A bill to reauthorize the Export-Import Bank, the American institution that provides loan guarantees, insurance and loans to credit-worthy foreign buyers for purchase of U.S. exports, has been approved by Congress and now awaits President Obama’s signature. With 90 percent of Ex-Im Bank transactions benefitting U.S. small businesses, the bill’s passage provides much-needed certainty and predictability to North Dakota exporters.
“Ex-Im Bank is critical for North Dakota exporters because of the types of products ND exports: agricultural-based products. These types of products can be capital intensive and take considerable time to move from North Dakota to the buyer’s country,” said Corey Kratcha, President of Sorm Exports LLC based out of Wahpeton, ND. “With Ex-Im financing and insurance it allows the exporter to utilize their operating capital in the most effective manner. “
The reauthorization bill, H.R. 2072, will extend Ex-Im Bank’s authority to help finance export sales for three years and raise its lending limit to $140 billion; without reauthorization, the bank likely would have reached the current limit of $100 billion by May 31.
In 2011, Ex-Im provided a record $33 billion in export financing, with the majority of transactions benefiting U.S. small businesses. Ex-Im receives no taxpayer funds — its costs are covered by the fees it charges — but the federal government would be responsible for any losses if the bank failed.
Most American companies back the bank because it helps sell U.S. products in foreign markets where private credit is scare, but some entities – such as Delta Air Lines – say Ex-Im loans give unfair advantage to foreign competitors. Of the approximate $33 billion in Ex-Im financing approved last year, about $11 billion benefited large commercial sales of Boeing Co products, causing competition problems for airlines like Delta.
Small-to-medium sized enterprises with an international footprint believe it’s more important than ever for U.S. manufacturers to secure the financing they need to stay competitive in foreign markets.
“Ex-Im Bank is the lifeline of American exports in an era when financing is such a vital thread of putting deals together. Today’s goods are expensive and event big players with large lines of credit need some sort of finance to enable export shipments,” said Stacy Anthony, International Sales Manager for Brandt Holdings Company. “[The loss of Ex-Im Bank] would negatively affect our export volume by 40 percent.”
With exports accounting for over $3.3 billion in revenue for North Dakota – an over 400 percent increase since 2000 – companies like Brandt Holdings and Sorm Exports let out a sigh of relief when the bill was approved on Tuesday.
“If Ex-Im services were unavailable it would be a major blow to companies like Sorm Exports,” Kratcha said. “We are a small startup company that is in a business that most traditional financial lenders are nervous to work in. Ex-Im provides us the ability to be more proactive in the business and work with more customers.”