access to capital forum 2015
TRANSCRIPT
Access to Capital ForumNational Small Business Week 2015
Microloans & Revolving Loan FundsHeather W. Fisher, Executive Director, Ozarks Small Business Incubator
Myles Smith, Manager of Member Services, Howell-Oregon Electric Cooperative, Inc.
Johnny Murrell, Executive Director, South Central Ozark Council of Governments (SCOCOG)
CrowdfundingJason Graf, CEO, CrowdIt
Jason Graf, CEO and co-founder
@CrowdItJason
@DontJustDreamIt
@417bizbroker
**crowdit (from any cell phone)
The Suit and the DreamerLocal entrepreneur Jason Graf launched a local crowdfunding
platform, CrowdIt, where dreamers and mentors work together.
CEO & Co-Founder, CrowdIt.comBusiness Broker, Murphy Business & Financial Corporation
- Owned/ Operated a Small Mortgage and Real
Estate Company
- Business Broker for Murphy Business &
Financial
- SCORE Mentor
- JP Advisors - Operations/Capital Acquisition
- CrowdIt
- BYOP “Build Your Own Pizza
- Auto Concierge
- BEO Now
- Idea Guy / Creative Thinker
- SERTOMAN
• Self-fund
• Borrow
• Friends and Family
• Outside Investors
• Accredited
• Non-Accredited
• Accredited Investors
• 10-12 Million Households in the US, out of 117
million
• Test: $1M net worth (exclude home & related
debt); or$200K income last 2 years (or $300K
with spouse)
crowdfunding
Syllabification: (crowd·fund·ing)
Pronunciation: /ˈkroudˌfəndiNG/
Definition of crowdfunding:
noun
the practice of funding a project or venture by raising many small amounts of
money from a large number of people, typically via the Internet:
“An Internet ‘EVENT’ that harnesses the power of your network!”
•Funds
•Awareness
•Feedback
Four Main Types of Crowdfunding
Donation Based
Passion
Emotion
A Cause
Civic Duty or Community Involvement
Expression
Think CauseMomentum.Org
Donation Based
Reward or Incentive Based
Pledge or contribute to receive something in return.
Product
Recognition
Collaboration
Widget
1st Edition
Credits
Etc.
Bands, Film, Start-Ups, Inventors,
Tech, Apps, Gaming, etc…
10
• Market Research
• Demand
• Proof of Concept
• Pre-Sales
• Marketing
WHY?
• Determine your Dream
• Create a Plan
• How much you need?
• Full or Flexible
• Determine Really Cool Incentives
• Post Project to Site
• Pitch
• Video (115% more funding)
• Pictures
• Incentives / Levels
• Pick time (15 to 75 days)
• Rally the troops
• Market, Market, Market!!!
• Tier 1, Tier 2, Tier 3
• Collect and fulfill promises.
• Dream realized
• side uncertain
According to the Federal Reserve, there are 27 million businesses that need capital in some form.
• 23% of those businesses never even apply for funding because of "fear of rejection."
The fears are justified in today's structure. About 50% of all businesses that do apply for funding get shot down.
• within this market.
In Need of Funding
Video
–mandatory
–show you are a real person (credible / trustworthy)
–reason to stay on page
–higher rate of funding / viral
–address the Portal community / “THANK YOU”
–CREATIVE
•traditional talking head / finger puppets / demos / voice over / stop animations, etc.
–keep it simple
–CALL TO ACTION!!
Pictures
Audio
Create The Pitch
Incentives
–important to success / put in the work & thought
–wide range of price points
•$5 - $100 = small
–EASY TO DISTRIBUTE
–MP3’s, digital still pics, acknowledgments on a website, thank you’s, etc.
•$150 - $500 = medium
–often physical goods
–t-shirts / product, etc.
•$600 - $1,000 = large
•$1,000+ = extra large
–live, custom, special goods & services, or experiences
–Meaning / value to your contributors
–Unique / Special / Limited edition
–Create a Goods Menu
–Allow contributors to be a part of your project
–Utilize your strengths / hobbies - get personal
Deliver on promises
Stay engaged
Invite them to continue the journey
• get feedback
• ask them to post on the rewards they receive
Celebrate Victory and
Capital!!!
