World Trade - December 2008 - (Page 28)

Trading in Tough Times How U.S. Exporters Can Beneﬁt From Pre-Export Financing Programs - Luis M. Noriega, vice president, Global Trade Services at JPMorgan Chase & Co. W orking capital and its lifeblood, cash ﬂow, are two of the most dynamic parts of a company’s balance sheet. In today’s unprecedented economic environment, that dynamism and risk are magniﬁed even further by the complexities of supply chain management—the physical movement of goods and services, and the corresponding payment ﬂows across national borders. Managers naturally devote special attention towards working capital optimization involving their company’s international trade ﬂows. Just as a company should seek diverse revenue sources to withstand ﬂuctuations in business cycles, so should a ﬁrm seek diverse markets for importing and exporting purposes. While the United States domestic market is vast and oﬀers expansion potential, the greatest potential, by far, lies beyond America’s shores. Yet, the traditional ﬁnancing oﬀered by commercial banks is not always suﬃcient to meet the needs of U.S. exporters, especially given the repayment risk associated with export sales. While an exporter’s internally generated capital may fund the company’s export sales growth to a point, once its exports reach 20 percent or more of total sales, the company may need to explore additional funding alternatives including trade ﬁnance and export credit agency support. Export Working Capital Guarantee Loans In such cases, export working capital guarantee loans help U.S. ﬁrms compete more eﬀectively in the global marketplace by providing the government-guaranteed liquidity necessary to accept new business. Through the Working Capital Guarantee Program (WCGP) oﬀered by the Export-Import Bank of the United States (Ex-Im Bank), U.S. exporters can obtain ﬁnancing from participating lenders when traditional commercial ﬁnancing is otherwise not available, or when their borrowing needs are greater than the lenders’ credit standards will allow. As the table indicates, the exporter may be able to access higher advance rates, up to 75 percent against eligible export-related raw materials, workin-process and ﬁnished goods inventories, and up to 90 percent against eligible export-related accounts receivable. Funds may be used to ﬁnance the cost of manufacturing, producing and purchasing eligible items to be exported, as well as the ﬁnancing of related foreign accounts receivable. The guaranteed ﬁnancing may also be used to support the issuance of commercial and standby letters of credit and bank guarantees related to an export order. Ex-Im Bank’s pre-qualiﬁed commercial lender partners using Delegated Authority can expedite the loan process by committing working capital guarantee loans without prior approval from Ex-Im Bank. Currently, there are six levels of Delegated Authority, ranging from $1 million to up to $10 million per exporter, with more experienced lenders enjoying fast-track authority from Ex-Im Bank to approve individual credits up to $25 million per exporter. Supporting the Growth of Export Sales Based in Saginaw, Michigan, B&P Process Equipment LLC manufactures mixing and separating equipment for the plastics, chemical,

Table of Contents Feed for the Digital Edition of World Trade - December 2008

World Trade - December 2008 Contents The Promise of Peril The Current Reality with IP in China Supply Chain Watch Tradewinds Performance Partners: Awards of Excellence Managing With Mobility What 2009 Bodes for the Supply Chain Small Business Takes to Export Green is Here for Good Fast Fashion

World Trade - December 2008

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