Missouri’s U.S. Sens. Roy Blunt-R, and Claire McCaskill-D, are calling for the reauthorization of an 80-year-old program that lends financial backing to Show-Me State businesses selling outside of the country: Export-Import Bank of the United States. Without reauthorization, the bank would see its eight-decade run end on Sept. 30.
Although a spokeswoman for Ex-Im Bank said she has confidence the bank is not approaching its last days, the prospect of losing business support services is daunting for at least a couple local exporters.
In the Springfield area, six companies have used the bank to help generate $49.1 million in international sales since 2007: 3D Corporate Solutions LLC, Custom Metalcraft Inc., Executive Coach Builders Inc., International Division Inc., Paul Mueller Co. (OTC: MUEL) and Tuthill Corp. During that time, Missouri companies sold $1 billion in products and services outside the U.S. with direct help from Ex-Im Bank.
In fiscal 2013, the bank approved more than $27 billion in total authorizations to help generate roughly $37.4 billion in U.S. export sales.
Custom Metalcraft General Manager Scott Higgins said Ex-Im Bank is critical to the roughly $4 million in international sales the stainless steel manufacturer generates annually.
“We would lose all of that if the Ex-Im Bank goes away,” Higgins said.
That’s because Ex-Im Bank can guarantee receivables for Custom Metalcraft’s clients.
Higgins said he can’t imagine trying to compete without it.
“We are using it as a means to offer terms to our international customers,” Higgins said. “We’re competing against European stainless steel manufacturers for product to be delivered in Europe, England, Malaysia. They can offer terms because they are in the same countries. We can’t offer terms because it is awfully hard to collect from the U.S.”
Ex-Im Bank Regional Director Mark Klein said the bank offers a variety of products centered on three key services: pre-export working capital; export credit insurance; and foreign-buyer financing.
“If their local bank is not comfortable providing them with the working capital they need to grow their exports, I can come in working with the lender – I don’t lend the money, the banks lend the money – and I can provide a 90 percent principal and interest guarantee on that line of credit,” Klein said of pre-export working capital.
“We share a little bit of shelf space with the (Small Business Administration), so I work closely with the SBA, the customer and with the lender, to make sure they are placed with the right product.”
International Division Inc. President Jose Sala said 98 percent of the company’s manufactured products are sold overseas and he’s worried no government guarantee of payment could be damaging to his business.
This year, InDiv built a 16,000-square-foot manufacturing facility in Buffalo for industrial poultry-raising equipment – the firm is branching out into swine cages, too – which is sold from Mexico to Bolivia, Nigeria, Saudi Arabia and the Philippines. With the help of Ex-Im Bank, InDiv has secured more than $11.6 million in sales since 2007, and overall sales nearly have doubled since 2009.
Sala said InDiv routinely insures short-term customer payments through the bank, which frees up the company to secure working capital via the SBA.
“Having that insurance, and the backing from the SBA, puts a value on my foreign receivables,” Sala said. “I have a lot of ongoing, open accounts because some of my customers we’ve been working with for 30 years, so it works nicely as a bundled package.
“If it wasn’t for that, there’s no local bank that would want an international receivable, and you can’t blame them.”
Sala didn’t know how the company would be affected if Ex-Im Bank wasn’t reauthorized, but said it wouldn’t be a positive scenario.
“I have to believe it would have a big impact on our ability to utilize the SBA program that we’re in,” Sala said, adding InDiv founder Forest Lipscomb used to personally insure receivables before the company began using Ex-Im Bank. Lipscomb died in 2009.
Klein said his regional clients’ No. 1 fear is not getting paid. Without guarantees on receivables, he said it would be hard for U.S. companies to compete in foreign markets.
“All things being equal, if I’ve got my U.S. company competing against a German entity, and the German entity is offering 120-day terms and my company is operating under cash in advance, I’d see a lot of business going to the Germans, unfortunately,” Klein said.
Higgins said without Ex-Im Bank, Custom Metalcraft would have to require cash up front, and that wouldn’t sit well with buyers. With U.S. sales flat and international markets growing, the issue would only compound the problem, he said.
It is possible to obtain letters of credit through European banks and other markets, but Higgins said it’s a hassle international customers don’t face if they buy stainless steel tanks made closer to home.
“We even set up an office in Amsterdam. We have local connections with Europe so we are in the same time zones; we are talking the same languages in order to better serve our customers over there. I’d have to shut that office down immediately,” Higgins said. “We’re just not going to be competitive if we can’t offer terms.”
In a statement from Blunt’s office, the senator said Ex-Im Bank offers Missouri businesses an invaluable support system.
“Missouri businesses and thousands of workers in our state have benefited from Export-Import Bank loans. I’m pleased to co-sponsor Sen. (Joe) Manchin’s (D-W.Va.) bill, which will help continue America’s competitiveness in the international marketplace,” Blunt said.
In a letter of support published in Springfield Business Journal’s July 28 issue, Sen. McCaskill said reauthorization was important for Missouri.
“I strongly support the reauthorization of the Ex-Im Bank to help the thousands of Missourians who benefit from its services. The Senate is expected to take up legislation to extend the authorization of the Ex-Im Bank. Without similar action from the House of Representatives, the authorization for the bank will expire, and U.S. businesses will lose this valuable resource,” she wrote. “We cannot let this happen.”
Dolline Hatchett, vice president of communications for Ex-Im Bank, told SBJ she feels confident the bank would secure reauthorization based on its long history of support for businesses. And the services it provides more than pay for the program, she said.
According to ExIm.gov
, in the previous fiscal year, the bank earned more than $1 billion above the cost of operations for U.S. taxpayers.[[In-content Ad]]