Questions?
Managing CreditTracey Blaue, Consumer Credit Counseling Service
Gap FinancingLisa Zimmerman, Justine PETERSEN
Coffee BreakBe back in 10-minutes!
Bootstrap Financing Maximizing Benefits by Minimizing Risks
Raymond E. Williams, Williams Law Office LLC
Bootstrap Financing
Bootstrap Financing
Starting or financing a company with little capital using personal finances, relationships, and operating revenues of the company
Sources of Bootstrap Financing
• Savings • Credit Cards • Factoring of Accounts Receivable • Trade Credit • Customer’s Letters of Credit • Leasing • R/E Equity Loans • Friends and Family
Risks of Bootstrap Financing
Personal Risk • Agreements done without professional
assistance & documentation • Banks, Accountants, Attorneys • Friends and Family • Adhesion, non-negotiable, unfavorable terms
in Agreements • High Interest and Costs • Legal Risks
Avoiding the Risks
• Understand the Agreement • Write it Down
Examples
1) Family & Friends • Gift, Loan, Investment • If an investment, what are the terms
• ownership, vote, day-to-day decisions • manager salary / distributions • additional capital • dissolution of company • is the investment marital property? • what if someone dies?
LLC Operating Agreements
Missouri Revised Statute, § 347.081.1 Operating agreement, contents--policy statement--enforceability, remedies. 347.081. 1. The member or members of a limited liability company shall adopt an operating agreement containing such provisions as such member or members may deem appropriate, subject only to the provisions of sections 347.010 to 347.187 and other law. The operating agreement may contain any provision, not inconsistent with law, relating to the conduct of the business and affairs of the limited liability company, its rights and powers, and the rights, powers and duties of its members, managers, agents or employees. . . .
Examples
2) Loans • Security / Collateral
• Promissory Note: Defines terms of repayment and default
• Security Agreement: Provides collateral for the loan if case of default and defines the terms in case of default
• Generally, must be in writing if > 1 year • Avoids confusion over repayment, interest,
fees, and collections for both parties
Examples
3) Guarantors / Co-signers • Guarantor co-signs promissory note • After default, what happens – lender takes
the Guarantor’s money but what happens to the Guarantor?
Examples
4) Buy – Sell Agreement with Seller Financing • New owner purchases business from Seller,
without bank credit & owner wants a monthly income stream
• Seller finances with monthly payments at competitive interest
• Buy-Sell Agreement but no Security Agreement
• Buyer decides to leave Missouri and defaults on loan
• Buyer sells all fixtures, equipment, inventory and leaves the state
Examples
5) Leases a) Software
• Popular with software now – especially with the “Cloud”
• What if it doesn’t work right? b) Equipment
• Will you own it? • What if you don’t want it? • Can you buy it? • What are the costs?
Personal Guarantees
• Rare for a New Business to Not Face Personal Guarantees for Financing
• Often the case for Bootstrap Financing • Personal Credit Cards • Home Equity Loan • Leases • Loans • Friends and Family!
• Goal of the business is to separate personal asset liability from business asset liability • Legal Liabilities • Financial Liabilities
Tax Consequences
I’m not an accountant, but I encourage you to visit with one about the tax consequences of any of these methods of Bootstrap Financing that you might choose to employ.
Summary
Bootstrap Financing • Know and manage the risks at
the outset • Avoid legal and financial pitfalls • Tremendous Source of Capital
for Your Business
Raymond E. Williams
Williams Law Offices, LLC
(417) 256-4529
Equity & Mezzanine FinanceJason Graf, CEO, CrowdIt
EQUITY & MEZZANINE FINANCING
- Business Broker for Murphy Business & Financial
- SCORE Mentor
- CrowdIt.com
- JP Advisors - Operations/Capital Acquisition
- BYOP “Build Your Own Pizza
- Auto Concierge
- BEO Now
- Idea Guy / Creative Thinker
- SERTOMAN
• Self-fund
• Borrow
• Friends and Family
• Outside Investors
• Accredited
• Non-Accredited
• Accredited Investors
• 10-12 Million Households in the US, out of 117
million
• Test: $1M net worth (exclude home & related
debt); or$200K income last 2 years (or $300K with
spouse)
If you're a young entrepreneur who owns your own business
or wants to launch one, you have two basic ways to raise
money: with debt and with equity.
