What Is EXIM Direct Loan?
EXIM direct loans are a secure and competitive financing method to provide assistance to the foreign buyers of US goods and services. The EXIM bank takes responsibility for handling the payment if the foreigner buyer defaults. The bank pays the remaining principal amount and interest on loan.
How does EXIM Direct Loan Work?
EXIM Bank's direct loan is used for financing purchases of US capital equipment and services by an international buyer. Eligible applicants for this are financial institutions and there is a three-step process.
- Firstly, the US exporter and international buyer negotiate a sales contract.
- Secondly, International buyer and/or U.S. exporter identifies a financing institution to provide the loan (commonly a U.S. bank, but foreign banks willing to lend U.S. dollars can also apply), and
- finally lending institution submits the final application to EXIM bank for review and approval.
Repayment terms for capital equipment are available up to five years and 10 years for large scale products.
The Advantages of EXIM Direct Loan
It meets customers’ needs of export financing by providing them various advantages such as a fixed interest rate.
Limits country and credit risk and increases loan portfolios.
Encourages trade and SMEs to develop by providing them ease in financing.
How EXIM Direct Loan Can Help Your Business?
Direct loans provide fixed rate financing to credible international buyer in both public and private sector for 12 years in general and up to 18 years for renewable energy projects. There is no limit on the transaction size. EXIM Direct loan finances your local costs up to 30 percent. Not only does it give security to international buyers by covering 100 percent commercial and political risks, but it also provides financing of subsidiary services and fees, for example, legal, financial, bank, etc.
What are the Qualifications for EXIM Direct Loan?
EXIM evaluates the economic and environmental impact of certain transactions. Apart from that the eligibility criteria for the Direct loan is as following:
- EXIM provides finances only to the US content.
- EXIM limits offering to finance in certain countries and under certain terms which are specified on their country limitation schedule.
- Products must be shipped from the US to a foreign buyer.
- EXIM’s direct loan does not put any limitation on the size of the export sale.
- EXIM does not support exports by military buyers or exports of military or defense products and services.
- It is mandatory that all direct loans fulfill to U.S.-flag shipping requirements.
What are the Costs for EXIM Direct Loan?
The four monetary costs associated with the EXIM direct loan are the letter of interest processing fees, commitment fee, exposure fees, and fixed interest rate. Letter of interest is the contract that has not been awarded, then an exporter or an international borrower or a lender may request for this. It contains EXIM’s terms for a specific transaction. $100 fees are charged for processing the letter of interest. Based on the unused part of the loan, commitment fees of 0.5 percent are charged. Exposure fees are charged based on risk which is calculated by exposure fee calculator online. Interest rate fixed at Commercial Interest Reference Rate (CIRR) is borne by the international buyer.