Letter of Credit Basics Seminar
Davi Tserpelis
Senior Vice President
Commercial Banking
Foreign Receivable Financing Programs
davi.tserpelis@citi.com – 631-265-4484
 Provide an overview of government sponsored lending
programs available to support cash flow for exporters
– Small Business Administration
 SBA Export Working Capital Program
– Export – Import Bank of the US
 EXIM Working Capital Guarantee Program
 EXIM Medium-Term Guarantee Program
 EXIM Long-Term Guarantee Program
 EXIM Financial Institution Buyer Credit Program
Export Working Capital Programs:
Who do they support?
 Programs are primarily for small and medium-sized
businesses that are U.S. domiciled exporters
 Company is a manufacturer, trading company, wholesaler,
distributor or a service company
 Qualifying businesses:
– SBA products- determined by an entity’s industry (NAICS code)
and either number of employees or Annual Receipts (in millions)
– EXIM products – determined by EXIM Country Limitation
Schedule and US content requirements
Export Working Capital Programs
Common qualifying business purpose usage
 Finance of foreign accounts receivable
 Acquire inventory for export or to be used to manufacture
goods for export
 Pay the manufacturing costs of goods for export
 Purchase goods or services for export
 Support standby letters of credit related to export
 Working capital directly related to export orders
 Support an indirect export. (The borrower’s direct customer
is located in the United States and his customer is overseas)
 Goods must be shipped from the USA
EXIM Working Capital Program
Standard Structure Basics
 Facility Size $1,000,000 minimum
 Up to 90% against foreign receivables up to 180 days old
(depending on credit insurance) and up to 75% against
export related inventory
 Typically a one year annually renewable credit line
 Monthly borrowing base certificate
 Fees vary
Working Capital Guaranty Program
core benefits
 Enable clients to grow their export business
 Enable clients to borrow against foreign accounts receivable
and inventory typically not conventionally financed
 Higher leverage and advance rate than conventional
financing with government guarantee
Determining which product is the best fit: EXIM’s WCGP vs. SBA EWCP
If product does not meet 50% US content
Products manufactured abroad 100%
Yes, must be shipped from the USA
Defense product or defense customers;
Yes, subject to Citi ‘s credit policy
Transaction Specific ( large contract 1-3
90 % advance rate of foreign A/Rs
Yes, dependent on underwriter
Yes, dependent on underwriter and foreign receivable
insurance requirements
A/R credit insurance required
Typically, no, only required in some cases by underwriter
Yes, but can be mitigated with three or more years of
documented positive buyer experience, only 80% advance
rate on A/R’s without insurance
Use of proceeds
To acquire inventory and pay for productions
costs; To purchase goods for resale; Delivery
of services;
To support stand-by letters of credit with
reduced (25%) collateral.
Loan max
$5 MM
Loan minimum
Application Fee,
Facility fee depends on term of loan:
6 months: .75% of loan amount
12 months: 1.50% of loan amount
(The facility fee is reduced if 100% of the borrower’s A/R are either insured or
covered by a letter of credit.) or if borrower meets industry medium quartile for
4 out of 7 key ratios
SBA charges a guaranty fee of .25% per year
Interest rate
Negotiable with lender
Negotiable with lender( should include ongoing fee)
Requirement to use outside counsel
Yes, only certain approved EXIM lawyers
No, unless required by underwriter
Field examinations required
Yes, semi-annual at borrower’s cost, annual with audited financials
No, (but subject to Citi’s underwriting requirement )
Monitoring of borrowing base
EXIM Medium-Term/Long-Term Guarantee
Program Overview
 Term loans for your client to purchase large ticket items from your Company
wherein bank has a local presence
 Finance refurbished items, construction cost, computer software,
engineering cost and some local overseas cost, etc
No defense articles or services, or military buyers and shipped from US
 Buyer must be in an eligible country according to EXIM Country Limitation
Schedule and bank
 Buyer must be in business for at least three years and able to provide
current financial statements and three years of audited financial statements
Finance up to 85% of the purchase price or the US content, whichever is less
 Finance term between 2 and 5 years for Medium Term and 5-10 for
Long Term
 Minimum $1,000,000
Financial Institutional Buyer Credit (FIBC) Program
 Allows bank to lend to a foreign buyer of US goods and services on a shortterm basis backed by insurance
 This policy affords coverage against commercial defaults and political
events that result in nonpayment under a buyer obligation.
 The policy also provides coverage against political risks such as war,
revolution, expropriation or confiscation by a government authority,
cancellation of import or export licenses after shipment and foreign
exchange inconvertibility, and commercial losses due to protracted default,
insolvency of the buyer or failure to reimburse for other reasons.
Devaluation is not covered.
 Political only coverage is 100%;
 Non-sovereign obligors/guarantors, including non-sovereign public sector
and private sector financial (non-letter of credit) and non-financial
institutions is 90% coverage; and
 Approved agricultural commodities are covered at 98%
How the Lender will support you…
Citibank is a preferred lender of programs
Educate Company on products and identify best product for
Help qualify Company for program and process loan request
including application completion and underwriting
Process Bank and Government Agency Approval
Ensure that government agency is notified of loan closing
Service relationship and present other complimentary solutions
(ex. trade credit, foreign exchange, international banking)
Thank You For your Time Today
Davi Tserpelis
Senior Vice-President
Commercial Banking
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