The Export-Import Bank of the United States supported $362.7 million in Connecticut exports to foreign companies in 2011.
Ex-Im’s various programs — mostly loan guarantees — disbursed $132.4 million to Connecticut companies. The businesses leveraged that money to make nearly triple the sales in foreign lands, where competitive financing can be difficult and unpaid invoices are hard to recover.
“It is pretty much an ironclad guarantee that you are going to get paid,” said John Emmerson, president of East Granby pipeline manufacturer Magnatech LLC.
Ex-Im Bank occasionally provides direct loans to fund foreign sales, but its principal role is guaranteeing other banks’ loans and credit lines. If a foreign bank withdraws its credit after the Connecticut company has delivered its product, or a foreign customer refuses to pay for an order, Ex-Im provides the unpaid funds.
“Otherwise, if something happens, and a customer doesn’t pay me, I don’t have a recourse,” Emmerson said. “About the only thing I can do is fly down to Argentina or wherever and try to set up a court case, but that isn’t practical.”
For a company such as Magnatech, the Ex-Im bank is vital to competing in the global marketplace. The 43-year-old company has 52 employees and sells equipment for welding pipes and tubes together. Roughly 70 percent of its sales are to foreign customers, as it provides fittings for oil and gas pipelines to customers in places such as Saudi Arabia and United Arab Emirates.
“Even for a small company, exporting is very practical. It is a big world out there,” Emmerson said. “If we didn’t export, I don’t think we’d be around.”
Magnatech received $10.2 million in loan guarantees from the Ex-Im Bank in 2011, facilitating $10.2 million in global sales. This disbursement doesn’t mean Ex-Im paid Magnatech any money, just provided back up for exports if needed.
The Ex-Im Bank is playing an increasingly large role as the federal government pushes local businesses to increase their exports. President Barack Obama wants the national to double the amount of its 2009 export by the end of 2014. In Connecticut, total exports must hit $28 billion in 2014, a pace of about 15 percent annual increases.
“With Ex-Im Bank, you can cover 90 percent of your credit risk, and that’s great,” said Anne Evans, Connecticut district director for the U.S. Department of Commerce.
As exports have increased, so have the loan guarantees and other disbursements from Ex-Im Bank. In 2011, the bank disbursed $35.4 billion nationally supporting $40 billion in export sales, a record high for the agency.
“The reason companies are finding success selling outside the U.S. is because that is where 95 percent of the customers are,” said Phil Cogan, spokesman for Ex-Im Bank. “Selling just in the U.S. is very limiting.”
The Ex-Im Bank is a self-supporting federal agency funded using fees from its insurance and interest from a few direct loans. The agency made $1.9 billion in profit over the past five years,
“Taxpayers don’t pay anything for the financing we provide,” Cogan said.
The agency also provides competitive financing for U.S. goods and services sold outside of the country. This levels the playing field so a U.S. company doesn’t lose out on a contract if it can’t get the same financing internationally as a foreign competitor, Cogan said.
“That allows U.S. companies to sell based on the quality they provide, not the financing terms they can get,” Cogan said.
However, Ex-Im only provides insurance, loans and financing for U.S. made goods. Connecticut companies selling goods that are partially manufactured in other nations can only get coverage for the percentage made in America.
While Ex-Im is very limited in providing direct funds to companies, particularly small businesses, the U.S. Small Business Administration has three programs to help Connecticut companies boost their global business.
The SBA International Trade Loan provides up to $5 million to support fixed asset export sales.
The SBA Export Working Capital program provides a $5 million line of credit for companies to finance suppliers, inventory and production of exports, as well as working capital during long payment cycles.
The SBA Export Express program provides up to $500,000 to help companies cover expenses while increasing international trade. The money can be used for marketing, travel expenses, translating products literature for foreign customers and financing specific export orders.
“These are added incentives for the companies to grow internationally,” said John Joyce, SBA New England regional manager for export finance programs.
