The United States Export-Import (Ex-Im) Bank, originally established in 1945, is an independent agency created to help finance U.S. exports to industrializing and developing markets by providing loans, credit guarantees, and insurance. In its 60-year history, the agency has supported more than $400 billion in U.S. exports.
The Ex-Im Bank ranks as one of the most viable sources of financing for small- and mid-sized exporters. For instance, an estimated 1,150 small businesses used Ex-Im Bank programs for the first time from fiscal years 1997 through 1999. In FY 2004, the bank approved 2,572 small business transactions, nearly 83 percent of its total transactions; some 291 small businesses used the Ex-Im bank for the first time that fiscal year. This viability is underscored by the continued reluctance of many banks to make loans for international trade purposes, despite the growing consensus that international markets are a potentially lucrative new area for many small businesses to explore. "You've seen the statistics on the economic benefits of exporting," wrote Jan Alexander in Working Woman. "You've read the success stories about small companies that quadrupled their revenues through international sales. All you need is a little extra cash to get things started." But since "loan officers in the U.S. have a tendency to see nearly all foreign markets as unpredictable and all loans associated with foreign expansion as very risky," said Alexander, organizations like the Export-Import Bank and the Small Business Administration (SBA) "have a mandate to help American businesses each step of the way, offering instruction and support in everything from identifying viable foreign markets to closing and financing the deal." The Export-Import Bank confirms as much in its own words. "We want to ensure that no innovative small company loses the opportunity to make a foreign sale because it lacks working capital or competitive export financing," stated one Ex-Im executive in Business America.
Indeed, organizations such as the Ex-Im Bank are widely recognized as a valuable resource for small businesses that might otherwise be wholly muscled out of international markets by larger competitors. "Small business and middle market companies must be aware of the existence of export financing programs that can help them increase their export sales by providing access to competitively priced working capital financing," said William Easton in Business Credit. "Historically, small businesses and middle market companies have experienced a significant competitive disadvantage in obtaining working capital financing versus larger Fortune 500 companies." The programs maintained by the Ex-Im Bank are designed to address these competitive disadvantages.
PRIMARY EX-IM PROGRAMS
The primary way in which the Ex-Im Bank aids small-and medium-sized U.S. exporters is through one or more of its financing programs. These are summarized as follows:
Working Capital Guarantee Program (WCGP). The Working Capital Guarantee Program, which is operated in conjunction with the SBA's Export Working Capital Program, assists small business exporters in obtaining the capital they need to purchase inventory or raw materials, market exports, or engage in manufacturing activities. The program guarantees 90 percent of the principal and interest on working capital loans extended by commercial lenders to eligible exporters, provided the loan is fully collateralized (through inventory, accounts receivable, or other means). The loan amount may be used for a variety of business purposes, including purchase of raw materials, purchase of inventory, or manufacturing expenses (including cost of labor, engineering, and other services).
Export Credit Insurance Program. The Export-Import Bank makes available credit insurance to qualified small businesses. This insurance, which may be obtained directly or via an insurance broker, consists of a wide variety of policies designed to protect businesses against losses incurred in developing countries, where commercial and political developments can trigger defaults. In FY 2004, small businesses received $1.6 billion in credit insurance authorizations. Specifically, this program 1) protects the exporter against the failure of foreign buyers to make payment because of national political and/or economic developments; 2) encourages exporters to offer international buyers competitive terms of payment; 3) gives exporters and their lending institutions greater financial flexibility in handling overseas accounts receivable (policies are assignable from the insured exporter to financial institutions).
Small Business Insurance Policy Program. The Export-Import Bank provides short-term (no more than 180 days) policies designed to address the unique credit requirements of smaller, newer exporters. Under the policy, Ex-Im Bank assumes 95 percent of the commercial and 100 percent of the political risk involved in extending credit to the exporter's overseas customers. "This policy frees the exporter from 'first loss' commercial risk deductible provisions that are usually found in regular insurance policies," stated the Ex-Im Bank. "It is a multi-buyer type policy which requires the exporter to insure all export credit sales. It offers a special 'hold-harmless' assignment of proceeds which makes the financing of insured receivables more attractive to banks."
Short-Term Single Buyer Program. This option is available to exporters who do not wish to insure all their short-term credit sales under a multi-buyer policy when they are in fact making single or multiple sales to the same buyer. The policy offers 90 percent to 100 percent coverage for both political and commercial risks of default, depending on buyer, term of sale, and type of product. It has no deductible, and small businesses are eligible for special reduced premiums.
Other notable programs offered by the Ex-Im Bank include: 1) Umbrella Policy—allows state agencies, export trading and management companies, insurance brokers, and other agencies to act as intermediaries between the Bank and their clients. 2) Medium-Term Insurance—comprehensive (100 percent) coverage available to exporters of capital goods or services in amounts of $10 million or less and terms up to five years. 3) Guarantees to Foreign Buyers—various loans and guarantees of commercial financing that can be extended to foreign purchasers of U.S. capital goods and related services. 4) Guarantees of repayment protection for private sector loans to buyers of U.S. capital goods and related services. 5) Programs Supporting Export of Environmental Goods and Services—This Ex-Im Bank offering supports export of environmental goods and services by providing short-term environmental insurance policies that feature no deductible and comprehensive coverage in the event of default. 6) Seminars and Briefing Programs—Available to members of the small business community, these discussions and seminars cover a variety of exporting topics.
