Chapter 7 Trade financing techniques
Import Bank of the United States) offers the
following services:
Pre-export financing to US exporters of
certain qualifying goods and services;
A range of export credit insurance policies;
A variety of loan guarantees;
Guarantees to international lessees who
lease US-produced capital goods via
finance leases, up to a contract value of
USD 10 million; and
Direct fixed rate loans for terms of over
seven years to international buyers of
US capital equipment and services,
usually with a minimum contract value of
USD 10 million, up to a maximum 85%
of the contract’s value (or 100% of the
value of the US content of the contract). A
downpayment of 15% of the contract value
must be made by the buyer before the
loan can be extended.Advantages
ECAs provide significant support to
exporters in their jurisdiction. It is particularly
useful for companies exporting for the first
time (especially if they are SMEs). It is also
useful to companies exporting to a new
country, especially where counterparty risk
or country risk is difficult to evaluate, or
where commercial insurance or support is
relatively expensive. Most ECAs provide a range of different
services to support the export of
capital goods or services, typically
in circumstances where commercial
insurance is difficult to arrange.Disadvantages
The rules governing a specific country’s
ECA can be restrictive and difficult to
meet. As a result the ECA’s offering may
not match the exporter’s needs.
Obtaining ECA support can be time-
consuming, depending on the nature of
the contract which needs support.Evaluation
Export credit support can be an invaluable
support to exporters seeking to manage
counterparty and country risk when
exporting to a new country. It often provides
support in situations where commercial
insurance or credit support is prohibitively
expensive.
However, it can be difficult to establish
compliance with the often very strict rules
ECAs apply. For instance, some ECAs
require exported goods to meet country of
origin requirements. This can be difficult
in the case of manufactured goods, where
the inputs are sourced from many different
locations around the world.