presentation on… Export Finance...Export Finance Export-Import Bank of the U.S. SBA Export...
Transcript of presentation on… Export Finance...Export Finance Export-Import Bank of the U.S. SBA Export...
Export Finance
Export-Import Bank of the U.S.
SBA Export Solutions Group
Trade Credit Insurance Agency, LLC
Sharyn Koenig
Patrick Hayes
Edward Arnold
Dear God, please, not another boring presentation on…
John Vilardo M&T Bank
Financing Your Exports Unraveling the mysteries of trade finance
The exporter’s challenge
Export Sales Opportunities
Fulfilling Orders Collecting on Sales
The Exporter The Exporter’s Banker
Credit Insurance Broker Credit
Insurance Underwriter
SBA EX-IM
Problem #1 –
The 95 Percent Solution
Problem #1 – The 95 percent solution
• This firm is an exporter, but cash-in-advance has been its mantra – Foreign customers are pushing for terms – They would buy more if they could get terms – Competitors are offering terms – Losing some foreign buyers to the competition
• But there is country risk! – War, revolution, inconvertible currency, embargo
• But there is commercial risk! – Foreign buyer can’t pay, files bankruptcy, disappears
What happens if they don’t pay?
Credit Insurance
Broker
Credit Insurance
Broker
Private credit Insurance
Solution #1 – The 95 Percent Solution
Problem #2 –
The case of the shrinking borrowing base
Problem #2 – The case of the shrinking borrowing base
• This firm is an active, growing exporter – Lots of export customers, distributors – Export A/R and export-dedicated inventory represent an
increasing share of balance sheet assets • Their long-time lender provides an asset-based line of credit
– But the bank excludes foreign A/R in calculating their borrowing base
– They heavily discount the value of export-related assets
So as export sales ↑ ↑ ↑, working capital gets tighter
Your Bank
Solution #2 – The case of the shrinking borrowing base
Credit Insurance
Sample Borrowing Base
Collateral No Loan Guarantee With Loan Guarantee
Export Collateral
Value Advance Rate
Borrowing Base
Advance Rate
Borrowing Base
Raw Material $200,000 20% $40,000 75% $150,000
Work in Progress $200,000 0% $0 75% $150,000
Finished Goods $600,000 50% $300,000 75% $450,000
Foreign A/R on Open Account
$400,000 0% $0 80% $320,000
Foreign A/R by Letter of Credit
$600,000 70% $420,000 90% $540,000
MAX LOAN $2,000,000 $760,000 $1,610,000
Problem #3 –
The case of the missing borrowing base
Problem #3 – The case of the missing borrowing base
• This firm is an exporter, but cash-in-advance has been its mantra – Foreign customers are pushing for terms – Losing some foreign buyers to the competition
• But offering terms will create a working capital squeeze – To offer terms, the business will need a WC loan
• Their lender is receptive, but this historically cash-in-advance-driven firm has no export A/R to borrow against
No export A/R → no borrowing base → no Asset-Based Loan….?
Your Bank
Your Bank
(direct)
Solution #3 – The case of the missing borrowing base
Problem #4 –
The case of the prepayment that wasn’t
Problem #4 – The case of the prepayment that wasn’t
• This firm is an exporter, but cash-in-advance is its mantra – The prepayment provides the working capital needed for
fulfilling purchase orders • A foreign buyer agrees to prepay, but their condition…
– A performance bond • The exporter asks their lender; they have a solution…
– A standby letter of credit – The cost? A bank fee and cash collateral maintained on
deposit = 100% of the face amount to the standby L/C
The exporter’s access to their prepayment WC is frozen!
Your Bank
Your Bank
Solution #4 – The case of the prepayment that wasn’t
Problem #5 – The case of the competitive exporter
• Exporter needs RE, M&E, debt refinancing…
• … anything to improve the competitive position of the exporter
Your Bank
Solution #5 – The case of the competitive exporter
Problem #6 – The case of the business that hated paperwork
• Exporter needs any or all of the solutions described above
• Loans up to $500,000
Your Bank
Solution #6 – The case of the business that hated paperwork
Problem #7 – The buyer without good banking options
• U.S. Exporting firm produces capital equipment
• Buyer favors their equipment, but has received a 5-year financing package from
U.S. firms’ foreign competition
• The machine is expensive and the buyer does not have cash on hand
• To finance machine using local bank would entail a high interest rate and a very
short term
The U.S. firm wants to win this order but can’t provide a 5-year financing package
Your Bank
Solution #7 – The buyer without good banking options
making exporting elementary… The game’s afoot!
Contacts
Sharyn H. Koenig Managing Director, Eastern Region Export-Import Bank of the U.S. 5835 Blue Lagoon Drive, Suite 203 Miami, FL 33126 T: 305-526-7436 X 17 F: 305-526-7435 OR 866-491-9157 www.exim.gov
Patrick Hayes, International Trade Finance Manager – Eastern U.S. SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH 44114 216-522-4731 www.sba.gov/international
Edward J. Arnold PhD Trade Credit Insurance Agency, LLC 5373 Transit Road Williamsville, NY 14221 Tel: 716-932-7713 Cel: 716-481-9370 Fax: 716-408-5508 e-mail: [email protected]
John Vilardo, Vice President International Trade Finance One Fountain Plaza 12th Floor Buffalo, New York 14203 716-848-7344 phone 716-848-7318 fax 716-863-3486 mobile [email protected]