How To Grow International Sales by Offering Credit Terms but Minimizing Risks Warren Bares J. Maxime Roy, Inc. Ex-Im Bank Registered Broker

Export credit insurance can help your company: Export credit insurance can help your company: Increase foreign sales Increase foreign sales Finance foreign sales Finance foreign sales

Increasing Foreign Sales Become more competitive by offering credit terms Become more competitive by offering credit terms Your customer would prefer to use your money rather than theirs Your customer would prefer to use your money rather than theirs Interest rates are high in many countries Interest rates are high in many countries

Prime Lending Rates Around the World Colombia13% Colombia13% Mexico 7% Mexico 7% Peru 21% Peru 21% India 12% India 12% Russia 15% Russia 15% Nigeria 18% Nigeria 18% USA 3.25% USA 3.25%

Cash-In-Advance Less risk to the seller Less risk to the seller More risk to the buyer - risk of seller not shipping or performing per agreement More risk to the buyer - risk of seller not shipping or performing per agreement Buyer will either have to use their own cash or bank line of credit Buyer will either have to use their own cash or bank line of credit May cause seller to lose business to competitors who offer open account May cause seller to lose business to competitors who offer open account

Letter of Credit Buyers bank issues letter of credit Buyers bank issues letter of credit Seller is protected – can rely on bank to pay upon presentation of documents Seller is protected – can rely on bank to pay upon presentation of documents Buyer is protected – bank will only pay once seller has performed according to the conditions in the letter of credit Buyer is protected – bank will only pay once seller has performed according to the conditions in the letter of credit Disadvantages Disadvantages Costs Costs Issuing Bank charges – 1% to 2% of the Letter of Credit Issuing Bank charges – 1% to 2% of the Letter of Credit Confirming Bank charges – Confirming Bank charges – Ties up capital of buyer Ties up capital of buyer Complexity Complexity

Documentary Collection Sellers bank transfers documents to buyers bank Sellers bank transfers documents to buyers bank Sight Draft Documents Against Payment - Buyers bank releases documents to buyer upon payment Sight Draft Documents Against Payment - Buyers bank releases documents to buyer upon payment Documents Against Acceptance – Buyer goes into their bank and signs draft promising to pay in certain number of days (30, 60, 90 days) and receives documents to clear goods Documents Against Acceptance – Buyer goes into their bank and signs draft promising to pay in certain number of days (30, 60, 90 days) and receives documents to clear goods Disadvantage to seller – not a guarantee of payment by the buyers bank. Bank pays upon receipt of payment from the buyer. Risk to Seller. Disadvantage to seller – not a guarantee of payment by the buyers bank. Bank pays upon receipt of payment from the buyer. Risk to Seller.

Open Account Low risk to buyer Low risk to buyer Higher risk to seller Higher risk to seller Risk of default due to commercial and political risks Risk of default due to commercial and political risks Seller Considerations: Seller Considerations: Reduces cash flow while waiting on payment Reduces cash flow while waiting on payment Makes seller more competitive – will increase sales Makes seller more competitive – will increase sales Buyer Considerations: Buyer Considerations: Their interest rates are high – they want your credit Their interest rates are high – they want your credit

How can the seller offer credit terms without taking on the risk? Export Credit Insurance Credit insurance company assumes the risk

Risks covered by Export Credit Insurance Commercial Risks - insolvency, bankruptcy, and protracted default Commercial Risks - insolvency, bankruptcy, and protracted default Political Risks - war, revolution, civil unrest, expropriation, currency transfer risk, and cancellation of export or import licenses. Political Risks - war, revolution, civil unrest, expropriation, currency transfer risk, and cancellation of export or import licenses.

Political Risks - updated North Korea – Unpredictable leadership / possible war with South Korea North Korea – Unpredictable leadership / possible war with South Korea Cyprus – financial crisis Cyprus – financial crisis Iran – nuclear ambitions / tension with Israel Iran – nuclear ambitions / tension with Israel Arab Spring – In February of 2011 Egypts President, Hosni Mubarak resigned Arab Spring – In February of 2011 Egypts President, Hosni Mubarak resigned Syria Syria

Bank Financing of Foreign Accounts Receivable Most lenders will not allow foreign accounts receivable as collateral in a borrowing base calculation. Most lenders will not allow foreign accounts receivable as collateral in a borrowing base calculation. However, foreign accounts receivable that are credit- insured are eligible for inclusion in the borrowing base. However, foreign accounts receivable that are credit- insured are eligible for inclusion in the borrowing base. Improve cash flow and liquidity by borrowing against insured foreign accounts receivable. Improve cash flow and liquidity by borrowing against insured foreign accounts receivable.

Credit Insurance - Coverage and Cost Policies available to insure one buyer or multiple buyers. Policies available to insure one buyer or multiple buyers. Policies tailored to Small Business and policies for larger companies Policies tailored to Small Business and policies for larger companies Coverage is % of the invoice amount, after deductible Coverage is % of the invoice amount, after deductible Some policies have no deductible Some policies have no deductible Rates depend primarily on payment terms & country of the buyer(s) Rates depend primarily on payment terms & country of the buyer(s) Pre-paid and pay-as-you-go policies Pre-paid and pay-as-you-go policies

Ex-Im Bank Small Business Multi- Buyer Policy Exporter must qualify as Small Business by SBA Size Standards Exporter must qualify as Small Business by SBA Size Standards Must have less than $7.5MM in foreign credit sales on average over the prior 3 years Must have less than $7.5MM in foreign credit sales on average over the prior 3 years Must be in business for at least one year Must be in business for at least one year Must have a positive net worth Must have a positive net worth

