Throughout the world, the U.S. manufacturing industry is known for its innovation and excellence. Agriculture equipment’s “Made in the USA” label has a well-earned reputation of being high quality and desirable. Unfortunately, extending credit or accessing financing to export products to foreign buyers can be a major barrier to global growth for many companies.
Commercial lenders are often reluctant to extend credit or offer financing to foreign buyers. Understandably, foreign buyers prefer and expect open account credit terms, as cash up front can adversely impact their cashflow. Often, requiring pre-payment can ultimately make U.S. equipment more expensive for the buyer. Thus, American companies that are unable to extend credit may lose out on valuable sales opportunities.
EXIM Offers a Solution
The Export-Import Bank of the United States (EXIM), the official credit agency of the federal government, enables U.S. businesses of all sizes to win international sales in more than 180 countries. EXIM is an independent, self-sustaining agency with a mission of supporting jobs by financing the export of American goods and services.
EXIM supports the financing of a broad range of farm equipment such as tractors, combines, seeders, silos, irrigation pivots, disc harrows and related parts and components. Many companies involved in sales of agriculture products and services use EXIM’s export credit insurance to:
- Provide open account credit to enter new markets and increase sales in existing ones.
- Protect against buyer nonpayment. assigning EXIM-secured foreign receivables to a lender.
Protecting Against Nonpayment
Getting paid is essential to keeping any business afloat, and it is the primary concern of U.S. export executives. If foreign buyers don’t pay, there is often very little recourse for the seller, and the financial loss can sometimes be significant. Consequently, many U.S. businesses are wary of entering international markets.
EXIM’s export credit insurance empowers U.S. companies to win international sales while minimizing the financial risk of exporting. EXIM insures a company’s foreign accounts receivable against commercial (e.g., bankruptcy) and political (e.g., sanctions) risks in global markets. By using export credit insurance, U.S. businesses are assured their bottom line will be protected should their foreign customers fail to pay.
EXIM’s short-term insurance coverage also allows U.S. companies to extend open account credit terms of typically up to 180 days to their buyers. Due to the fear of not getting paid, many companies often require pre-payment or resort to using costly, time-consuming letters of credit. EXIM insurance policies are flexible enough to cover an entire export portfolio, a handful of foreign buyers or just a single buyer. Additionally, policies come with the added benefit of only paying premiums upon shipments.
Obtaining a Line of Credit
For many U.S. businesses, a lack of access to financing can stand in the way of global growth. Commercial lenders do not always have the capacity or willingness to provide loans for higher risk markets or transactions.
With its working capital loan guarantee, EXIM can work with a company’s lender to secure working capital financing and provide the funds necessary to help companies pay for materials, equipment, supplies, labor and other inputs needed to fulfill export orders, post standby letters of credit to serve as bid bonds, performance bonds, or payment guarantees, and purchase finished products for export.
EXIM provides a 90% loan guarantee decreases to lenders in support of their credit facilities to companies to help decrease repayment risk and increase the lender’s willingness to extend a loan. Qualified EXIM lenders can expedite the loan process by committing EXIM’s guarantee without prior approval. Companies benefit from the fast turnaround and are also able to borrow more with the enhanced collateral.
Financing for Your Foreign Buyers
EXIM also insures or guarantees term loans extended by lenders to creditworthy international buyers for purchases of U.S. capital goods or services. Due to this support, U.S. companies have more opportunities to compete for sales in markets worldwide.
With its medium- and long-term financing support, EXIM covers 100% of commercial and political risks on the financed amount after a down payment (at least 15% of the contract amount) is made by the buyer. Due to EXIM’s support, lenders are more likely to provide a loan to the buyer and often with lower interest rates. This support is very beneficial to the U.S. company as they get paid in full by the lender after the shipment occurs.
Increase Your Export Sales Now
The international market is ripe with potential. But, given increased credit risks and foreign competition — including competition backed by foreign export credit agencies — EXIM support can be a key factor in providing the incremental support necessary to increase U.S. competitiveness. With EXIM’s line of export finance products, U.S. companies can venture into new markets and increase sales with existing customers as well as new customers.
Contact EXIM for a free trade finance consultation by emailing ExportHelp@exim.gov or calling 202-565-3901.