PESA hosted a webinar with the EXIM bank on June 24 for a discussion of the tools and resources available to American OFS companies wishing to access foreign markets. Kimberly Reed, President and Chairman, and Paula Swain, Managing Director – Global Energy, Project Finance Division were hosted by Tim Tarpley, Vice President Government Affairs, PESA, to discuss how EX-IM can assist with working capital, export credit insurance and direct loans.
Reed opened with an overview of the agency, highlighting its efforts to fill gaps in private export finance in order to bolster U.S. job growth at no cost to the American taxpayer. EXIM provides trade financing solutions such as export credit insurance, working capital guarantees and guarantees of commercial loans to foreign buyers to empower exporters of U.S. goods and services. In fiscal year 2019, EXIM authorized a total of $8.2 billion dollars in financing including $2.2 billion for small businesses.
Reed said EXIM understands exporters and private lenders are hurting right now; in swift response to the outset of this year’s health crisis, EXIM raised the guarantee coverage option of their Supply Chain Finance program and Working Capital Guarantee program to 95%, up from the standard 90% guarantee.
EXIM’s Supply Chain Finance Guarantee Program increases supply chain liquidity, giving access to capital faster and at lower costs. The Working Capital Guarantee allows exporters borrow more with the same collateral and unlock the cash flow. These relief measures make the programs more widely available to U.S. suppliers and exporters. They also give financial institutions the incentive to make more supply chain financing available to America’s exports by reducing their credit risk.
Other EXIM temporary relief measures during the pandemic include a Temporary Bridge Financing Program, Progress Delivery Payment Financing, as well as flexibilities such as waivers, deadline extensions and streamlined processing.
2020 ANNUAL COMPETITIVENESS REPORT
Chairman Reed provided an overview of the soon-to-be released EXIM 2020 Annual Competitiveness Report, a report she recently shared with Congress. There are now 115 export Credit Agencies in the world, a 35% increase from the 85 that were there only four years ago, and their methods of securing deals are more sophisticated and proactive for their workers than ever before.
Reed stated there’s been a catalyst of this increase in aggressiveness by other countries in export credit fields and that is China. Congress has recognized this and has mandated EXIM to launch a specific program called the Program on China and Transformational Exports, a major part of EXIM’s mission.
“Our nation’s national security strategy emphasizes that Beijing’s infrastructure investments and trade strategies reinforce geopolitical aspirations. It warns that China challenges American power influence and interest attempting to erode our security and prosperity,” she said.
Relative to technologies such as wireless communications and 5G, as well as many other technologies, Reed noted EXIM is extremely conscious of how active and aggressive Chinese companies and the Chinese government are all over the world. The goal of EXIM’s China program is that at least 20% of EXIM’s total financing authority or $127 billion be devoted to exports to compete with China. The two goals of the program are to directly neutralize export subsidies for competing goods and services financed by official export credit-tied aid or blended of financing provided by China and other countries, as well as advance of comparative leadership of the United States with respect to China or support U.S. innovation, employment and technological standards through direct exports in a series of industries, including 5G, artificial intelligence, water sanitation, renewable energy and biotechnology.
“The future of American jobs lies in these technologically advanced industries and related goods and services,” said Reed.
EXPORT CREDIT INSURANCE
Paula Swain then provided some in-depth detail around two finance offerings relative to supporting both small and large businesses. The first, exporter or supplier credit, is where EXIM supports domestic companies in the form of export credit insurance to cover foreign accounts receivable. Banks don’t typically take foreign accounts receivable risk, but with EXIM Bank Credit Insurance, they’re more willing to advance against those receivables. EXIM has a strong network of delegated authority lending banks that help with the working capital program and can support working capital for U.S. goods and services that will be exported. The agency also has a supplier credits facility.
EXIM issues loan guarantees to banks that are not willing to take the foreign buyer risk that’s associated with that lending program. With foreign buyer underwriting, EXIM approaches these two different ways; one is either a corporate credit basis where EXIM looks at historical operations, as well as sound financial standing, or in project financing which are really large greenfield projects with complex and contractual structures.
Swain encouraged attendees to request letters of interest from EXIM as an indication of support. These letters can give companies a competitive edge on their international competition. Swain said foreign export credit agencies, including various U.S. competitors, have similar letters as tools.
If you have additional questions about EX-IM or are interested in joining the International Trade Committee, please contact PESA Vice President Government Affairs Tim Tarpley. For more information, please visit www.exim.gov.WATCH THE WEBINAR