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After almost 80 years of operation, the Export – Import Bank of the United States (
Ex-Im Bank) currently faces an uncertain future
of whether or not it will be re-authorized.
During this time, many American companies are caught in limbo, especially small
and medium-sized enterprises (SMEs). In addition to providing products such as credit
insurance to U.S. companies, Ex-Im Bank
also provides working capital guarantees
against loans to U.S. exporters subsequently
supporting nearly 164,000 jobs in the United
States. As 90% of Ex-Im Bank’s loans supported U.S. SMEs, SMEs are now having difficulty
finding alternative financing to continue to
run their businesses.
We sat down with Randy Abrahams, Executive Chairman of Ex Works Capital LLC, to
discuss the current situation from the view
of the private sector marketplace.
Private sector offering costs are generally
higher if they are not guaranteed by a gov-
ernment agency such as Ex-Im or the Small
Business Administration (SBA). On the pri-
vate side, Ex Works Capital takes a minimal
share of the exporter’s gross margin. It is
more expensive, but allows the companies
to sell and capture margins. Otherwise, they
are unable to ship product due to the lack of
financing options from traditional banks or
lenders on the international side without a
The SBA program provides a guarantee on
working capital loans similarly to Ex-Im
Bank, with a few key differences. Under
the SBA program, the country limitation
schedule is not as strictly observed as Ex-Im
Bank, the company must have 500 or fewer
employees based on industry and military
related products are not restricted.
After acquiring World Trade Finance
in California, Ex Works Capital now has
the ability to extend SBA working capital
guaranteed loans up to $5 million. The acquisition was a strategic move for Ex Works
Capital due to the uncertainty of Ex-Im
Bank. Not only do the companies have to
search for alternative options, but so do the
The cost of insurance in the private marketplace is higher than Ex-Im in most instances
especially since Ex-Im insurance offerings
are transaction specific. Ex-Im prices their
product well and is considered worldwide
to be reliable on execution of claims. Private insurance pricing can prove complex.
Private insurers center their pricing around
a significant amount of data on the credit
pools they insure.
It is important to remember insurance is
just one product of Ex-Im. The guarantee of
loans by Ex-Im is a significant part of their
In a world without Ex-Im support for export-
ers, there are only two options for small to
mid-size business. The first is to pay more
for capital and insurance (that may or may
not be available). The second option is to
curtail shipments, which is more costly. For-
tunately, there are certain financing options
that can keep these businesses running
and workforce employed like those options
provided by Ex Works Capital.
As we sit at the time of this printing, Ex-Im
Bank remains unable to offer new credit to
its program user population which is comprised mostly of large and regional banks
that provide the financing through to end
borrowers. It remains unclear as to whether
a rarely used motion will be successful to
move Ex-Im to the floor for a vote, at which
point it would likely be approved.
It is hard to imagine an economy such
as that here in the United States not having
an Ex-Im Bank to support exports. The key
to Ex-Im’s future, if reauthorized, will hinge
on how it may be reauthorized. The term of
its reauthorization and rules under which
it can operate forward could be revised and
may impact its effectiveness.
To some degree, it may simply be too
late. Some major industrial manufacturers,
like G.E. and Boeing, have recently announced closings of plants in the U.S. and
new plants to be built and manned offshore
as they find support in Canada, France and
China. The manufacturers claim the lack of
clarity around Ex-Im as reason for their departure. Can these companies be blamed as
they do not operate in a theoretical world?
The companies have a business to run and
those host countries will gladly embrace the
job creation through credit enhancements
their government agencies will be pleased
to provide in Ex-Im Bank’s absence.
Ex Works Capital is a domestic and export trade
finance company offering financing solutions to
businesses utilizing its own capital, as well as by
leveraging its Delegated Authority granted by
both SBA and Ex-Im. Ex Works Capital’s offerings include Working Capital Financing, Term
Loan Financing and Export Trading.