Debt financing means borrowing money.
Equity financing means selling a piece of the company.
Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes.
Shares
When a company sells shares to other investors, it
gives up a piece of itself as a way to raise money to
finance growth.
Small, privately held companies sell shares to
private investors, who then hold equity in the
company.
Companies that are more ambitious open their
shares up to the public. When a company goes
public and sells shares of stock, it's selling many
pieces of itself to whoever wants to buy.
In most cases this is the quickest way to amass
large amounts of cash to finance growth.
Venture Capital
Young companies often need money for growth or for
research and development, but they're not far enough along
to sell stock.
In such situations, they often look for help from venture
capitalists, or VCs. These are professional investors who
identify promising companies and sink money into them in
exchange for a share of ownership -- and, often, a voice in the
direction of the business.
Venture capitalists are in it for profit. They expect to cash in
their ownership stake when the company either goes public
by selling stock or gets acquired by another company.
Taking on a Partner
If you're looking to open a restaurant or a small
shop, you should understand going in that your
equity financing options will be very limited. You
might not get much interest from stockholders or
venture capitalists because the risk might be too
high and the return too low.
One option is to turn to the oldest form of equity
financing there is: taking on a partner.
You might tell a couple of friends that if they
each chip in $25,000, they will have equity in the
business.
In some instances, such as when everyone
invests the same amount of money, you will be
equal partners.
In other cases you might want to retain a
majority stake of the business and have partners
control less than 50% of the business.
Convertible Debt
Convertible debt blends the features of debt financing and equity financing. In basic terms, convertible debt starts out as a
Those benchmarks might have to do with reaching revenue targets, raising money from other sources, or gaining a specific mark
Convertible debt offers investors a measure of security: They start out with a promise that they will be repaid, which is not
THE PROS THE CONS
No Interest Payments - You do not need
to pay your investors interest, although
you will owe them some portion of your
profits down the road.
Giving Up Ownership – Equity
investors own a portion of your business,
and depending on your particular
agreement, they may be able to have a
say in your day-to-day operations,
including how you spend the money that
they’ve invested.
For example, if you think you need a
BMW to meet with clients, and they
think you need a used Honda – you’ll be
in the Honda.
Depending on who your investors are,
and how their vision for the business
aligns with yours – this can be no
problem at all, or a major pain in the you-
know-what.
No Liability – If the business doesn’t
succeed, the investors are the ones who
take the hit – not you or your family.
No Monthly Payments - You probably
won’t need to make monthly payments
until you make a profit – which keeps
more cash in your pocket while you get
things up and running.
Mezzanine financing is basically debt capital that
gives the lender the rights to convert to an ownership or
equity interest in the company if the loan is not paid
back in time and in full. It is generally subordinated to
debt provided by senior lenders such as banks and
venture capital companies.
Typically Larger Companies
• Tech
• Healthcare
Mezzanine Financing
Tutorial
Advantages of mezzanine financing
• Mezzanine capital gives your business the ability to execute a change of control, expand or acquire a competitor.
• Interest-only payments allow your company to conserve cash.
• While you may lose some independence, there’s usually no loss of majority control of the company.
• Flexible financing can be structured to best meet the needs of your business.
• Mezzanine lenders can provide valuable strategic guidance and financial sophistication.
Disadvantages of mezzanine financing
• You may be required to relinquish some equity upside so the lender can achieve its required rates of return. (On
the flip side, mezzanine lenders are there for the long term, so they have your company’s best interests at heart.)
• Mezzanine financing is more costly than other forms of debt, and may come with restrictive covenants.
