VAGTC Teams With Ex-Im
GRAND RAPIDS — The Van Andel Global Trade Center has hooked up with the Export-Import Bank of the United States to bring export financing services to small to mid-sized companies.
Export Import Bank (Ex-Im) is the nation’s official export credit agency, and its sole job is to assist in financing the export of U.S. goods and services to international markets and create U.S. jobs. The bank helps U.S. companies of all sizes capitalize on export opportunities by providing them with working capital guarantees, or pre-export financing, export credit insurance and guarantees, loan guarantees, and buyer financing. According to Ex-Im, an average of 85 percent of its transactions directly benefit U.S. small businesses.
VAGTC is Ex-Im Bank’s 44th “city/state” partner. The bank has a whole range of such partners, including global trade groups, state governments and universities.
VAGTC’s mission is to increase the ability of Michigan businesses to compete globally by providing them with training, consulting and pro bono counseling. Its role in the new partnership is to educate companies about what’s available and assist them in making applications for different forms of export financing products through Ex-Im, said Executive Director Jeffrey Meyer.
“We need to make sure that we’re getting this information not just to the big companies, but also to the small and medium-sized companies,” he said. “A major key to success in the global marketplace is being able to offer competitive financing options to foreign buyers, and having available working capital to produce the goods for export.”
This new relationship with Ex-Im Bank, he said, opens the door for Michigan businesses to take full advantage of the valuable programs that will help them become more competitive in export markets.
VAGTC has trained more than 6,000 individuals, consulted more than 600 Michigan companies on international business topics, and has provided more than 1,000 hours of pro bono counseling.
Michigan’s export shipments of merchandise in 2004 totaled $35.6 billion. It ranks fourth in the nation for exporting activity. In the past five years, Ex-Im Bank has supported more than $592 million of exports from 124 Michigan companies, according to the agency.
One of the great challenges in supporting small and medium-sized businesses is letting them know that there are various financing packages available to assist them in selling to a global marketplace, said Phil Cogan, spokesman for Ex-Im. Even many larger companies aren’t aware of the trade finance support that’s available.
“I’ve had conversations with executives from large companies that said they haven’t gone after business overseas or pursued overseas contracts because they were afraid, for example, of not getting paid,” Cogan said. “They didn’t realize that one of the things the Export Import Bank can do is guarantee payment for foreign buyers to make sure a U.S. exporter does get paid. We assume the vast majority, or, in some cases, all the risk, based on our analysis of the political and economic situation involving the foreign buyer.”
Much of what Ex-Im Bank does is guarantee loans made by commercial banks; so commercial banks, in effect, are the distributors of what Ex-Im Bank has to offer. Ex-Im doesn’t compete with commercial banks; it supports their activities, Cogan explained. Ex-Im will actually go out and train a bank’s staff in the ABCs of financing exports.
“It’s only by working through the commercial lending institutions that we’re able to give this financing support to businesses,” he said. “Some banks have found that they can create an entirely new profit center that they never envisioned by helping their existing customers expand their business overseas. We will help banks become trade finance experts to serve their existing clients or to attract new ones.”
Meyers said some companies may need a neutral partner to help broker a deal between Ex-Im Bank and a commercial lender, and in those cases, VAGTC can serve as “a really neutral, credible” facilitator.
“We don’t have to worry about the size of a deal. We can work with the smallest company in the world that may have one nice export product and help them get serviced,” Meyers said. “There may be times when the banks or the insurance providers don’t have the resources to put into lots of small Ex-Im deals. So in those cases, we can help those smaller companies get access to the same things the larger companies have access to.”
With Ex-Im Bank, there is no minimum size transaction, and banks get a 90 percent guarantee from Ex-Im Bank on the loan principal.
“It’s a very good guarantee. No one else in the United State does that,” said John Emens, vice president for small business and deputy head of Ex-Im Export Finance Group. “As a result of our guarantee, the risk of that loan for the bank goes way down, because they have a loan that’s guaranteed by the U.S. government.”
Of the roughly 8,000-plus banks in the United States, Ex-Im deals with about 140 to 150 a year, Emens said. More than 50 of those banks have delegated authority, which means Ex-Im Bank has approved their underwriting up to a specific dollar amount.
He said there are nine banks in the country that have “super delegated authority.” Bank One/J.P. Morgan Chase, for example, can broker deals of up to $10 million and approve them in-house without getting Ex-Im Bank’s approval.
“The real issue for Ex-Im Bank is the abilities of the banks to do proper underwriting of the risk that they’re offering to us to guarantee or insure,” Emens said.
There are some small banks, too, that are extremely active in trade financing either because they’re located in a part of the country that does a lot of trade finance, or because their management has taken a special interest in the trade financing sector.
“We’ve seen very rapid growth in the support of small business; in the last four years, direct support of small business has increased from something in the neighborhood of $1.6 billion in (loan) approvals to $2.6 billion in approvals.”