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

1. How To Grow International Salesby Offering Credit Terms but Minimizing RisksWarren BaresJ. Maxime Roy, Inc.Ex-Im Bank Registered Broker

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

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

4. Prime Lending Rates Around the World Colombia 13% Mexico 7% Peru 21% India 12% Russia 15% Nigeria 18% USA 3.25%

6. Cash-In-Advance Less risk to the seller 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 May cause seller to lose business to competitors who offer open account

7. Letter of Credit • Buyer’s bank issues letter of credit • 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 • Disadvantages • Costs • Issuing Bank charges – 1% to 2% of the Letter of Credit • Confirming Bank charges – • Ties up capital of buyer • Complexity

8. Documentary Collection Seller’s bank transfers documents to buyer’s bank Sight Draft Documents Against Payment - Buyer’s 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 Disadvantage to seller – not a guarantee of payment by the buyer’s bank. Bank pays upon receipt of payment from the buyer. Risk to Seller.

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

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

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

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

15. Bank Financing of Foreign Accounts Receivable 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. Improve cash flow and liquidity by borrowing against insured foreign accounts receivable.

16. Credit Insurance - Coverage and Cost • Policies available to insure one buyer or multiple buyers. • Policies tailored to “Small Business” and policies for larger companies • Coverage is 90-100% of the invoice amount, after deductible • Some policies have no deductible • Rates depend primarily on payment terms & country of the buyer(s) • Pre-paid and pay-as-you-go policies

17. Ex-Im Bank Small Business Multi-Buyer Policy 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 be in business for at least one year Must have a positive net worth

19. 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 $100,001 to $300,000: credit agency report and either a trade reference, ledger history, or buyer’s financial statements for last 2 fiscal years $300,001 to $1million: Credit agency report and 2 trade references and the Buyer’s audited or signed unaudited financial statements for the last 2 fiscal years with notes

20. Over $1 million: • Credit Agency Report and • 2 Trade References and • a Bank Reference and • Buyer’s audited financial statements for the last 3 fiscal years

21. Ex-Im Bank U.S. Content Requirements Short -Term Insurance • 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 • Each item must be at least 51% U.S. content on a cost-basis.

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

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

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

25. Export Credit Insurance • Safely Increase Foreign Sales • Finance Insured Foreign Accounts Receivable

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

27. Our role as Broker Confer with client to determine which policy type best meets their needs Obtain quotes from Ex-Im Bank and / or private insurers 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 Assist with claims – from filing through the point of getting paid Premium rates are the same with or without a Broker!

28. For further assistance… J. Maxime Roy, Inc. Warren Bares 911 Lee Avenue, Suite 410 Lafayette, LA 70501 Office (337) 235-7548 Cell (337) 298-0664 Email: warren@jmaximeroy.com