For more information on these and other Ex-Im offerings, contact the bank's central headquarters in Washington, D.C., or one of its six regional offices across the United States. For more information on these centers, or on any of the institution's other programs and services, call 1-800-565-EXIM or access their Web site at http://www.exim.gov. In addition, the United States maintains 14 U.S. Export Assistance Centers (USEACs) which serve as one-stop centers for export-related services of the Ex-Im Bank and other agencies, including the Small Business Administration and the Department of Commerce.
Alexander, Jan. "Where the Money Is." Working Woman. December-January 1998.
"Ex-Im Bank Enables U.S. Companies to Increase Their International Sales." World Trade. January 2006.
Export-Import Bank of the United States. "Your Passport to the Global Marketplace." 2004 Annual Report. Available from http://www.exim.gov/about/reports/ar/ar2004/index.html. Retrieved on 29 March 2006.
Hoover, Kent. "Export-Import Bank of the United States." Washington Business Journal. 26 January 2001.
"New VP Small Business at US Ex-Im." Trade Finance. February 2006.
Sletten, Eric. How to Succeed in Exporting and Doing Business Internationally. John Wiley, 1994.
Hillstrom, Northern Lights
updated by Magee, ECDI
Export-Import Bank of the United States
EXPORT-IMPORT BANK OF THE UNITED STATES
The Export-Import Bank of the United States, commonly known as Eximbank, facilitates and helps to finance exports of U.S. goods and services. Eximbank has implemented a variety of programs to meet the needs of the U.S. exporting community, according to the size of the transaction. These programs take the form of direct lending, or the issuance of guarantees and insurance so that exporters and private banks can extend appropriate financing without incurring undue risks. The direct lending program of Eximbank is limited to larger sales of U.S. products and services around the world. The guarantees, insurance, and discount programs have been designed to assist exporters in smaller sales of products and services.
Eximbank began as the Export-Import Bank of Washington, authorized in 1934 as a banking corporation organized under the laws of the District of Columbia (Exec. Order No. 6581 [Feb. 2, 1934]), 12 C.F.R. § 401, reprinted in 12U.S.C.A. § 635. The bank was continued as an agency of the United States by acts of Congress passed in 1935, 1937, 1939, and 1940. It was made an independent agency of the government by the Export-Import Bank Act of 1945 ([12U.S.C.A. § 635]), which was subsequently amended in 1947 to reincorporate the bank under federal charter. The name was changed to Export-Import Bank of the United States by the Act of March 13, 1968 (82 Stat. 47). In 2002, Congress reauthorized Eximbank for a four-year period.
The mission of Eximbank is to help U.S. exporters to meet government-supported competition from other countries and to correct market imperfections so that commercial export financing can take place. The bank considers aiding in the export financing of U.S. goods and services when there is a reasonable assurance of repayment. Eximbank does not compete with private financing, but instead supplements it when adequate funds are not available in the private sector. As stated in the Export-Import Act of 1945, as amended, the loans provided are generally for specific purposes and at rates based on the average cost of money to the bank as well as the mandate of the bank to provide competitive financing, and offer reasonable reassurance of repayment. The act further states that financing should be provided for U.S. exports at rates and on terms that are competitive with financing provided by the principal foreign competitors of the United States. Furthermore, in authorizing loans or guarantees, account should be taken of any serious adverse effects upon the competitive position of U.S. industry, the availability of materials that are in short supply in the United States, and employment in the United States.
The bank is authorized to have outstanding at any one time loans, guarantees, and insurance in an aggregate amount not to exceed $75 billion. The bank is also authorized to have a capital stock of $1 billion and may borrow from the U.S. Treasury up to $6 billion outstanding at any one time. Subsidy costs of the bank's programs are appropriated on an annual basis.
Eximbank operates a loan program and a guarantee program for medium- and long-term export transactions. Both programs provide up to 85 percent financing, operate on the basis of preliminary and final commitments, and are open to any responsible party. Eximbank loans also carry the minimum interest rate allowed by the Organization for Economic Cooperation and Development.
To reduce the risks of buyer default for U.S. exporters, Eximbank offers a variety of insurance programs. These policies insure against the risk of default in export transactions and are available in a variety of plans that are tailored to the special needs of different types of exporters and financial institutions.
Eximbank offers other programs designed primarily to benefit small-business exporters, including the Working Capital Guarantee Program, a loan-guarantee program designed to provide access to working capital loans from commercial lenders. The bank also sponsors the Engineering Multiplier Program, which provides financing to support feasibility studies that have the potential for generating further procurement of U.S. exports.
The bank has moved to use technology to improve the delivery of services. Beginning in 2002, customers could apply online for letters of interest as well as Eximbank's working-capital guarantee. Automating insurance applications and processing will soon be implemented.
2002 Annual Report. Available online at <www.exim.gov> (accessed November 12, 2003).
U.S. Government Manual Website. Available online at <www.gpoaccess.gov/gmanual> (accessed November 10,2003).