Global Business

Down But Not Out: Ex-Im Options for Middle Market Exporters

The US Export-Import Bank provides financing support to domestic companies of all sizes so they can compete more effectively for overseas business. Currently, the Ex-Im Bank is subject to certain limitations as it awaits Senate confirmation of its board members. However, companies seeking to grow internationally can still benefit from Ex-Im programs in the meantime.  


The US Export-Import Bank provides financing support to domestic companies of all sizes so they can compete more effectively for overseas business. Currently, the Ex-Im Bank is subject to certain limitations as it awaits Senate confirmation of its board members. However, companies seeking to grow internationally can still benefit from Ex-Im programs in the meantime.  

With emerging markets expected to drive global growth over the next several decades, conducting business internationally is an essential consideration for US companies looking to expand their bottom lines. Yet, it’s estimated that only a fraction currently sell to overseas customers, despite access to the programs of the US Export-Import Bank (Ex-Im)—some of which are specifically designed for middle market companies.

What the Ex-Im Bank Can Do for You

As the official export credit agency (ECA) of the US, the Ex-Im Bank is an independent federal agency. It facilitates the financing that companies of all sizes need to compete globally while reducing the risks of doing business overseas. It does this in collaboration with select US banks by providing loan guarantees, credit insurance and even direct funding, backed by the full faith and credit of the US government. 

 

Ex-Im’s guarantees can help you secure standby letters of credit, purchase US-made products for export or pay for material inputs and the labor needed to fulfill your export orders—all of which can enhance your global competitiveness.

 

Unlike ECAs in other countries, Ex-Im Bank’s charter must be renewed every four years by the US Senate, which also approves nominees to its board. Since 2015, when the charter was last renewed, Ex-Im Bank has lacked a sufficient number of board members to authorize credits over $10 million. This has rendered the Ex-Im programs inadequate for larger multinational deals.

Despite these limitations, Ex-Im remains operative and continues to support a variety of programs—a fact not easily discerned amid the gridlock. As a result of that confusion, many small and medium-sized exporters may not be aware of some helpful financing options available to them.

For instance, companies today can still utilize Ex-Im’s Export Credit Insurance products to protect against nonpayment by a foreign customer, covering both commercial and political risk. The program also facilitates the conversion of foreign accounts into receivables insured by the US government. This makes it easier and more cost-effective to obtain working capital loans; it also allows businesses to extend credit to qualified foreign buyers.

Exceeding the Caps

For companies with financing needs beyond the $10 million cap, there’s still another option to finance their international deals.

The Working Capital Guarantee Program enables companies of any size to secure guarantees on revolving loan facilities related to their sales overseas. Under this program, the company’s primary bank lender still extends the loan, but the Ex-Im Bank provides up to a 90 percent guarantee on the facility.

As with all Ex-Im programs, the Working Capital Guarantee Program is only available through approved banks. However, each lender has a different lending authority. A handful of banks—including J.P. Morgan—are designated Fast Track Lenders, with lending authority of up to $25 million. These banks are still able to facilitate larger loans while earning the Ex-Im guarantee, despite the current lending cap.

The Fast Track Lending Program

J.P. Morgan has been a Fast Track Lender since 2006, when we became the first US bank to offer this service to multinational clients. The program offers:

> Financing up to $25 million

> A means to compete more effectively in global markets

> Expedited processing of requests

> Improved working capital and risk mitigation

> The opportunity to extend favorable terms to your foreign customers

 

Eventual Return to Normal

Given potential growth opportunities in foreign markets—as well as the nature of international competition—US companies should explore all tools available to them. Making the most of the Ex-Im programs that are accessible today could help create better bottom-line opportunities in the future. After all, despite its current limitations, Ex-Im and its lending partners continue to provide American businesses with the support to compete globally, while controlling risks inherent to overseas expansion. 

Case Study: Helping Noble Biomaterials Inc. Extend Its Global Reach

 

Noble Biomaterials Inc. blends textiles and technology to create antimicrobial and conductivity solutions used in the performance apparel, healthcare, industrial and emerging wearable technology markets. With half its sales to foreign buyers, Noble had the opportunity to improve its global competitiveness by accessing Ex-Im’s Working Capital Guarantee Program.

However, the company’s former bank had withdrawn from the program. Additionally, most of Noble’s foreign sales are to buyers in Sri Lanka, which Ex-Im classifies as high risk. Even if Noble had access to the program, the Sri Lankan receivables would have been omitted from consideration, reducing the benefit.

Enter a New Bank

As a longstanding participant in Ex-Im programs, J.P. Morgan’s Global Trade group, working with the Asset Based Lending team and Ex-Im specialists, customized a solution that was previously unavailable to Noble.

Using our familiarity with the Ex-Im Working Capital Guarantee Program—and the agency’s familiarity with our internal credit-writing standards—our team requested, documented and received a waiver allowing the Sri Lankan assets to be included in the financing.

As a result, Noble now has a new source of working capital. This has enabled the firm to further extend its international reach, reduce the risk inherent to conducting overseas business and improve its growth prospects.

Jonathan Heuser, Head of Global Trade, Commercial Banking

 Jonathan Heuser

Jonathan Heuser, Head of Global Trade, Commercial Banking

Jonathan Heuser, Head of Global Trade for Commercial Banking, is responsible for delivering traditional trade, supply chain finance and export finance solutions to domestic and international clients.

Global Business Jonathan Heuser Trade