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Manage export payment settlement, mitigate financial risks and optimize working capital
of the world’s consumers live outside the US
Companies that only sell domestically are reaching less than 5 percent of their potential customer base
Exporting is the #1 mode of entry into the international marketplace
Financing Your Exports
Using the right financing tools can help exporters increase their working capital and win sales against foreign competitors. Getting paid for the transfer of goods is the end goal in an export transaction, and the seller must choose a financing option that minimizes payment risk while also meeting the buyer’s needs.
There are many payment methods that can assist you in financing your export operation both pre- and post-export.
Common Payment Methods
A commercial letter of credit (LC) is a method of payment in which the issuing bank replaces its credit risk for that of the buyer and undertakes the obligation to pay the seller upon the sellers’ compliance with the terms of the letter of credit.
Commonly used to mitigate the risk of non-performance. Exporters most often will use it to mitigate risks related to the buyer’s ability to pay invoices. Buyers most often will use it to mitigate risks related to the exporter’s eligibility to bid, fulfill contract performance and honor warranty obligations.
An open line of credit where the buyer pays the seller after shipment or at an agreed upon time after the receipt of goods.
A flexible and secure financing option in which the issuing bank is liable for payment even if the importer defaults. The terms and conditions of the letter of credit can be tailored to the needs of the exporter, thereby reducing risk while still having a fair and legally binding contract in place. Exporters can pass financing costs on to their buyers and receive payment sooner than an open account—once the terms of the letter of credit have been met—which can help to improve cash flow and shorten the days sales outstanding (DSO).
Letters of Credit
Protects exporters against nonpayment if the exporter meets the terms in the LC; mitigates cross-border risks
Leverages the bank’s compliance and control mechanisms
Manages payment and document exchange, governed by global standards
Offers flexible financing options
Risk of non-payment is entirely on seller: full counterparty, country, currency and cross-border risks
Compliance, control and anti-money laundering issues managed by seller
No third-party oversight or guarantees
Simple, streamlined and inexpensive
Export Import Bank of the United States (EXIM)
For many US exporters, a lack of financing can stand in the way of taking advantage of new business opportunities abroad. The EXIM Bank is the official Export Credit Agency (ECA) of the United States that helps businesses expand their export sales. The mission of ECAs, including EXIM, is to drive exports from their respective countries by offering trade financing and risk mitigation solutions, such as loan guarantees, export credit insurance and direct funding options for exporters and their foreign buyers.
The EXIM working capital loan guarantee program affords pre- and post-export working capital to companies seeking to leverage their short-term international assets. The program offers a 90 percent loan guarantee to lenders and provides aggressive advance rates against export related accounts receivable and inventory (including work-in-process) and reduced collateral requirements for international standby letters of credit.
The EXIM Bank provides a 100 percent full-faith loan guarantee backed by the US government on a term loan the lender provides to a foreign buyer. This allows exporters of capital goods and related services to offer competitive financing terms to foreign buyers, thereby increasing their foreign sales. Foreign buyers benefit from this cost-effective solution with longer tenor and diversified funding.
EXIM letter of credit insurance provides protection against an issuing bank’s failure to pay under an irrevocable letter of credit. The coverage is valid for up to 180 days, and exceptions for longer-term agreements can be made.
US-based, credit-worthy corporates sourcing capital equipment and related services from North American countries or Western Europe may qualify for ECA long-term loan guarantees. The lender extends a term loan facility supported by a 95 to 100 percent guarantee from the ECA of the supplier’s country. The US borrower benefits from a competitively priced loan with a longer tenor than what the commercial market will generally allow, as well as a diversified source of funding and limited negative carry.
Achieve Success in Your Export Operation
Despite the risks, there are many benefits to entering global markets through exporting.
As a recognized leader in global trade services, our team of trade experts can provide financing options to help make a competitive export sale, reduce the risk inherent in cross-border payments, and develop a secure and efficient trade process that also can help improve your cash flow.
J.P. Morgan's Trade Experience
Countries in which we support international trade activities
Trade professionals around the globe
Banks in our correspondent network
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