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Joseph Ringer - Ex-Im Bank

Joseph Ringer

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Going global? Don’t do it alone! Joseph Ringer, regional director of Export-Import Bank of the United States, explains the incredible breadth of services offered to U.S. companies, small and large, exporting goods and services abroad. It’s a risky world and Ex-Im Bank was created 80 years ago to mitigate that risk in ways most people haven’t even thought about. If your company is expected to go global, don’t miss this interview!

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Russ: This is the Businessmakers Show heard on the radio, seen online at thebusinessmakers.com, brought to you by Comcast Business, built for business. It's featured guest time on the show, and I'm very pleased to have with me Joseph Ringer, regional director for the Export-Import Bank of the United States of America. Joseph, welcome to the Businessmakers Show.

Joseph: Thanks, Russ. I'm glad to be here.

Russ: Tell us about the Export-Import Bank.

Joseph: The Export-Import Bank, by the way, is 80 years old. It's a small, by Washington standards, federal government agency that is the official export credit agency of the US government.

Russ: Okay

Joseph: Actually, the name of the bank is a misnomer.

Russ: Okay.

Joseph: It has nothing to do with importing.

Russ: Okay.

Joseph: The bank was set up in 1934 to do two-way trade between Russia and the United States.

Russ: Okay.

Joseph: Two years later, in approximately 1936, trade with Russia was banned, but they never bothered to change the name of the bank.

Russ: Okay.

Joseph: So we are really - should be called the Export Bank of the United States.

Russ: Okay. So anybody doing business in the United States that's desirous of doing business internationally would be a great client of the Export-Import Bank?

Joseph: Yes. We work with all sizes and types of companies. The minimum requirements, Russ, are that the company has to be in business for at least one full year -

Russ: Okay.

Joseph: - have one person working in the business full-time -

Russ: Okay.

Joseph: - and they have to have a positive net worth. We never tell the customer how much the positive net worth has to be. And of course, they have to be exporting either US made products and/or services provided by US personnel.

Russ: Okay. But with that criteria, it could be a fairly early stage company, right?

Joseph: It could be.

Russ: Okay.

Joseph: But we also work with some of the largest companies in the United States. Any company in the United States that is exporting US-made goods and/or services is eligible for our services. Even foreign companies that are here, as long as they're exporting US-made products, can use our services.

The two major risks of exporting are both the commercial risk and the political risk. Political risk is defined as war, revolution, confiscation, expropriation, cancellation of the import-export license, and something new to most people, the transfer risk or the risk of inconvertibility. What that means is the foreign buyer can't come up with the dollars to pay back the exporter.

Russ: Okay.

Joseph: So we also cover the commercial risk, bankruptcy, insolvency, and a legal term called protracted default. Those are the risks, the major, catastrophic risks, of exporting, and that's why all sizes of companies use our programs to help them guard against those risks.

Russ: Let's say a US commercial bank is financing inventory and growth of a small business that wants to export. Will it be rather common for that bank to encourage the company that they're financing to use the Ex-Im Bank?

Joseph: Yes, because usually, Russ, when it comes to financing export-related inventory or export-related accounts receivable, the advance rate that we allow against export-related inventory is much higher than what a normal bank would allow.

Russ: Okay.

Joseph: We allow a maximum of 75 percent against raw materials, work in process, and finished goods. Many banks don't allow even inventory financing, period.

Russ: Right.

Joseph: And if they do allow it, they usually advance against a lower rate. Against foreign receivables, the advance rate maximum for us is 90 percent. A lot of banks don't even want to finance foreign receivables. So we're doing the things of the exporter and for the bank that will help the exporter grow their business, create more jobs in our country, and help our country overall.

Russ: Okay. That sort of explains why our federal government decided this might be a good idea, because it's a different kind of business. It's more complicated, requires more risk, and - but you guys are experts at it.

Joseph: Well, it's true, but we're not the only game in town. All of the industrialized countries have the equivalent of Ex-Im Bank. In Canada, they call it EDC, and in England, it's EGCD. In France, it's COFACE, or Germany. So they're all competing against us. They're all trying to produce and help exporters in their own home countries.

