Increasing Capital for U.S. Businesses
The EXIM Supply Chain Finance Guarantee (SCFG), offered to lenders, assists U.S. exporters and their suppliers through accounts receivable financing. It is designed to increase liquidity in the supply chain and provide suppliers, particularly small businesses, with access to capital faster and at a lower cost.
Through this program, U.S. suppliers can sell their accounts receivable to a private sector lender at a discounted rate to obtain early payment of their invoices. This is often a better rate than the suppliers alone could receive, as it reflects the creditworthiness of the U.S. exporter. The accelerated payment of accounts receivable improves suppliers' cash flow and increases their liquidity to fulfill new orders. Exporters have the option to extend payment terms and obtain a working capital benefit without imposing undue financial hardship on their suppliers.
The EXIM guarantee, which bears the full faith and credit of the United States, is provided directly to the private sector lender. EXIM provides a 90% guarantee of an eligible account receivable while the lender bears 10% risk.
Benefits to the Suppliers
- Improved cash flow because suppliers' accounts receivable are quickly converted into cash, improving their liquidity position.
- A better rate when suppliers sell their accounts receivable to the lender because the rate is based on the credit rating of the exporter.
Benefits to the Exporter
- Flexibility in extending the terms for the exporter's accounts payable (the repayment of the suppliers' invoices).
- Additional source of working capital funding for the exporter - which is not treated as debt on their balance sheet.
How It Works
- The exporter has pre-existing relationships with its suppliers.
- The lender reaches out to the exporter about enrolling in the SCFG program.
- The exporter gives the lender a list of its suppliers.
- The lender reviews the benefits of the program with the suppliers and the suppliers decide whether to participate.
- The exporter obtains accounts receivable (documented by invoices) from participating suppliers and sends a list of the approved accounts receivable to the lender electronically.
- The lender validates the list to verify the suppliers' accounts receivable that are eligible for discount and payment, and the supplier selects the accounts receivable for accelerated payment.
- The exporter submits its list of exports products, list of suppliers, and certification of content to the lender.
- EXIM conducts its approval process and establishes the guarantee with the lender.
- All discounted accounts receivable are paid by the lender to the supplier via ACH (electronic payments).
- The exporter is then liable for repaying the suppliers' accounts receivable when due, as determined by the agreement between the lender and the exporter.
- Exporter must be a U.S.-domiciled company that exports U.S. goods and/or services and adds value to the export, such as assembling the inputs into a finished product.
- To certify that the goods and services are eligible for the SCFG program, the exporter must:
(1) Generate a list of goods and services produced and exported;
(2) Generate a list of U.S.-based suppliers that provide inputs to the exported goods and services identified in (1); and
(3) Certify that the goods and services identified in (1) fulfill EXIM's SCF program content requirement (see "Exported Goods and Services Eligibility" below).
- Suppliers must be U.S.-domiciled companies that supply goods and/or services to eligible U.S. exporters.
Exported Goods and Services Eligibility
- Exported products must meet EXIM's SCFG content policy requirements: EXIM will guarantee suppliers' accounts receivable, payable by the U.S. exporter, if the cost of goods and services sold by the exporter, exclusive of the exporter's own labor costs, is more than 50% U.S. content.
- The more than 50% U.S. content requirement, excluding the exporter's labor costs, aims to capture the U.S. content in the goods and services provided by the supply chain. This requirement is specifically tailored to the SCFG program to ensure it supports U.S. supply chain jobs.
- Lender must have an existing electronic supply chain finance platform to process the transactions which is subject to EXIM due diligence and approval.
For more information on EXIM's Foreign Content Policy, please contact the Policy Group at 202.565.3760.
For information on EXIM and its other products or policies, contact Business Development at 202.565.3946.