How your bank can benefit from EXIM

By James Burrows

You may have heard of the Export-Import Bank of the United States (EXIM) and its support of U.S. companies. But did you know community banks can also benefit from having a relationship with EXIM?

EXIM is an independent federal government agency that supports the creation of American jobs by facilitating the export of U.S. goods and services. When the private sector can’t or won’t provide financing, the agency fills the gap for companies that produce “Made in the USA” goods and services by supplying the financing necessary to compete for global sales.

In today’s global economy, many companies have expanded their sales beyond American borders—the world is their market. And, community banks serve an important role in international trade. Many small- and medium-sized companies lean on community bank financing.

EXIM also supports thousands of small- and medium-sized businesses across the country, giving them confidence to enter new markets. This segment alone comprises more than 90% of EXIM’s transactions. One of the ways EXIM helps these smaller businesses is by reducing the risk of private-sector lenders when they support export transactions. From loan guarantees to export credit insurance, EXIM has a product available to reduce the risk of community banks that help American exporters.

This reduction of risk allows your bank to offer larger lines of credit with less risk and more profit. Teaming with EXIM provides many benefits for community banks, including:

• meeting customers’ needs for export financing

• attracting new customers

• increasing profits

• limiting country and buyer risks

• satisfying bank regulatory requirements

• selling, transferring and assigning EXIM-supported loans to third parties

Pre-export financing: your working capital loan, our guarantee

The EXIM working capital loan guarantee allows a lender to extend pre-export working capital loans to qualifying companies, with EXIM covering 90% of the risk. Loans backed by EXIM’s guarantee can also support bid and performance bonds, export-related inventory advances of up to 75%—including work-in-process—and export-related accounts receivable advances of up to 90%. EXIM does not require loads of paperwork or long processing times. In fact, it is just the opposite.

Qualifying lenders can have an EXIM credit line authority whereby they can extend eligible export working capital loans without prior EXIM approval. The agency grants delegated authority to qualifying lenders of up to $1 million per exporter and $10 million per institution, with no previous EXIM experience required. Delegated authority allows community banks to commit the EXIM guarantee when they approve the loan and to share the fee EXIM charges.

Foreign accounts receivable financing

EXIM’s export credit insurance policies allow lenders to increase their trade-related services portfolio while limiting exposure to country and buyer risks. These policies are available for short-term credits (generally up to 180 days) and medium-term credits (generally up to five years). Open account credit terms are a great marketing tool for your customers. They can increase the exporter’s ability to sell more instead of insisting on cash in advance. When exporters assign the policy proceeds of their export credit insurance policy to their lender, EXIM pays claims directly to the lender, allowing the lender to increase an exporter’s credit line.

Independent community banks can also reduce their risk on confirmations and negotiations of irrevocable letters of credit issued by a foreign bank. EXIM’s letter of credit policy typically covers 95% of the foreign-issuing bank risk.

Regulatory benefits

Since EXIM is a U.S. government agency, the EXIM-insured portion of a community bank’s letter of credit insurance policy is exempt from Legal Lending Limit Requirements. Furthermore, because this insurance product is conditional, a 20% Risk-Based Capital Guidelines rating has been assigned by U.S. banking regulators.