Export-Import Bank On Record Pace For Export Financing

By Phoenix Business Journal

WASHINGTON -- The Export-Import Bank is on its way to setting another record for financing sales of U.S. products overseas.

Through the first six months of the fiscal year, the federal agency provided $13.4 billion in direct loans, loan guarantees and credit insurance to U.S. exporters and their customers overseas. Last year, it provided a record total of $24.5 billion in export financing.

⿿I⿿m confident we⿿ll have another record-breaking year,⿝ said Fred Hochberg, chairman and president of the Ex-Im Bank.

One way the bank is boosting its numbers -- and furthering President Barack Obamaâ¿¿s goal of doubling U.S. exports by 2015 -- is by getting more small businesses to take advantage of its export financing products.

Last year, $5.1 billion of the Ex-Im Bankâ¿¿s transactions benefited small businesses, up 58 percent from two years earlier. For the past two years, the agency has met its congressional mandate of providing at least 20 percent of its financing dollars to deals that benefit small businesses.

The small-business share of Ex-Im Bank deals should increase further this year, Hochberg said. The agency is sponsoring a series of 20 forums across the country to educate small exporters about its products. It also has begun providing working capital financing to ⿿indirect exporters⿝ -- businesses that supply products or services to larger U.S. exporters. In addition, it has offered a new streamlined credit insurance program for small businesses that cuts the processing time for this product from 15 days to five days.

Although small businesses accounted for 20.7 percent of Ex-Im Bank financing dollars last year, they accounted for 85 percent of the agency⿿s total number of transactions. As a result, Ex-Im Bank resources are being strained because ⿿small-business owners need much more one-on-one work on those transactions.⿝

⿿It is a real challenge to meet the 20 percent threshold each and every year based on the resources we have,⿝ Hochberg told the Senate Banking Committee, which is working on legislation to reauthorize the agency.

Hochberg said Congress needs to allow the agency to keep more of the money it generates from its fees to cover administrative expenses. The Ex-Im Bank has been self-sustaining since 2008, and it has returned $3.4 billion to the U.S. treasury over the past five years.

Critics, however, consider the Ex-Im Bankâ¿¿s deals to be a form of corporate welfare. Citizens Against Government Waste this year called for elimination of the agency.

⿿The Export-Import Bank is one more example of the government⿿s willingness to continue to expose taxpayers to risk while allowing private companies to reap the benefits,⿝ said CAGW President Tom Schatz. ⿿It provides politicians with easy handouts dressed up as job creation, but it⿿s corporate welfare through and through.⿝

The loan-loss rate on the Ex-Im Bank⿿s loans, however, is only 1.5 percent -- ⿿well below most commercial banks,⿝ Hochberg said. So the risk to taxpayers is low, at least for now.

Some critics have called the agency ⿿Boeing⿿s bank,⿝ because that aerospace giant has been a frequent beneficiary of Ex-Im Bank financing. This month, for example, the agency provided a $700 million direct loan to finance the sale of satellites by Boeing Space and Intelligence Systems in El Segundo, Calif., to Immarsat, a London-based provider of mobile satellite communications services to the maritime industry.

Hochberg said the loan enabled Boeing to win the contract over a foreign competitor that also was backed by an export credit agency. The Ex-Im Bank⿿s mission, he said, is to make sure ⿿financing is never an impediment⿝ when U.S. companies are competing for foreign sales. The Boeing loan will help the company ⿿and its many small-business suppliers maintain jobs in California and around the country,⿝ Hochberg said.

Infinia Corp., a 145-employee solar power company in Kennewick, Wash., is one example of a small business that has benefited from Ex-Im Bank financing. The agency authorized a $30 million loan in March to Dalmia Solar Power Ltd. in India to finance the purchase of Infiniaâ¿¿s modular solar electricity system.

⿿Ex-Im Bank⿿s support was absolutely essential for providing the long-term financing needed to move this project forward,⿝ said J.D. Sitton, who was Infinia⿿s CEO at the time.

What: Official export credit agency of the U.S.

Products: Provides direct loans, loan guarantees and export credit insurance.

2010 financing volume: $24.5 billion.

Small-business transactions: $5.1 billion.

Loan-loss rate: 1.5 percent.

Cost to taxpayers: Zero -- Ex-Im covers expenses through fees charged to borrowers.

Copyright 2011 American City Business Journals


Copyright bizjournals.com 2010

More from Commodities

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell

How Can Gold Continue This Upward Momentum?

How Can Gold Continue This Upward Momentum?

Week Ahead: Investors Keep Economy in Check as Trade, North Korea Talks in Limbo

Week Ahead: Investors Keep Economy in Check as Trade, North Korea Talks in Limbo

Oil Rally Steadies Even as Potential Supply Disruptions Persist

Oil Rally Steadies Even as Potential Supply Disruptions Persist

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%