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Financing for the Small Manufacturer

Nov. 11, 2010
Don't overlook Ex-Im Bank as a source for working capital. Options exist for exporters and suppliers to exporters.

Gaining access to capital has been bedeviling manufacturers for well over a year, putting particular strain on small- to medium-sized enterprises whose options for relief are more limited than their larger brethren. It's been frustrating for manufacturers trying to muster working capital for improving business conditions, one Ohio manufacturer told U.S. policy makers during a summer roundtable event. It also challenges smaller manufacturers' abilities to participate in President Barack Obama's goal to double exports over the next five years.

The U.S. Export-Import Bank of the United States has been trying to help turn that tide. In recent weeks, the independent federal agency released data that illustrate the financing help the Ex-Im Bank already has provided to small to midsized producers and shared news of an additional program to help manufacturers free up working capital. The new program does not require the manufacturer to export products.

Pamela Bowers: Ex-Im Bank financing for small businesses increased by 16% in fiscal 2010, according to the vice president of business credit. As of mid-October, the Ex-Im Bank had authorized a record $24.5 billion in export financing for fiscal 2010. The figure incorporates another record -- $5 billion in financing for small business, which represents an approximately 16% increase over the previous year, according to Pamela S. Bowers, Ex-Im Bank's vice president of business credit. Of that $5 billion, about $1.4 billion is related to the provision of working capital loans to small companies. For example, among the final actions taken by the bank's board of directors in fiscal 2010 was a $7 million increase to a $5 million revolving working capital loan guarantee facility used by Retech Systems, a Ukiah, Calif.-based small manufacturer, to support an order to China.

Ex-Im Bank personnel have held numerous seminars around the country in an effort to make businesses aware of its offerings. Its products include working capital guarantees. This financing option encourages commercial lenders to making working capital loans by providing them with a 90% loan backing guarantee. Additional products include export credit insurance and loan guarantees that provide competitive financing for international buyers.

More recently, the Ex-Im Bank introduced the Supply-Chain Finance Guarantee Program. Manufacturers may be eligible to participate even if they do not directly serve export markets.

How does the program work? It allows suppliers of components used in products destined for export to sell their accounts receivables due from the exporter (for export-related production). The first transaction approved under the program occurred in mid-September. It was a 90% guarantee to support up to $100 million of liquidity from Citibank N.A. to small- and medium-sized suppliers of CNH.

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