Expanding U.S. Sales Overseas with Export Financing
29 Feb, 2012By: Charles Tansey
The Export-Import Bank of the United States (Ex-Im Bank) is breaking the mold on how the U.S. does business overseas. By providing competitive financing to American companies, it provides business owners a level playing field to face foreign competitors head on. Expanding sales of U.S. products into foreign markets is putting Americans back to work, and Ex-Im Bank has the resources to support them. The demand for American products is resonating abroad, but not enough businesses are able to meet those demands without help. Last fiscal year, Ex-Im Bank set export finance records including $32 billion in total authorizations and $41.3 billion in export sales at more than 3,600 U.S. companies, supporting approximately 290,000 American jobs. To engage more customers in more countries, American companies need to know the resources available to them.
Global Access for Small Business
In fiscal year 2011, small business financing rose over 70 percent from $3.3 billion in FY 2008 to $6 billion in FY 2011 and is up almost $1 billion from last year. Ex-Im Bank's Global Access for Small Business program addresses the demands of small business by providing finance solutions that are accessible and efficient. Ex-Im Bank increased its outreach efforts for small business in FY 2011 through Global Access forums and webinars, sharing with small business owners the opportunities available to improve their bottom line and increase sales by exporting goods and services.
Ceilings Plus Inc. is a small, woman-owned business in Los Angeles, California, that manufactures high-quality ceiling and wall panels. The company began exporting about five years ago, and more than 50 percent of its sales are now from exports.
The company first came to the attention of Ex-Im Bank in 2007 via a lender, Bank of the West, regarding its pre-export working capital needs. Ceilings Plus had won an $18 million contract for the expansion project of the Doha International Airport in Qatar. Although the company was successful in the United States, this was its first international deal, and a $2.2 million performance bond and collateral were required.
Ex-Im Bank's guarantee of a working capital loan enabled Ceilings Plus to access funds that would have otherwise been tied-up in the performance bond. The company subsequently was awarded an $11 million contract for Phase II of the project, for which Ex-Im’s guarantee was used again to support financing for issuance of a performance bond.
The Bank’s working capital guarantee has been instrumental. Due to its increased foreign sales growth, Ceilings Plus has increased its workforce from 86 employees in April 2008 to 150 employees in April 2011.
"Ex-Im Bank has engaged in steady collaboration with our company and our local bank to provide the financial support we needed. This helped give us the confidence to venture into the international world. Ceilings Plus sales have more than doubled and have increased our employment with the help of Ex-Im," said Ceilings Plus President Nancy Mercolino.
Mercolino’s comment is typical of small business owners that have benefited from Ex-Im Bank financing. Other small business success stories leverage Ex-Im Bank’s outreach effort to engage more small businesses and bridge the gap between them and foreign buyers. Company owners want the peace of mind that entering into the international marketplace is not only possible, but also a smart business move. Products like small business export credit insurance and working capital loan guarantees are the tools that ensure success for American businesses.
Gaining the Know How
In December, Ex-Im released its 2011 Annual Report, a comprehensive analysis of the Bank's export financing in fiscal year 2011. One feature is the report’s identification of key industries and markets guide its customers on where the economy is shifting in the global market.
Ex-Im Bank is focusing on a number of industries with high potential for U.S. export growth: agribusiness, aircraft and avionics, construction, medical technologies, mining, oil and gas, and power generation, including renewable energy. These industries support the critical needs of a growing number of middle-class consumers in emerging and other global markets that offer U.S. exporters some of their best opportunities for sales growth.
In particular, infrastructure-related financing reached $23.0 billion, more than a 130 percent increase over FY 2008, the same growth rate as the Bank's authorizations overall. This was a direct result of the Bank's emphasis on nine developing countries with rapidly growing infrastructure needs.
Global spending on infrastructure is forecasted to be in the range of two to three percent of global GDP, or $2 trillion per year for the next 20 years. That’s $40 trillion in global infrastructure opportunities for American companies.
Ex-Im Bank financing represents a 56 percent increase from 2010, and it includes financing for American-manufactured components of major projects in key markets such as India and Colombia, but it’s not nearly enough given the global opportunities.
In the year ahead, the Bank is committed to working with more companies to bid on and win more global infrastructure projects.
The transportation sector for FY 2011 volume was $13.2 billion, up from $5.6 billion in FY 2008. Authorizations for environmentally beneficial exports more than tripled from $227 million in FY 2008 to $889 million in FY 2011; and authorizations for renewable-energy exports increased to $721 million in FY 2011 from $30.4 million in FY 2008. Ex-Im Bank was one of the largest financiers of solar projects to India at $180 million.
Ex-Im Bank is open for business in 175 countries. However, the Bank has identified nine key markets as the primary focus of its outreach: Brazil, Colombia, India, Indonesia, Mexico, Nigeria, South Africa, Turkey and Vietnam.
These countries were selected using a number of factors, including the size of the export markets for U.S. companies, projected economic growth, anticipated infrastructure demand and need for Ex-Im financing in each market.
The projected investment in infrastructure across these countries over the next five years is more than $2 trillion. This increased demand for products and services will help small and large U.S. exporters in many sectors to maintain current employment levels and create a significant number of new jobs.
The Bank is implementing outreach plans for each market that include targeted private-sector and public-sector buyers, financial institutions and government agencies.
The Bank showed substantial increases in several of these markets. For example, export financing for sub-Saharan Africa was nearly $1.4 billion for the first time, supporting 8 percent of all U.S. exports to sub-Saharan Africa. Authorizations for exports to Colombia increased to $3.7 billion from $66 million, supporting 34 percent of overall U.S. exports.
Among the Bank's nine key countries, Colombia, India, South Africa, and Turkey have shown impressive increases compared to FY 2008. Export financing for India increased to $2.9 billion from $1 billion, rising to first in Bank authorizations and exposure in the Asian regional exposure while it had ranked 10th in Asia regional authorizations in FY 2010.