan provided by a qualified lender. The guarantee has a maturity of twelve months and is renewable.
Working Capital Working Capital Guarantee ProgramGuarantee Program
Working Capital Without Ex-Im Bank
Collateral Amount Advance Rate Borrowing Base Advance Rate Borrowing Base
Export inventory supported
by an export order
Raw materials 300,000 20% 60,000 75% 225,000
Work
in process 300,000 0% 0 75% 225,000
Finished
goods 600,000 50% 300,000 75% 450,000
Foreign account
receivable (FAC)
FAC 500,000 0% 0 90% 450,000
L/C backed
account
receivable 600,000 70% 420,000 90% 540,000
Table 14.3 Increased Borrowing Capacity under the Ex-Im Bank Working Capital Guarantee Program
Working Capital With Ex-Im Bank Guarantee
Total Borrowing Base 780,000 1,890,000
Increase Borrowing Capacity Under the Ex-Im Bank Increase Borrowing Capacity Under the Ex-Im Bank Working Capital Guarantee ProgramWorking Capital Guarantee Program
Working Capital Working Capital Guarantee Program (cont.)Guarantee Program (cont.)
Short-term single-buyer policies Short-term multibuyer policies Small business policy Small business environmental policy Financial institution buyer credit policy The bank letter of credit policy Financing and operating lease policy
Export Credit Insurance ProgramExport Credit Insurance Program
U.S. contents requirements: The products sold must be produced in the United States.
Restrictions on sales: ECIP may not be provided for exports destined for military applications (with some exceptions) or to communist nations.
Highlights: Export Credit Highlights: Export Credit Insurance ProgramInsurance Program
The program provides repayment protection for private-sector loans to creditworthy buyers of U.S. goods and services.
Special coverage exists for U.S. or foreign lenders on lines of credit extended to foreign banks or foreign buyers.
GuaranteesGuarantees
Guarantees (cont.)Guarantees (cont.)
Credit Guarantee FacilityCredit Guarantee Facility
This is an intermediate/long-term loan provided to creditworthy foreign buyers for the purchase of U.S. capital goods and services.
Direct Loan ProgramDirect Loan Program
Direct Loan Program (cont.)Direct Loan Program (cont.)
Guarantees loans to small businesses that are already engaged or plan to engage in international trade as well as those that are adversely affected by import competition
International Trade Loan ProgramInternational Trade Loan Program
The SBA provides certain programs for small business exporters.
- Export working capitalThis guarantees short-term working
capital loans to U.S. small business exporters.
Small Business AdministrationSmall Business Administration
A self-supporting agency of the U.S. government that:Is owned by U.S. governmentProvides insurance for private investment
in LDCs (covers currency inconvertibility, expropriation, political violence, etc.)
Provides project financing through loans and loan guarantees
Insures a broad range of risks
Overseas Private Investment Overseas Private Investment Corporation (OPIC)Corporation (OPIC)
Owned by private investorsProvides loans to foreign buyers for
purchase of U.S. goods and servicesTo be guaranteed by Ex-Im BankSuitable for high cost purchases
Private Export Funding CorporationPrivate Export Funding Corporation
The USDA provides financial support for export of U.S. agricultural products through GSM-102, GSM-103, and Public Law 480.
U.S. Department of AgricultureU.S. Department of Agriculture
States provide different programs to expand exports: loans, loan guarantees.
They also act as delivery agents for Ex-Im Bank programs.
State and Local Export State and Local Export Financing ProgramFinancing Program