Russ: Okay. Now I also know for a fact that the Ex-Im Bank is one of only three agencies that are owned and operated by the federal government that operates profitably. Is that correct?

Joseph: That is correct.

Russ: Okay.

Joseph: A lot of people are not aware of this.

Russ: Right.

Joseph: Last October 1st, we returned a little over $1 billion -

Russ: My goodness.

Joseph: - to the US Treasury for the general fund.

Russ: Okay. How exactly does the Ex-Im Bank make money?

Joseph: Well, we make most of our money on large - working on large projects, because we have the ability to finance say power projects overseas, or if one of the big airline companies comes to us and they want to sell one of their wide-bodied jets overseas to a foreign country, there are a lot of fees that are associated with that type of transaction. So we make a lot of - a lot of the money off of that. But we subsidize small business exporters in our country. We define small business at Ex-Im Bank as a manufacturing company that has 500 workers or less, in general. There are some exceptions. For wholesalers, dealers, distributors, or service companies, or trading companies, it's 100 workers or less.

If it's a service company, like an engineering company, for example, it's based on revenue, and it usually goes up to a maximum of about $30 million per year. That definition, Russ, covers about 97 percent of all the companies in the United States. For the large banks in our country, it would encompass all of the business banking departments of those companies, and most of their middle market or commercial banking departments. Of course, regional banks and community banks, we can deal a lot with them.

Russ: Okay. This $30 million number, is that $30 million -

Joseph: Per annum in revenue.

Russ: Per - in revenue?

Joseph: In revenue. In revenue. That - but that's total for -

Russ: In total revenue, not -

Joseph: In total revenue.

Russ: - not export only revenue?

Joseph: No, just total revenue.

Russ: Total revenue. Okay. Let's go back to that huge sale of that jumbo jet -

Joseph: Right.

Russ: - to a European country.

Joseph: Right.

Russ: Did I hear you correctly, that you would actually finance that transaction?

Joseph: Well, in a case like that, we have the ability to either make a loan directly to the foreign buyer of that airplane, or to guarantee a bank, either a US bank or a foreign bank that works with us, who would agree to make the loan to the foreign buyer, guaranteed by Ex-Im Bank. What a lot of people don't know is that for every wide-bodied jet that we finance, say for - for Boeing, for example, there are about 20,000 subcontractors, many of them small, who gain as a result of that export transaction that we're financing for Boeing.

Russ: Sure.

Joseph: So even though Boeing is a big customer of course -

Russ: Sure.

Joseph: - most of our customers, about 86 percent, are small businesses.

Russ: Okay. Well, that's really why I wanted to get you on the show. I know how our audience leans towards the small business perspective, and I - I thought it would just be extremely valuable to many of them to - to hear this story, too. Okay. Often, you're probably working with banks in the actual financing of the transaction, correct?

Joseph: Yes. There's two ways that we do this. We provide a working capital program. Any bank can use this program. It's a 90 percent guarantee from the federal government, if the bank will loan the money to say a manufacturing company, a trading company, a distributor, a dealer, and advance against a borrowing base made up of export-related inventory or accounts receivable.

But the question is also how is the exporter selling their products overseas? Many of our exporters today, Russ, are still selling on what we call cash in advance or letters of credit. But we inherited from the Europeans, as a matter of fact, export credit insurance, and now we're finding out that more and more companies, all sizes, are using export credit insurance to sell to foreign buyers around the world. In that case, the buyer doesn't have to put up any collateral. They don't have to put up any personal guarantees. And usually, the exporter is able to bury or pass on the cost of the insurance to the customer overseas.

It's much cheaper than letters of credit, and it doesn't count against the buyer's line of credit. It's open account credit.

Russ: Okay. But export credit insurance insures the exporter that they're going to get paid.

Joseph: It insures them against the risk of non-payment, for both political and/or commercial reasons.

Russ: Wow. Wow.

Joseph: But the other thing that they can do with the policy is if their bank allows it, they can assign the proceeds of the insurance policy to their bank, so if their bank has set up a line of credit, say a domestic line of credit, it's a slam dunk. All they have to do is amend the line of credit to include foreign receivables insured by Ex-Im Bank. In the event of a claim, we'll issue a joint check, but the check will go to the bank.

Russ: Because the bank took care of the export.

