ARE YOU AN IMPORTER: Finance your Imports through foreign Export Credit Agency Government Loans and Guarantees!
This article is geared toward the millions of US companies that import goods and services into the US annually and do not utilize long established credit financing options best suited to add considerable value to their bottom line. This article is to convey the beneficial financial options of working with your foreign country of import Credit Agency to add value to your company.
This information is geared directly to the US companies importing yet are not utilizing the advantageous credit financing options available to them from their country of import…be it a company you’re buying/importing from in Asia, South America, North America (Canada), Europe, the Middle East or the Pacific South (Australia/New Zealand).
As a definitive example of what is possible for US importers, the US National Association of Manufacturers contracted the Economist Intelligence Unit to issue a detailed report covering the activities and policies of the world’s leading Export Credit Agencies (ECAs). That report, in 2014, showed that the world’s largest ECAs financed approximately $488 billion dollars in 2013 financing their nation’s exports to importers around the globe. If your US company wishes to better understand and utilize these ECAs export credit financing loans and loan guarantees, to facilitate your import into the US, this article is for you!
Let’s begin with a basic premise: You are a US or Foreign Domiciled Company, in operation for at least 3 years, importing food and agriculture, commodities, manufactured components or finished goods. You are purchasing your import items by investing your own cash or conventional borrowed funds, at current inventory loan or working capital interest rates.
If either of these two options is your current business model, the likelihood is that you are reducing your capital reserves and increasing your cost of goods sold per unit. These two scenarios represent the vast majority of US importers financing options. The question here is this: Why operate your financing division in the least beneficial mode to yourself and your company?
The answer is simple. If you are not aware of short and long term options of financing, specifically designed to finance your imports, your only option is conventional methods of financing that are, generally speaking, not in the best interest of adding liquidity to your bottom line.
An Export Credit Agency (ECA) is a Regional or Nation based Government backed financing arm established to offer short and long term financing options to support the export of goods and services produced by their nation’s private sector, be they food and agriculture, commodities, manufactured goods and services or project financing. Thus, you as a US importer are eligible to receive very low government backed financing rates and terms to purchase said goods and services from your foreign supplier’s ECA.
Today there are over 70 ECAs around the world working to provide direct loans, loan guarantees and credit insurance to facilitate growth in International Trade. These ECAs, through the guidelines of the Organization of Economic Co-Operation and Development (OECD), work together to maintain a stable line of low interest financing options to expand such trade.
Each ECA has their own set of guidelines, as an example the US has 16 different Government Agencies offering various financing options supporting US exports to foreign importers. Of these 16 different US Government Agencies, the US ExIm Bank is our nation’s official ECA. However the US ExIm Bank only supports financing US exports, not imports into the US. On the other hand, most all of the other national and regional ECAs around the world support both export and import financing for their nation’s companies.
Nonetheless, for this article, we are focusing on US companies and their need to increase profits while reducing overhead and purchase capital outlays. Therefore, we are committed to relaying financing option solutions best suited to maximize investment returns.
For example, a US importer should understand that, by design and OECD protocols, depending on the funding dollar amount, the tenor, the useful life of the goods or services purchased or the project financing will determine which of the financing options will best fit with the US importer’s needs. For the sake of argument, one should understand that the terms will be agreeable, very low annual interest rates and will match the needs of the importer to facilitate their cycle of import, sale and receipt of payment from their buyer. Be that a 6 month cycle or an 18 year cycle. Again, based on the useful life of the goods and services imported. Another current example is one of the Asian ECAs has several programs to finance their nation’s exports to buyers with annual interest rates ranging from 0.11% to 4.2%…again based on which program the importer best fits into.
One should understand that these financing ECAs have been in existence and operation for many years, have a streamlined, vetted, bank-backed, OECD protocol system which reduces the time needed to facilitate a trade financed package. One should remember these entities are in business to assist and facilitate International Trade not to hinder International Trade.
Our company and team, GDM Distributors (www.gdmdistributors.com) offers general and finite Consulting Services to any size US or Foreign Domiciled company that wishes to explore a more balanced and beneficial import financing strategy while reducing overall business operation expense.
We welcome you to review our website and should you wish to discuss financing options we look forward to consulting with you and your team.
GDM Distributors, Inc.