Working Capital Guarantee Program
Working Capital Guarantee Program allows the exporters to unlock or overcome any working capital hindrance before the shipment of their consignment. Important to note, while the entire program is operated by the commercial lenders, it is backed by Export-Import Bank’s guarantee.
This business friendly program allows the exporters to purchase raw materials, suppliers or equipment to fulfill the export orders committed by them. In addition, the funds obtained can be used for positing bids and performance bonds. Many commercial banks have now expanded the authorized channelizing of the funds obtained under the program for the issuance of standy letters of credit, making cash down payments, participation in trade shows, marketing activities and collection of the off-shore based receivables.
It is considerable that the Working Capital Guarantee Program is a highly effective financing program for the US based exporters are relying on account receivables from off-shore based customers, the exporters had always found hard to support the liquidity needs for their entity. Moreover, commercial lending offered by banks is usually not available for early-stage small exporters as they generally lack sufficient collateral to mortgage with the banks. At the same time, banks are also skeptical about the repayment risk associated with the new or even medium scale exporters citing high risk of default.
Therefore, under this situation, Working Capital Guarantee Program turns out to be the boon for all the exporters, be it small or medium-scale and allows them to compete more effectively in the global arena without worrying much about their working capital needs. Therefore, with the program offering guaranteed loans to participating exporters, US export trade has surely been benefited.
Reference
U.S. Government International Financing Programs. n.d. 14 May 2016 <http://www.export.gov/finance/eg_main_018097.asp>.
Working Capital Guarantee. n.d. 14 May 2016 <https://www.bbt.com/business/lending/commercial-lending/working-capital-guarantee.page>.
