Working Capital Loan Maintains Cash Flow
Sometimes, American ingenuity needs a hand to unlock the necessary cash flow. That was the case for Competitive Engineering Inc. (CEI), a leader in the engineering and manufacturing industry that provides precision-machined parts worldwide.
The small business, based in Tucson, Arizona, has a highly skilled staff of 73 workers who deliver precision components for a variety of customers, including the aerospace and data-storage industries. With international sales growing, CEI turned to EXIM to obtain the vital funds necessary to fulfill its export orders and maintain cash flow.
CEI sought a lender that would include foreign accounts receivable as collateral in its borrowing base. EXIM was the answer. EXIM’s working capital guarantee provides generous advance rates so businesses can borrow more with less. “That was key to sustaining exports and supporting jobs,” said CEI President Don Martin, who founded the company with his wife, Charlotte, in 1987.
Businesses Can Borrow More with EXIM
EXIM’s working capital guarantees enable U.S. exporters, mainly small- and medium-sized businesses, to obtain working capital loans from qualified commercial lenders, based on inventory and foreign accounts receivable. EXIM advances up to 75 percent for export-related inventory and up to 90 percent for foreign accounts receivable.
The benefits include:
- Making funds available to fulfill international sales orders;
- Turning inventory and accounts receivable into eligible collateral for loans;
- Covering standby letters of credit used as performance or bid bonds; and
- Providing expedited application turnaround by the lender.
EXIM doesn’t replace a commercial bank. The agency works with the lender and provides them with a 90 percent loan guarantee that backs the debt and protects the lender from nonpayment. With this backing, the lender is more likely to extend loans to exporters as they only carry 10 percent of the risk.
CEI Sustains Exports and Creates Jobs
Since 2005, CEI has benefitted from EXIM’s working capital guarantee of a $2.2 million line of credit from its lender, GBC International Bank in City of Industry, California.
EXIM’s guarantee has allowed the company to obtain a larger line of credit that helped cover inventory and purchases of materials. The funds have enabled CEI to maintain cash flow while awaiting their payments of foreign accounts receivable. This capacity has allowed the company to sustain exports to major buyers in Mexico and the Philippines and to remain competitive.
Exports now account for 40 percent of CEI’s total sales, and over the past five years, EXIM has helped to support nearly $55 million of the company’s exports. As a result, CEI has been able to increase revenue and create jobs, adding 10 new positions in the past two years.
EXIM has experts located throughout the country who can answer questions about the working capital guarantee, provide information on EXIM’s products and services, and guide you through the application process. Contact Stephen.Maroon@exim.gov or call 202.565.3901 to learn more.