Joseph: Because - exactly.

Russ: Okay.

Joseph: Exactly.

Russ: Very, very interesting. So, I mean, does it - I mean, when they're issuing this export credit insurance policy, I assume they're checking the credit-worthiness of - of the foreign buyer, and deciding that this is worth the risk?

Joseph: Yes. It depends upon the policy. We have - for example, the policy that we have, the newest policy is called the Express Insurance Policy. We provide free credit reports on the foreign buyer to the exporter. If the credit report comes back favorably, we will set up a revolving $100,000.00, up to a $100,000.00 revolving line of credit for that exporter to sell to that foreign buyer. We're not open in every country around the world. We publish a country limitation schedule that's available on our website. It lists every country in the world from A to Z. It tells you whether we're open in that country, whether we're closed in that country, or whether there are restrictions in that country.

Just as a matter of fact, we just opened up in Burma for the first time in - I don't know if we've ever been open in Burma.

Russ: Okay. Okay. For simplicity's sake, let's say that I'm a small company. I've invented, manufactured a small medical device, and suddenly there's a - there's a giant hospital in India that wants to buy 100,000 of these things from me. I come to you. What would you do for me?

Joseph: Well, the first thing that I would do, I would make sure that the medical products are made in the United States, because we have to make sure that whatever products that you're trying to export, they meet our minimum requirements. If it's a small medical item, I would probably recommend selling to the hospital in India on a short term basis. Short term is usually up to 180 days open account maximum. It doesn't mean you have to grant the buyer 180 days, but anything - net 60, net 90, net 120 days.

If you're selling a large piece of medical equipment made in the United States, we also have the ability to arrange with a bank to make a loan to the Indian hospital, and we would guarantee that bank that in the event the medical hospital failed to pay, the bank could make a claim on us. You, the medical equipment exporter, would get cashed out upon shipment. That's called our Medium Term Program. It's good for capital equipment, new or used, made in the United States, shipped from the United States, up to a maximum of $10 million per buyer. We have to be open in that country for that type of financing. The buyer has to meet our medium term credit standards. But it's a great program to help capital equipment exporters in our country. Either manufacturers or dealers or even traders can use this program.

Russ: It is complex to do business internationally, but there's so much opportunity there now it just seems not right to overlook. In this sample that we just went through, would it be possible that my customer, this large hospital in India, knows about the US Export-Import Bank, and that they might help arrange financing to buy these products?

Joseph: It's funny that you ask that question, Russ, because sometimes I think that foreign companies know more about our programs than US companies. I think it's nice to say this, though, that Texas is the largest exporting state in our country.

Russ: All right.

Joseph: And as far as small business export financing, we do more small business export financing in Harris County than any other region of the bank.

Russ: Interesting. That is really interesting. Let's say that we have got somebody watching or listening right now, and they're real interested in perhaps contacting you and doing some business.

Joseph: Yes.

Russ: How do they do that?

Joseph: Well, first of all, I make house calls, Russ.

Russ: All right. Cool.

Joseph: I can - I don't mind giving out my contact information. In fact, I welcome it.

Russ: Okay.

Joseph: The way to reach me by direct phone is 281-721-0467. My cell is 713-301-1749. Or you can email me at Joseph.Ringer, R-I-N-G-E-R, at EXIM.gov. We're trying to get more banks to work with us here in the Houston area, and we know there are a lot of companies that we want to reach out to, and we want to thank you, Russ, for letting us do this today.

Russ: Well, I thank you for sharing it. One last thing. If they just want to go and read first, what - where's a good website?

Joseph: Go to our website. It's www.EXIM.gov. It's a good way to start. It's got a list of all of our programs. In fact, all of our forms are on the - on the website. But we can - we can work with - we have no minimum and we have no maximum.

Russ: All right.

Joseph: And I think that's a good way to end it.

Russ: Fantastic. Thank you so much, Joseph.

Joseph: Okay. Thank you, Russ.

Russ: You bet. And that wraps up my discussion with Joseph Ringer, regional director of the Export-Import Bank of the United States of America. And this is the Businessmakers Show, heard on the radio, seen online at thebusinessmakers.com, brought to you by Comcast Business, built for business.

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