Policy ParametersSmall Business Multi-buyer Policy Express Policy IndemnityPrivate buyers – 95% Sovereign Buyers – 100% Private buyers – 95% Sovereign Buyers – 100% DeductibleNone Rate schedule 0-60 days open account – 0.55% days open acct % Rates applied to amount of invoice Rates do not vary by country 0-60 days open account – 0.65% days open acct % Rates applied to amount of invoice Rates do not vary by country Minimum PremiumNone Advance PremiumNone Premium Payment Calculate and pay premium on ALL foreign credit sales for the month Premium due by the end of the month following the month of shipment Calculate and pay premium on all insured shipments for the month Premium due by the end of the month following the month of shipment Buyer Underwriting Credit information required to underwrite buyer limits Details on next two slides Credit information required to underwrite buyer limits Details on next two slides Claim Filing Window3-8 months after the due date Key FeaturesMeant to insure all foreign credit sales Unlimited number of buyers Does not require policyholder to insure all foreign buyers Limited to 20 buyers

CREDIT AND FINANCIAL INFORMATION REQUIREMENTS for Special Buyer Credit Limit Applications Up to $100,000: Either credit agency report, one trade Reference, or ledger history Up to $100,000: Either credit agency report, one trade Reference, or ledger history $100,001 to $300,000: credit agency report and either a trade reference, ledger history, or buyers financial statements for last 2 fiscal years $100,001 to $300,000: credit agency report and either a trade reference, ledger history, or buyers financial statements for last 2 fiscal years $300,001 to $1million: Credit agency report and 2 trade references and the Buyers audited or signed unaudited financial statements for the last 2 fiscal years with notes $300,001 to $1million: Credit agency report and 2 trade references and the Buyers audited or signed unaudited financial statements for the last 2 fiscal years with notes

Over $1 million: Credit Agency Report and 2 Trade References and a Bank Reference and Buyers audited financial statements for the last 3 fiscal years

Ex-Im Bank U.S. Content Requirements Short -Term Insurance Goods and services insured must be shipped from the United States Goods and services insured must be shipped from the United States Eligible goods and services are those produced or originated entirely in the U.S.; or those containing U.S. and foreign-originated components Eligible goods and services are those produced or originated entirely in the U.S.; or those containing U.S. and foreign-originated components Each item must be at least 51% U.S. content on a cost-basis. Each item must be at least 51% U.S. content on a cost-basis.

Credit Insurers Export-Import Bank of the United States (Ex-Im Bank) Export-Import Bank of the United States (Ex-Im Bank) Official Export Credit Agency of the U.S. Official Export Credit Agency of the U.S. Carries the Full Faith and Credit of the U.S. Government Carries the Full Faith and Credit of the U.S. Government Private Credit Insurance Companies / S&P Ratings: Private Credit Insurance Companies / S&P Ratings: Atradius (A-) Atradius (A-) Coface North America (A -) Coface North America (A -)

Private Credit Insurance Companies Chartis (A+) Chartis (A+) Euler Hermes ACI (AA-) Euler Hermes ACI (AA-) Great American Insurance / FCIA (A) Great American Insurance / FCIA (A) HCC Insurance Holdings (AA) HCC Insurance Holdings (AA) QBE Insurance Corp. (A+) QBE Insurance Corp. (A+) Zurich Emerging Markets (AA-) Zurich Emerging Markets (AA-) Lloyds of London Lloyds of London

Ex-Im Bank or Private Insurance? Ex-Im Bank Ex-Im Bank Full Faith and Credit of the U.S. Government Full Faith and Credit of the U.S. Government Offers lower cost insurance to Small Businesses (no minimum premium) Offers lower cost insurance to Small Businesses (no minimum premium) Open in more countries than most private insurers Open in more countries than most private insurers Not subject to insurance market cycles Not subject to insurance market cycles Unlimited capacity Unlimited capacity Exports must meet U.S. Content Requirements Exports must meet U.S. Content Requirements Does not support sales to military buyers Does not support sales to military buyers Private Insurers Private Insurers No U.S. content restrictions No U.S. content restrictions No restrictions on selling to foreign military No restrictions on selling to foreign military May offer more competitive rates / terms for larger businesses May offer more competitive rates / terms for larger businesses Minimum premium of $10,000 or more Minimum premium of $10,000 or more

Export Credit Insurance Safely Increase Foreign Sales Safely Increase Foreign Sales Finance Insured Foreign Accounts Receivable Finance Insured Foreign Accounts Receivable

Summing it up: Increasing Foreign Sales Give your foreign customers what they want – Credit Give your foreign customers what they want – Credit Pass the credit risk on Ex-Im Bank or a private credit insurer Pass the credit risk on Ex-Im Bank or a private credit insurer

Our role as Broker Confer with client to determine which policy type best meets their needs Confer with client to determine which policy type best meets their needs Obtain quotes from Ex-Im Bank and / or private insurers Obtain quotes from Ex-Im Bank and / or private insurers Review quotes with client and bind the policy selected Review quotes with client and bind the policy selected Ongoing work with client to help with shipment reporting, establishment of buyer coverage limits, documentation requirements and other policy management details Ongoing work with client to help with shipment reporting, establishment of buyer coverage limits, documentation requirements and other policy management details Assist with claims – from filing through the point of getting paid Assist with claims – from filing through the point of getting paid Premium rates are the same with or without a Broker! Premium rates are the same with or without a Broker!

For further assistance… J. Maxime Roy, Inc. J. Maxime Roy, Inc. Warren Bares Warren Bares 911 Lee Avenue, Suite Lee Avenue, Suite 410 Lafayette, LA Lafayette, LA Office (337) Office (337) Cell (337) Cell (337)