• The lender likely will require a board seat (typically, nonvoting).
• Mezzanine financings are highly negotiated, and the process may be lengthy.
You may want to consider mezzanine financing if your company has a record of strong cash flow and needs more
funds than traditional senior debt can supply.
• Start - Up
• Business Plan Only
• Large Investment Sought
• 7 Accredited Investors
• Debt / Equity
• 30% first half
• 40% total
• Existing Concept with Poor Management
• Franchise Concept
• Owner needed help
• Secured Sweat Equity in exchange for Operations
• 20% Ownership
• Secured Investor at 80% for funding
• Up to $750,000 to launch stores / Franchise
• Business was listed for sale
• Decent Profits / Price
• Awesome Potential for Scalability
• Secured Investor for Purchase $
• Debt / 30% Equity (reduced to 20% at payoff)
• Earn-out financing
• Start-up Company
• Founder asked us to partner
• Needed operations / organization help
• Accounting
• Staffing
• Management
• funding
• Secured 20% Ownership
• Helped secure funding
DISCUSSION
Angel InvestingJohn R. Perkins, Inspire Capital Corporation
Briefing for
West Plains Access to Capital
May 6, 2015
Key Definitions
• Angel investing: Directly investing personal funds
in an early-stage business. Because the
investment occurs soon after a business is started
(and thus is risky), an angel must be financially
capable of losing the entire investment. As such,
most angel investors are relatively high-net-worth
individuals.
• Angel organization: A formal or informal group of
active angel investors, typically characterized by
(a) control by members and (b) collaboration by
members in the investment process.
Source: Adapted from Kauffman Foundation angel-investing guidebook.
Sources of $ for Start-Ups &
Early-Stage Firms *
• “Pre-angels” (friends, family, credit
cards) Typically $25,000 - $100,000.
• Angels Typically $150,000 - $500,000
+ expertise & advice.
• Grants & contracts (e.g., MTC, SBIR)
Wide-ranging amounts.
• Venture capital firms Typically $1
million - $30 million.
* A bank might make a loan (e.g., SBA-guaranteed).
Angel Investors & Venture Capital
Firms Complementary
2013 Angel InvestmentSource: UNH CVR
Ea
rly
Sta
ge
Late
r
$24.8B +8.3%
70,730 deals
+5.5%
Avg. size = $351K
+2.6%
Primarily start-up
stage
2013 VC InvestmentSource: PwC/NVCA
Mostly early &
expansion stages
$7.36M avg. size
+3.7%
3,995 deals +4%
$29.4B +7%
Intended Benefits for
Angels & Entrepreneurs
• Obtain attractive ROI over long term (a triple
&/or a HR along with many K’s).
• Prior to investment, give reactions & advice to
company founders & management.
• Invest $$$ in start-ups.
• Following an investment, provide guidance &
feedback to entrepreneurs & their companies.
This list shows the motivation for angel investors
as well as potential benefits to entrepreneurs.
Overview of CI
• Created/formed by Columbia Chamber of
Commerce as part of its centennial
celebration $10K in start-up funds.
• Founded in mid-2006, first deals in 2007.
• 65 members all accredited investors.
• No $ put into a fund; no requirement re. $
invested per year.
• Individuals make own investment
decisions.
Deal-Selection Criteria
• Primary focus on technology- or
science-based start-ups.
• Especially interested in mid-Mo.
deals; will consider deals from
elsewhere in Mo.
• Prefer deals needing $150K - $500K.
• Desire high-potential (scalable)
ventures.
• Favor exit in 3 - 7 years.
Deal Process
Each step requires “thumbs up” for
process to continue:
1. Online application.
2. Prescreening by Missouri Innovation
Center (supports entrepreneurs,
operates incubator).
3. CI screening (committee of members).
4. Presentation & Q&A at members
meeting (20 + 15 minutes).
Deal Process (contd.)
5. Gauge interest (prefer >15 members).
6. CI due diligence underlying science
or technology, business plan, IP,
management, market opportunity.
