October 2009 Franchising World

Ex-Im Bank’s financing is more critical and useful than ever before in the current economic crisis.

By John Richter 

Franchising businesses may be leery of competing in the global marketplace during the current economic crisis, but the truth is that exports are more important than ever in these difficult times. In fact, companies cannot afford not to export.

While many U.S. companies are being forced to lay off workers, many others are maintaining or even adding jobs by exporting.

And International Franchise Association members–franchisors, franchisees and suppliers–can get the financing support they need to export from a valuable partner–the Export-Import Bank of the United States. Ex-Im Bank is the official export credit agency of the United States. It exists to help U.S. companies expand their business overseas so that they can create or maintain jobs for workers here at home.

Approximately one in 10 U.S. jobs is now dependent on exports, and statistics from the U.S. Commerce Department show that export-related jobs on average pay better. Foreign buyers are frankly an “untapped vein of gold.” 

It is true that lending standards have been tightening at many banks over the past year. Private insurers of U.S. export sales are pulling back. And without coverage of their receivables, companies are bound to limit their international efforts.

But Ex-Im Bank has the financing tools to help U.S. companies break into, or expand their business in, global markets. This includes export credit insurance.

Restaurant Associates, Ltd., of Kingston, Jamaica, was able to buy U.S. franchise rights and restaurant equipment for 10 new Burger King and Popeye’s franchise restaurants in Trinidad and Tobago, backed by an Ex-Im Bank-insured $992,240 loan from SunTrust Banks, Inc., of Atlanta. Ex-Im Bank regularly provides coverage for franchise rights in addition to equipment and services.

The Ex-Im Bank repetitive-shipment, medium-term insurance policy helped Restaurant Associates buy the franchise rights and equipment from Franke Resupply Systems, Inc., La Vergne, Tenn.; Charter House Innovations, Holland, Mich.; and Nieco Corp., Windsor, Calif. The franchise operator already had 36 fast-food restaurants in Jamaica, St. Lucia and Trinidad and Tobago.

Franchising of U.S. fast-food restaurants represents a growing business opportunity in Latin America and other parts of the world, and Ex-Im Bank is eager to support more such transactions. 

For 75 years, Ex-Im Bank’s mission has been to help finance the export of U.S. goods and services to international markets. The bank does not compete with private-sector lenders. It provides export financing products that fill gaps in trade financing, to keep trade flowing to emerging markets. Ex-Im Bank assumes credit and country risks that the private sector is unable or unwilling to accept.

Ex-Im Bank also helps level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters. In short, the bank supports exports that otherwise would not go forward.

Ex-Im Bank is legally mandated to find that a “reasonable assurance of repayment” exists for every transaction we authorize. Yet, the bank also acts as a catalyst that paves the way in opening up and cultivating more difficult markets. Ex-Im Bank is active in about 90 countries. It supports every kind of export¦from capital goods associated with large infrastructure projects, to exports by thousands of small businesses including consumer products and services.

The bank offers a variety of financing tools:

Working Capital Loan Guarantees: These cover 90 percent of the principal and interest on working capital loans for pre-export costs. These costs can include purchase of raw materials or finished products, production of exports, and coverage of standby letters of credit serving as bid bonds, performance bonds or advance payment guarantees. 

Export Credit Insurance: Protects mostly small-business exporters and their lenders against the commercial and political risks of a foreign buyer defaulting on payment. The insurance can cover multiple buyers, countries and transactions, and also allows exporters to extend credit terms directly to their international buyers. Both short- and medium-term insurance is available. 

Loan Guarantees: Ex-Im Bank’s commercial loan guarantees enable American firms to offer foreign buyers competitive credit to win a sale of equipment and services.

Financing enhancements to counter credit crunch: The bank has enhanced several of its trade finance products to help counter the tightening of credit and the lack of liquidity in the export marketplace. Among the changes is expanded access to the bank’s working capital loan guarantees. These loan guarantees are now available for indirect exporters, which are U.S. companies that provide goods and services destined for export by other U.S. companies.

Korean LOC facility: Ex-Im Bank also has approved a special delegated authority facility providing $2.9 billion in insurance cover involving letters of credit issued by 11 Korean financial institutions. It will help meet increased demand to ensure U.S. lenders’ confirmation of Korean bank letters of credit. This facility is a response to requests from U.S. banks and exporters. 

Short-term insurance: Also, with their short-term insurance policies, after paying a $500 premium, exporters pay as they go. That’s a great benefit for small businesses. With private short-term insurance, exporters usually pay a premium up front based on sales estimates. And if the sales do not reach estimated levels, the premium is not reduced.

Ex-Im Bank “take-out” option: In mid-July, the bank announced that commercial banks can reduce their liquidity risks and help make U.S. exports more competitive by selling their Ex-Im Bank-guaranteed medium- and long-term loans back to Ex-Im Bank. By purchasing the take-out option liquidity insurance, banks will be able to sell the guaranteed loans to Ex-Im Bank at par if there are significant changes in their credit spreads and funding costs, or in the overall market. 

To learn more about Ex-Im Bank financing products, visit the Web site www.exim.gov   or call1-800-565-EXIM (3946) and choose the option that puts you in touch with the bank’s nearest regional office. There are eight regional offices where staff can explain all the requirements to obtain financing. The Web site also provides information on financing products, key transactions, export opportunities, available training and more. 

Ex-Im Bank also has many partners, as near as:
• your local bank
• your Chamber of Commerce
• or the nearest of more than 100 

Export Assistance Centers around the country that are run by the Commerce Department’s Foreign Commercial Service. 

Delegated Authority Lenders: More than 200 commercial lenders have delegated authority to provide Ex-Im Bank-guaranteed working capital financing without prior approval from the bank. This greatly accelerates access to financing. A list of these banks is on the Web site. Insurance brokers that work with Ex-Im Bank also are listed on the Web site and are able to help clients select the best Ex-Im Bank export credit insurance for their needs.

To get a list of U.S. Commerce Department Export Assistance Centers, visit www.   export.gov   or www.buyusa.gov  and click on “Find Local U.S. Office.” These centers can help small businesses through the beginning steps of learning the requirements of foreign markets and finding foreign buyers. Ex-Im Bank and U.S. Small Business Administration offices often are co-located to provide one-stop shopping. Information about SBA financing programs can be found at the Web site www.sba.gov  . 

Another important resource: More than 50 Ex-Im Bank City-State Partners around the country, including Chambers of Commerce, state trade offices, and universities, can help local small businesses with exporting and obtaining Ex-Im Bank financing. These and many more trade-related organizations can explain the process of finding foreign buyers, and then they can help you obtain the financing support you need from Ex-Im Bank.

Also consider participating in one of the Ex-Im Bank exporter training seminars that are held around the country and at Ex-Im Bank headquarters. A calendar of seminars is available on the bank’s Web site.

Ex-Im Bank’s financing is more critical and useful than ever before in the current economic crisis. It is working to make its products even more flexible and accessible, and less expensive. It can boost borrowing power, speed cash flow, expand sales, help you enter new markets and mitigate losses.

 John Richter is senior vice president of small business of the Ex-Im Bank, the official export credit agency of the United States. Visit the Ex-Im Bank’s Web site at www.exim.gov   or 1-800-565-EXIM (3946) for the nearest regional office.