Moving out of a pandemic – and with looming inflation – access to working capital needed to maintain operations is increasingly difficult for businesses today.. The risk aversion is greater when the business in question is an exporter, as global markets can be even more fickle than domestic ones.
Low credit ratings (or no credit rating) shuts the door to traditional supply chain finance (SCF) programs for many companies. For those who are able to gain access to SCF, the costs can be very high, which negatively impacts supplier adoption and overall program success.
The situation, however, is not dire for exporters needing a working capital boost to maintain and grow their businesses. For more than a decade, the Export-Import Bank of the United States (EXIM) has been supporting U.S. exporters and their suppliers with its Supply Chain Finance Guarantee Program.
When private sector lenders are unable or unwilling to provide financing to exporters due to low credit ratings (or no credit rating), EXIM fills in the gap for American businesses by equipping them with the financing tools necessary to compete for global sales. Because it is backed by the full faith and credit of the United States, EXIM assumes credit risks that banks and other financial institutions are unable or unwilling to accept.
The financial institution is still providing the funding, but with the EXIM Supply Chain Finance Guarantee Program, there is a 90- or 95-percent guarantee to lenders who provide SCF funding to exporters.
The SCF Guarantee reduces risks to private lenders and increases their willingness to extend more funding to U.S. exporters. EXIM’s goal with the guarantee program is to create a more equitable playing field for U.S. companies in foreign markets and, in turn, create more higher-paying jobs in America. It does so by:
To participate in an EXIM Supply Chain Finance Guarantee program with a lender, the exporter must meet certain requirements, including:
LSQ is an EXIM-approved lender and SCF platform provider and has extensive experience implementing and executing programs using the guarantee. Our combined solution has proven to expand access to SCF programs, reduce costs to sellers, and improve working capital across the supply chain.
In its simplest form, SCF with EXIM takes place in five stages:
SCF presents a great opportunity for U.S. exporters looking to gain a competitive foothold in global markets. But getting a program off the ground with risk-averse financial partners is a challenge. Contact LSQ to see if an EXIM-backed Supply Chain Finance solution is a fit for your business.