As the hours wound down until the Export-Import Bank of the United States loses its charter for the first time in 80 years, Georgia companies were learning how to avoid being left holding the bag on an overseas sales gone bad.
Without mentioning the export credit agency by name, two successive panels at the American Express Grow Global event illustrated the central argument between those (mostly Republican) legislators who’d like to let it lapse at midnight and those who contend that doing so would put American jobs on the line.
While some call it a conduit for corporate welfare and say it inordinately benefits large firms like Boeing Co., some small exporters say Ex-Im is essential in taking the guesswork out of foreign sales.
The agency guarantees loans to foreign customers of U.S. firms, and it also insures export deals, helping smaller firms pull the trigger on clients they couldn’t vet themselves.
Opponents, meanwhile, say underwriting trade transactions is a job for the private sector.
Ed Marsh, Amex adviser on exports, didn’t comment directly on Ex-Im but did say that many options to mitigate risk exist in the marketplace.
“I think fear of payment risk is a huge issue for companies that they have to overcome and they have to get comfortable with, but there’s lots of ways to approach that: trade credit insurance is one, payment in advance is another, letters of credit is another. Honestly, Amex has some interesting products that help address that as well,” Mr. Marsh told Global Atlanta.
An executive from Coface, a massive France-based provider of export credit insurance, simplified the process during a discussion on compliance: Log onto his company’s online system, provide the value of the sale and name of the customers in say, Chile, and wait for the underwriters to come back with their assessment.
If approved, the exporter can take it literally take that policy to the bank, putting the financier as the beneficiary on the policy as collateral, said Craig Fargason of Coface.
“Now you’re able to borrow money against that credit insurance policy; you’ve protected yourself against a huge loss at a lower margin, and now you’re able to maximize that opportunity.
But it’s not always that simple, say small-business exporters.
Zaheer Faruqi of Peachtree City-based Aventure Aviation said he went to the private sector to insure $1 million in sales with an airline in the tiny island nation of the Maldives. Organizations like Coface would only underwrite $30,000 of the risk, while Ex-Im would take on 10 times that amount, he said.
“Ex-Im has been very kind to us. They have been very easy to work with. Unfortunately, it’s lapsing today, and that’s going to hurt us, because what it means is that I will no longer sell to that airline that amount of product,” Mr. Faruqi told Global Atlanta in an interview.
While he didn’t mention Ex-Im during his presentation, Mr. Faruqi and others on a panel warned of the challenges in getting paid, sometimes noting that they needed to guarantee upfront payment.
He once had to go to an event in Atlanta to enlist the U.S. ambassador to Thailand to pressure a Thai airline client to pay. Luckily, it worked.
“That was the best $50 lunch I ever had,” he said.
Tvsdesign, an Atlanta-based architectural firm with that has designed convention centers all over China, has had to change its billing practices in international work. In the U.S., payments come on a regular monthly schedule. In China, the firm is paid after the completion of a design phase, which could take a lot longer. That all has to be built into the bid, along with all travel expenses, said Becky Ward, a senior vice president at the firm.
Despite the challenges, Mr. Marsh of Amex said companies are awakening to the value of exporting as interconnected markets, lower regulatory barriers, technology and government activism help them distinguish real hurdles from “perceived hurdles” and export myths Amex sought to debunk at the event.
Companies are seeing inquiries on their websites from buyers in emerging markets, and those that have started exporting to one country are becoming more proactive about it.
“They may only be selling to one or two markets, but they’ve gotten past the mindset problems, so now it becomes an opportunity — let’s blow that up to five, 10, 15, 20 markets. You’ve already done the hard part. Now let’s really make it successful.”
Olga Ford, a U.S. Commercial Service officer in Virginia fresh off a posting in India, said she saw enthusiasm about India at the event, which offered one-on-one meetings during “Global Connections” sessions. Ms. Ford spoke with an entertainment company and an agricultural equipment provider, describing opportunities in a huge market with a large middle class familiar with American brands.
But the Ex-Im debate was also fresh on her mind. She noted that without reauthorization, U.S. exporters would be disadvantaged versus other nations with their export-credit agencies.
“The Europeans come with money, the Japanese come with money, the Chinese come with money — Our companies? All they have is the Ex-Im bank.”