letter of credit basics seminar foreign receivable financing programs davi tserpelis senior vice...
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Letter of Credit Basics Seminar
Foreign Receivable Financing Programs
Davi TserpelisSenior Vice PresidentCommercial Banking
[email protected] – 631-265-4484
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Objective
Provide an overview of government sponsored lending
programs available to support cash flow for exporters
– Small Business Administration
SBA Export Working Capital Program
– Export – Import Bank of the US
EXIM Working Capital Guarantee Program
EXIM Medium-Term Guarantee Program
EXIM Long-Term Guarantee Program
EXIM Financial Institution Buyer Credit Program
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Export Working Capital Programs:Who do they support?
Programs are primarily for small and medium-sized
businesses that are U.S. domiciled exporters
Company is a manufacturer, trading company, wholesaler,
distributor or a service company
Qualifying businesses:
– SBA products- determined by an entity’s industry (NAICS code)
and either number of employees or Annual Receipts (in millions)
– EXIM products – determined by EXIM Country Limitation
Schedule and US content requirements
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Export Working Capital ProgramsCommon qualifying business purpose usage
Finance of foreign accounts receivable
Acquire inventory for export or to be used to manufacture goods for export
Pay the manufacturing costs of goods for export
Purchase goods or services for export
Support standby letters of credit related to export transactions
Working capital directly related to export orders
Support an indirect export. (The borrower’s direct customer is located in the United States and his customer is overseas)
Goods must be shipped from the USA
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EXIM Working Capital Program Standard Structure Basics
Facility Size $1,000,000 minimum
Up to 90% against foreign receivables up to 180 days old
(depending on credit insurance) and up to 75% against
export related inventory
Typically a one year annually renewable credit line
Monthly borrowing base certificate
Fees vary
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Working Capital Guaranty Programcore benefits
Enable clients to grow their export business
Enable clients to borrow against foreign accounts receivable
and inventory typically not conventionally financed
Higher leverage and advance rate than conventional
financing with government guarantee
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Determining which product is the best fit: EXIM’s WCGP vs. SBA EWCPDescription EX-IM Bank WCGP SBA EWCP
If product does not meet 50% US content No Yes
Products manufactured abroad 100% No Yes, must be shipped from the USA
Defense product or defense customers; No Yes, subject to Citi ‘s credit policy
Transaction Specific ( large contract 1-3 buyers)
Yes No
90 % advance rate of foreign A/Rs Yes, dependent on underwriter Yes, dependent on underwriter and foreign receivable insurance requirements
A/R credit insurance required Typically, no, only required in some cases by underwriter Yes, but can be mitigated with three or more years of documented positive buyer experience, only 80% advance
rate on A/R’s without insurance
Use of proceedsTo acquire inventory and pay for productions costs; To purchase goods for resale; Delivery
of services;To support stand-by letters of credit with
reduced (25%) collateral.
Yes Yes
Loan max Unlimited $5 MM
Loan minimum 1MM 1MM
Fees Application Fee, Facility fee depends on term of loan:
6 months: .75% of loan amount12 months: 1.50% of loan amount
(The facility fee is reduced if 100% of the borrower’s A/R are either insured or covered by a letter of credit.) or if borrower meets industry medium quartile for
4 out of 7 key ratios
SBA charges a guaranty fee of .25% per year
Interest rate Negotiable with lender Negotiable with lender( should include ongoing fee)
Requirement to use outside counsel Yes, only certain approved EXIM lawyers No, unless required by underwriter
Field examinations required Yes, semi-annual at borrower’s cost, annual with audited financials No, (but subject to Citi’s underwriting requirement )
Monitoring of borrowing base Yes Yes
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EXIM Medium-Term/Long-Term Guarantee Program Overview
Term loans for your client to purchase large ticket items from your Company wherein bank
has a local presence
Finance refurbished items, construction cost, computer software, engineering cost and
some local overseas cost, etc
No defense articles or services, or military buyers and shipped from US
Buyer must be in an eligible country according to EXIM Country Limitation Schedule and
bank
Buyer must be in business for at least three years and able to provide current financial
statements and three years of audited financial statements
Finance up to 85% of the purchase price or the US content, whichever is less
Finance term between 2 and 5 years for Medium Term and 5-10 for
Long Term
Minimum $1,000,000
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Financial Institutional Buyer Credit (FIBC) Program
Allows bank to lend to a foreign buyer of US goods and services on a short-term basis
backed by insurance
This policy affords coverage against commercial defaults and political events that
result in nonpayment under a buyer obligation.
The policy also provides coverage against political risks such as war, revolution,
expropriation or confiscation by a government authority, cancellation of import or
export licenses after shipment and foreign exchange inconvertibility, and commercial
losses due to protracted default, insolvency of the buyer or failure to reimburse for
other reasons. Devaluation is not covered.
Political only coverage is 100%;
Non-sovereign obligors/guarantors, including non-sovereign public sector and private
sector financial (non-letter of credit) and non-financial institutions is 90% coverage;
and
Approved agricultural commodities are covered at 98%
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How the Lender will support you…
Citibank is a preferred lender of programs
Educate Company on products and identify best product for Company Help qualify Company for program and process loan request including application completion and underwriting
Process Bank and Government Agency Approval
Ensure that government agency is notified of loan closing
Service relationship and present other complimentary solutions (ex. trade credit, foreign exchange, international banking)
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© 2012 Citigroup Inc. Citibank, N.A. Member FDIC. Citi with Arc Design is a registered service mark of Citigroup Inc. Citigroup is an equal credit opportunity lender. Fees and conditions apply to certain of these products and services. Please contact your Citibank representative for the specific terms that apply to each product and service.All banking, commercial loans and credit lines are provided by Citibank, N.A. (Citibank), an equal opportunity lender, or its banking or lending affiliates. All credit products are subject to satisfaction of Citibank’s underwriting guidelines and credit approval. Fees and conditions, Including minimum balances, apply to some deposit and other products and services described. Treasury products are made available through Citibank. Subject to credit approval. Citibank is an equal credit opportunity lender. Offer subject to change or termination at anytime without notice, and cannot be combined. The terms, conditions and fees for accounts, products, programs and services are subject to change. All accounts and services are subject to approval .
Thank You For your Time Today Davi Tserpelis
Senior Vice-President Commercial Banking
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