When To Use Pre-Export Financing

Posted By : Aubrey Mead , on Sep, 2017

 

Companies in the United States, selling goods into other countries often experience significant challenges to those companies selling domestically. These challenges, including the delay between shipping, receiving of the products by the seller and then repayment, can create a hardship for small businesses.

To stimulate the economy, international sales are vital. The Ex-Im Bank was established to support small to medium sized businesses in their ability to market internationally, with one source of support coming in the way of pre-export financing.

A good way to think of pre-export financing is, as a working capital guarantee. Through the Ex-Im bank a commercial lender, which is typically the businesses financial institution, is guaranteed repayment of the loan, up to 90%, of what they provide to approved exporters. This 90% includes both principal as well as interest for the lender.

The Benefits

Through this guarantee process, the exporter (the business) must be engaged in purchasing or manufacturing US goods, or US services, that are then exported. The US based business is able to obtain either a single loan, which is considered to be transaction-specific for one sale or a revolving line of credit that can be used for multiple sales on an ongoing basis.

The businesses and lenders have no minimum or maximum amounts through the Ex-Im bank program, which allows the business to choose the working capital levels they require.

With the pre-export financing, the Ex-Im bank provides up to 75% advance on inventory, with is a critical part of the financial needs for any small to mid-sized business with the full 90% available for existing accounts receivables to foreign buyers.

While the lender will determine the interest rate, there is a low application fee and, as the load is fully collateralized, it is a very viable option for lenders to have the capital to lend to exporting companies.

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