Foreign buyers often demand the protection of standby letters of credit serving as bid or performance bonds in order to award contracts to U.S. exporters. As such, many exporters need the ability to meet their buyers’ bonding requirements in order to grow their international portfolios.
A performance bond issued by a financial institution guarantees the fulfillment of a contract. If the U.S. exporter fails to “perform” as agreed, the buyer is compensated. A bid bond – often required in a bid selection process – guarantees the foreign buyer that the U.S. exporter will execute the contract if selected.
A U.S. exporter’s ability to provide a foreign buyer with a bid or performance bond can often be the difference between making and missing out on a sale. But in order to issue a bond on a U.S. exporter’s behalf, banks require cash as collateral -- tying up funds needed to fulfill the sale itself. To overcome the challenge of obtaining a bid or performance bond, U.S. exporters can use EXIM’s Working Capital Loan Guarantee Program.
The Working Capital Loan Guarantee Program provides a guarantee to your business’ private bank that will enable the bank to issue a standby letter of credit for a bid or performance bond, giving you the credit required to win an international sale.
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