7. Negotiate deal terms with company.
8. Form LLC for CI investors & collect $.
9. Close deal & arrange CI liaison.
10. Periodic updates to investors.
Deal Flow Funnel (Annually)
1. # of entrepreneurs that contact CI/MIC about
possible funding = >100.
2. Of 100, # that apply to CI = 30 (ratio depends on
application fee).
3. Of 30, # sent to Screening Committee = 20.
4. Of 20, # that get “thumbs up” from SC & present
at members meeting = 12.
5. Of 12, # that proceed to due diligence = 6.
6. Of 6, # in which CI invests = 2.
Plan/hope to increase deal flow increase # of
investments 5 deals closed since start of 2014.
Results to Date
• Typical member investment = $5K-$20K.
• $3.7M invested in 18 deals:
– 4 from MU & 14 from community.
– 12 group investments & 6 investments by several
individuals.
• CI investments facilitated >$3M of grants,
equity, & debt for invested companies.
• 1 successful exit, 13½ operating, & 3½ RIP.
• Have created >75 new jobs (>60 FTE).
CI’s Investments to Date
Descriptions of CI’s Investments *
• Newsy – multiperspective online video
news service.
• Nasopure – nasal washing device.
• Equinosis – equine lameness detection &
evaluation system.
• Immunophotonics – cancer therapy using a
drug/device intervention.
• EternoGen – collagen scaffold matrix for
regenerative medicine.
* Range = $15,000 to $500,000.
Elemental Enzymes
• “Our mission is to provide ultra-stable
enzymes and other custom biologics to a
variety of industries. Our products are
engineered for use in harsh conditions
such as outdoors and in industrial
processes.”
• CI investment in 2012 = $400,000 from 35
members.
Thank you!
Questions?
Commercial LoansEric Judd, West Plains Bank and Trust Company
Lunch BreakCatered by Colton’s Steakhouse & Grill
City and State Tax IncentivesRobert D. Case, City of West Plains
Luke Holtschneider, Missouri Department of Economic Development
SBA Loan ProgramsEric Gholz, U.S. Small Business Administration (SBA)
SBA Programs and Resources
Eric Gholz, Economic Development SpecialistU.S. Small Business Administration
Springfield, MO Branch Office
KCDO & Springfield Branch Counties
www.sba.gov 2
www.sba.gov 3
4
SBA Loan Numbers in Southwest MO
• Total of 317 SBA loans made this past fiscal year
(Oct ‘13 – Sept ’14) for a total of $98,008,800.
• Top industries this last year:• Automotive parts and repair shops
• Liquor stores
• Chicken production
• Hotels and motels
• Dentists, lawyers, chiropractor, veterinary offices
• Plumbing, heating, and A/C contractors
www.sba.gov 5
SBA 7(a) Loan Programs
• Several loan programs through participating lenders and guaranteed by SBA
• Type of program depends on amount and lender
• Loan funds come from bank, not direct from SBA
• Borrowers work with lender and lender works with SBA on paperwork
www.sba.gov 6
SBA 7(a) Loan Uses
• Start a business
• Purchase an existing business
• Refinance debt
• Purchase/construct building, leasehold improvements, equipment and inventory
• Working capital and lines of credit
www.sba.gov 7
Benefits to Borrower
• Help banks make loans in some cases where they may not normally be able to make the loan
• Longer term = lower payment = improved cash flow
• Helps with shortfall in collateral
• No balloon payments
• Favorable interest rates as we set maximum rates
www.sba.gov 8
Fees to Borrower (7a)
Guaranty Fee to SBA*:
Loans over 1 year and based on guaranteed portion:
• Loans $150,000 or less: 2% (waived during FY15)
• Over $150,000 to $700,000: 3%
• Over $700,000: 3.5%
• Additional .25% for guaranteed portion over $1 million
Loans 1 year or less: .25% of guaranteed portion
Can be added to proceeds of loan*
www.sba.gov 9
Terms (7a)
• Maximum to one borrower/business outstanding at one time: $5,000,000
• Generally, 75-85% guaranteed to bank; this is how much SBA will pay out on a loss to the bank
• Building purchase or construction: up to 25 years
• Equipment, working capital, inventory: up to 10 years
