Government
Assisted Foreign Buying Finance
The
international sales of high-value capital goods or services
or exports to large-scale projects, which require medium-
or long-term financing, often pose special challenges to exporters
as commercial banks may be reluctant to lend large sums to
foreign buyers, especially those in developing countries,
for extended periods. One viable solution to these challenges
is foreign buyer financing offered by the Export-Import Bank
of the United States (Ex-Im Bank).
As
the official U.S. export credit agency, Ex-Im Bank supports
the purchases of U.S. goods and services by creditworthy foreign
buyers who are unable to obtain financing they need through
traditional commercial sources. Ex-Im Bank does not compete
with commercial banks but provides products that fill gaps
in trade financing by assuming country and credit risks that
the private sector is unable or unwilling to accept. With
Ex-Im Bank’s foreign buyer financing, U.S. exporters
can turn their business opportunities into real transactions
and get paid cash on delivery and acceptance of the goods
or services.
Key Points
•
Helps turn business opportunities, especially in emerging
markets, into real transactions for large U.S. exporters and
their small business suppliers.
•
Enables creditworthy foreign buyers to obtain loans needed
for purchases of U.S. goods and services, especially high-value
capital goods or services or exports to large-scale projects.
•
Provides fixed-rate direct loans or guarantees term financing
offered by commercial banks.
•
Available for medium- (up to five years) and long-term (generally
up to ten years) transactions.
Key Common Features of Ex-Im Bank’s Loan Guarantees
and Direct Loans
Ex-Im
Bank assists U.S. exporters by providing direct loans or guaranteeing
commercial loans to creditworthy foreign buyers for purchases
of U.S. goods and services. They are generally used to finance
the purchase of high-value capital equipment or services or
exports to large-scale projects that require medium- or long-term
financing. Ex-Im Bank’s foreign buyer financing is also
used to finance the purchase of refurbished equipment, software,
and certain banking and legal fees, as well as some local
costs and expenses.
Characteristics of Government Assisted Foreign Buyer Financing
Applicability
Suitable
for the export of high-value capital goods or services or
large-scale projects that require extended-term financing.
Risk
Commercial
bank and/or Ex-Im Bank assume all risks.
Pros
•
Buyer financing as part of an attractive sales package
•
Cash payment upon shipment of the goods or services
Cons
•
Subject to certain restrictions per U.S. foreign policy
•
Possible lengthy process of approving financing
There
is no minimum or maximum limit to the size of the export sale
that may be supported by the Bank’s foreign buyer financing.
Ex-Im Bank requires the foreign buyer to make a cash payment
to the exporter equal to at least 15 percent of the U.S. supply
contract. Repayment terms up to five years are available for
exports of capital goods and services. Transportation equipment
and exports to large-scale projects may be eligible for repayment
terms up to 10 years and for certain sectors up to 12-15 years.
Military items are generally not eligible for Ex-Im Bank financing
nor are sales to foreign military entities. In addition, goods
must meet the Bank’s foreign content requirements. Finally,
Ex-Im Bank financing may not be available in certain countries
and certain terms per U.S. foreign policy.
Key Features of Ex-Im Bank Loan Guarantees
•
Loans are made by commercial banks and guaranteed by Ex-Im
Bank.
•
100 percent principal and interest cover for 85 percent of
U.S. contract price.
•
Negotiated interest rate, usually floating and lower than
fixed rate.
•
Fully transferable, can be securitized and available in certain
foreign currencies.
•
Faster documentation process with the assistance of commercial
banks.
•
Promotes cash payment financing.
•
No U.S. vessel shipping regulations under $20 million.
Key Features of Ex-Im Bank Direct Loans
•
Provides fixed-rate loans directly to creditworthy foreign
buyers.
•
Supports 85 percent of U.S. contract price.
•
Exporter will be paid in full upon disbursement of a loan
to the foreign buyer.
•
Generally, the goods must be carried exclusively on U.S. vessels.
•
Best used when the buyer insists on fixed rate.
Fees and Ex-Im Bank Contact Information
Letter
of Interest: $100.
Preliminary
Commitment: 0.1 of 1 percent of the financed amount up to
$25,000.
Guarantee
Commitment: 0.125 percent per annum on the undisbursed balance
of the loan.
Direct
Loan Commitment: 0.5 percent per annum on the undisbursed
balance of the loan.
Exposure
Fee: Varies, depending upon tenor, country risk, and buyer
credit risk.
For
more information: Visit www.exim.gov or call 1-800-565-EXIM.
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