What Is EXIM Working Capital Guarantee Program?
EXIM's Working Capital Guarantee Program helps small companies to obtain the equity necessary to purchase stock or raw materials, export them on the market or engage in manufacturing. The Working Capital Loan Guarantee from EXIM enables exporters to free cash flow to satisfy their sales orders and to expand towards new foreign businesses. Small exporting companies can borrow far more with the same collateral for a loan, secure overall performance and bond specifications to win projects and increase their international competitiveness.
How does EXIM Working Capital Guarantee Program Work?
EX-IM cooperates with your bank to ensure 90 per cent of the credit to the lender but under the parameters:
- Export related export advance rate of up to 75 percent
- Foreign debt advance rate of up to 90 per cent
- A collateral of up to 10 per cent of the value may be issued by standby letter of loan as bid bonds or performance or anticipated payment guarantees.
The Advantages and Disadvantages of EXIM Working Capital Guarantee Program
- Large contract flexible funding.
- Increasing advance rates than conventional funding.
- Get the credit from a skilled creditor without EXIM review quickly.
- Inclusion of collateral in the borrowing base otherwise excluded.
- Lower bid requirements, performance bonds or advance payment guarantees.
- Failure to comply with the repayment plan would mean that the company runs the risk of securing property as security held by the lender.
- Loan default will damage the organization's credit rating to make additional finance more expensive and complex.
- Interest rates can be very high and business money can actually be leached that could be spent better and spent elsewhere.
What are the Qualifications for EXIM Working Capital Guarantee Program?
To qualify for the Working Capital Guarantee program, businesses must comply with the basic eligibility requirements established by EX-IM banks. These qualifications are:
- The company has been in business for at least one year or more.
- At least one full-time employee is in the company.
- The company has kept its net value positive.
- Based on all indirect and direct costs, the business uses more than 50 per cent of the US's exporter goods and services.
How to Obtain EXIM WCGP for My Business?
There are two guidelines through which EX-IM WCGP can be obtained for any enterprise, as follows:
Preliminary Commitment Application (PC):
A small exporter may directly apply to EX-IM for a preliminary loan guarantee (PC). A PC is an EXIM agreement that reflects if the borrower's needs generally meet requirements for EX-IM'S financing. After a PC is given, a loan is secured by the exporter.
Delegated Authority Lender:
A small firm exporter can apply via a lender with EXIM delegated authority. Most lenders whom have worked with EX-IM are given the discretion of a pre-approved loan status, known as the delegated authority after rigorous screening, enabling them to handle functioning capital loan on established criteria without EXIM pre-authorization.
What are the Costs Associated with EXIM WCGP ?
Total costs and procedure charges for SME’s to consider before applying:
- Fines charge by EXIM Application transaction fee of $100 for the final financial commitments.
- Early Facility Fee Loans for one-year amounts to 1.75% of the total loan value.
- Loans up to six months will require 0.875% of the total amount of the credit.
- The commercial lender shall charge the interest rate and other applications fines.