• If combined uses: between 10 and 25 years
• Lines of credit: up to 7 years
www.sba.gov 10
Interest Rates (Except SBA Express and 504 programs)
• Variable Rate Maximum
• Under 7 years: Prime + 2.25%; Currently 5.5%
• 7 years and over: Prime + 2.75%; Currently 6.0%
• Fixed Rate Maximum
• Under 7 years: Currently 7.60%
• 7 years and over: Currently 8.10%
Loans $25K or less: add 2% more to maximum
Loans over $25k to $50k: add only 1% more
www.sba.gov 11
504 Fixed Asset Loan Program
• A 504 loan can be used for:
• The purchase of land, including existing buildings
• The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
• The construction of new facilities or modernizing, renovating or converting existing facilities
• The purchase of long-term machinery and equipment
www.sba.gov 12
504 Fixed Asset Loan Program
• Borrower puts in 10% of cost
• New business or special purpose property – 15%
• Both new business & special purpose property – 20%
• Bank finances 50%
• Certified Development Company (CDC) finances 30-40% depending on amount of equity injection
• 10 & 20 year terms
• Great fixed interest rates on CDC’s financing:
• 4.821% for 20 year term (October 2014)
• 4.695% for 10 year term (October 2014)
www.sba.gov 13
• The Microloan Program assists small businesses in need non-traditional financing.
• The SBA provides loans and grants to Intermediaries who deliver technical assistance and training
• A microloan is up to 6-years in length, fixed rate, of $50,000 or less
• It may not be a line of credit.
• A microloan of more than $20,000 generally prohibited unless the borrower demonstrates that it is unable to
Microloans
About a micro lender intermediary
• The Intermediary Makes all Credit Decisions
• Must be organized as a not-for-profit, quasi-governmental economic development agency, or an established Native American Tribal Government
• Intermediaries are required to provide technical assistance to their microloan borrowers
• A microloan of more than $20,000 is generally prohibited unless the borrower demonstrates that it is unable to obtain credit elsewhere at comparable interest rates
Basic SBA Eligibility Criteria
• Must be for-profit
• Business must be located in U.S.
• Show ability to repay loan through cash flow
• Not be on parole, probation or incarcerated
• Must be considered “small”
• Not more than $15 million in tangible net worth or more than $5 million in net profit (avg last 2 years)
• Eligibility Questionnaire from lender
• Several types of businesses or scenarios may be ineligible
www.sba.gov 16
Items to Bring to Bank
• Business plan
• History/description of business
• Management experience/resumes
• Last 3 years of income statements and balance sheets with interims to date
• Last 3 years of filed business tax returns
• Cash flow projections
www.sba.gov 17
Items to Bring to Bank
• Aging of receivables; inventory listings
• Quotes/purchase contracts for items to be purchased with loan proceeds
• Listing with terms of other business debts
• Franchise agreements
• Leases
• Details of additional financing
• Details of criminal history: type of offense, dates, etc
www.sba.gov 18
Questions?
Contact info:
Eric Gholz
830 E Primrose
Springfield, MO 65804
(417) 890-8501 Ext. 203
Snack BreakBe back in 10-minutes!
Certified Development CompanyMindy Murray, Rural Missouri Inc. (RMI)
Export Working Capital and Credit Insurance
Mark E. Klein, Export-Import Bank of the United States
Export-Import Bank of the United States
EX-IM Bank – Exports Through Jobs
The official Export Credit Agency (ECA) of the U.S. Government
Self-sustaining and Independent
Established in 1934 Headquarters in D.C. Twelve Regional Offices
EX-IM Bank enables U.S. companies –large and small-
to turn export opportunities into real sales that help to
maintain and create U.S jobs and contribute to a
stronger national economy.
Export-Import Bank of the United States
Where are those Regional Offices ?
Export-Import Bank of the United States
• $675 Million returned to U.S. Treasury in 2014
• Default Rate of .175% as of the end of 2014
No Cost to Taxpayers
Export-Import Bank of the United States
Small Business IS Our Business
▪ 90% of transactions support small business
▪ No transaction is too small
Export-Import Bank of the United States
No Deal is Too Small for EX-IM Bank
$12,600$800$400
Global Consumers
(We’re only 5%)
Export-Import Bank of the United States
Working Capital Guarantee
▪ Funds to pay for raw materials, labor, supplies, etc.
▪ 90% guarantee to lenders for export-related working capital
lender loans
▪ Transaction specific or revolving loans
▪ No minimum or maximum amount
▪ https://www.youtube.com/watch?v=5Ct7Ea_zmSU
Export-Import Bank of the United States
Our Guarantee Increases Your Borrowing Power!
Export-Import Bank of the United States
Export Credit Insurance – Exporter Benefits
Risk Mitigation
▪ Allows exporters to safely extend credit terms to foreign
buyers
Competitiveness/Marketing
▪ Extend terms to existing customers
▪ Attract new customers and enter new markets
Financing Tool:
▪ Ability to assign foreign receivables
▪ Accelerate cash flow
▪ https://www.youtube.com/watch?v=pXmhoFuz1-8
Export-Import Bank of the United States
Covered Risks
Commercial Risks
▪ Insolvency
▪ Bankruptcy
▪ Protracted default
Political Risks
▪ War, revolution, insurrection
▪ Cancellation of import and export license
▪ Currency transfer risk
Export-Import Bank of the United States
Short-Term Export Credit Insurance
Express Insurance Policy
▪ New policy (introduced 3/30/2011) for small
businesses with up to 20 debtors
▪ Streamlined application
▪ EX-IM Bank will secure information on the first
couple of debtors and provide quote and debtor
approval within 5 business days for amounts up
to $300,000
Must Meet SBA Small Business Guidelines
Export-Import Bank of the United States
Short-Term Export Credit Insurance
Small Business Multi-Buyer Policy
▪ For exporters with annual export credit sales of
less than $7.5 million, and which meet the SBA
definition of “small business.”
▪ Special rates with no country risk factor
▪ $500 deposit and NO deductible
Must Meet SBA Small Business Guidelines
Export-Import Bank of the United States
Pricing: Small Business Multi-buyer Policy
Term/
Type of Foreign Buyer
Class I:
Sovereign
Class II:
Bank
Class III:
Private
Sight Letters of Credit $0.03 $0.03 N/A
S/DD/P; CAD $0.06 $0.08 $0.20
1-60 Days $0.16 $0.20 $0.55
61-120 Days $0.27 $0.33 $0.90
121-180 $0.35 $0.43 $1.15
181-270 days $0.43 $0.54 $1.45
271-360 Days $0.53 $0.65 $1.77
Pricing per $100 of insured shipments
Export-Import Bank of the United States
Short-Term Export Credit Insurance
Standard Multi-Buyer Policy
▪ For exporters not defined as a small business, or
have annual export credit sales of more than
$7.5 million
▪ Premiums based on term, country, and buyer type
▪ Varied deposits and deductibles apply
Export-Import Bank of the United States
Short-Term Export Credit Insurance
Single-Buyer Policy
▪ For exporters wishing to insure single or multiple
shipments to one buyers
▪ Premiums based on term, country and buyer type
▪ NO deductible, but minimum advanced premium
and deductibles apply
Export-Import Bank of the United States
Buyer Financing (Medium-Term)
Used to finance foreign buyers purchasing U.S. capital
equipment:
▪ 85% financed, 15% cash down payment
▪ Repayment up to 5 years, exceptionally 7 years
▪ Amounts of $10 million or less
Export-Import Bank of the United States
Just A Few Restrictions
▪ U.S. Content Policy
▪ Military Policy
▪ Restricted Countries (CLS)
Export-Import Bank of the United States
U.S. Content Policies
▪ Short-term:
Must exceed 50% U.S. content to support the entire
transaction
Products must be manufactured in and shipped from the
U.S. (for pre-export, companies must be located in the U.S.)
Services must be performed by U.S.- based personnel
▪ Medium-term:
If contract has no more than 15% foreign
content, Bank supports 85% of the contract price
Otherwise, the Bank will limit support to the
U.S. content
Export-Import Bank of the United States
Military Policy
No Defense Articles or Services, or Military buyers
Three Exceptions:
▪ Humanitarian purposes▪ Drug interdiction▪ Dual use items
Export-Import Bank of the United States
Restricted Countries
▪ EX-IM Bank is open in all continents, with the
exception of some countries
▪ Country restrictions for political or economic
conditions and default Issues
▪ Refer to the Country
Limitation Schedule (CLS)
www.exim.gov, and under
Country/Fee info.
Export-Import Bank of the United States
Country Limitation Schedule (CLS)
Export-Import Bank of the United States
One Final Tool/Resource…
Export-Import Bank of the United States
Success Story – Auburn Leather; Auburn, KY
Export-Import Bank of the United States
Contact Information
Mark E. Klein
Regional Director
Central Region
Phone: 312.353.8073
Cell: 312.375.1883
Accounts Receivable Financing and Letters of Credit
Christine Glauber, Arvest Bank
International Department Mission
“People Helping People Find Financial Solutions for…Doing Business Across Borders…
With the Top Service Level Available in the International Banking Market.”
International Trade Services
• Import and Export Letters of Credit
• Import and Export Documentary Collections
Standby Letters of Credit
• Domestic Standby Letters of Credit
• International Standby Letters of Credit to support
Bid, Warranty and Performance Guarantees
International Treasury Management
• Foreign Exchange Wires & Cash Management
• Foreign Exchange Advisory Services & Risk Mitigation
4 Basic Methods of Payment and the
Relative Risk
Exporter
Open Account
Documentary Collections
(Time)
Documentary Collections
(Sight)
Letters of Credit
Confirmed Letter of Credit
Cash in Advance
Importer
Trade Services
• Standby Letters of Credit
– Domestic Standby Letters of Credit
• Widely used in the U.S. but also worldwide
– International Standby Letters of Credit
• Used in the form of Bid or Performance Bonds (Bank
Guarantees)
Trade Services
• Commercial Letters of Credit
– Import Commercial Letters of Credit
• Used as a mechanism of payment for imported goods
– Export Commercial Letters of Credit
• Used as a mechanism of payment for exported goods
Advising / Confirming Bank
Ap
plic
atio
n
Beneficiary/Seller
Exporter
Contract
Goods
Letter of Credit (Sight/Time)
Documents
Applicant / BuyerImporter
Issuing/Opening Bank
Letter of Credit Process
Trade Services
• Documentary Collections – Inexpensive, non-loan
related product for high volume trade with
repetitive customers
– Import Documentary Collections
• D/A or D/P
(aka CAD or Cash Against Documents)
– Export Documentary Collections
• D/A or D/P
Cash Management & FX
• International Cash Management
– International Wires (USD and FX)
– Foreign Bank Drafts
– Foreign Check Clearing/International Cash Letters
• Foreign Currency Advisory Services
– FX Risk Awareness Hedging Strategy
– FX Risk Mitigation
– Forward & Window Contracts
Accounts Receivable Financing
• Ex-Im Bank– $3.5MM Delegated Authority
– Delegated Authority can expedite the lender’s loan process by having Ex-Im Bank’s committed guarantee without prior approval
– Ex-Im assumes 90% of the lender’s credit risk
– Other Ex-Im Programs
• www.exim.gov
• SBA Programs (i.e.Export Express)
• Export Credit Insurance
Questions?
International Department
Phone: 1 (855) 682-2113 or (918) 631-1097
E-mail: [email protected]
SWIFT: ARVTUS44XXX
Christine Glauber ~ (918)520-9316 ~ [email protected]
One-on-One AppointmentsPlease check the schedule with Glenda and meet at your assigned table.