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About nine years ago, Jim Ajmal, president and owner of Valley of the Sun Cosmetics, wanted to expand his business in foreign countries. At the time, his Gardena, Calif.-based cosmetic products business was grossing about $300,000 in annual sales - but only 15 to 20 percent of those sales came from international buyers. So, he decided to obtain support from the Export-Import Bank of the United States, a federal agency that helps U.S. exporters ramp up their ability to export U.S. goods and services.
Today, exports account for 99 percent of the company's annual revenues, which have grown to $4 million. From risk protection and credit to working capital and term financing, the Export-Import bank is designed to strengthen U.S. exporters' positions within the global marketplace. Last year alone, the agency approved $35.8 billion in export financing on $50 billion worth of goods and services. And over the past four years, the Export-Import Bank has increased its financing to small businesses like Ajmal's by 92 percent.
Here are four things business owners should know about the Export-Import Bank.
— Jim Ajmal, president and owner of Valley of the Sun Cosmetics
At the core of Ajmal's success has been the $300,000 line of credit that the agency provides. Ajmal can tap into his line of credit, allowing him to further extend credit to international buyers so they are able to make larger purchases on goods and services. For example, customers from countries such as Pakistan, UAE and the U.K. can buy $100,000 worth of product at a time. Because the bank is giving Ajmal the ability to extend his credit terms, his customers don't need to submit payments for 30 to 60 days, giving them additional flexibility to make larger purchases. "With 30 to 60 days extended credit limit, customers are buying twice [as] much or even sometimes more than before and are growing with us," he says.
When it comes time to make and receive international payments on large orders, businesses can use a trusted online foreign exchange service, which enables bank-to-bank money transfers. Helpful tools such as email market-rate alerts and currency converters can help business owners determine the best time to send and receive international payments.
Ajmal also uses the bank's credit insurance, which would cover his losses regardless of whether a customer files for bankruptcy or a political revolution is taking place.
In this case, the insurance would cover up to 90 percent of the purchase value for a product that is shipped but never paid for.
Despite the Export-Import Bank's broad appeal, "it's not for everyone," says Paul Sabbah, CEO of Stamford International, a Stamford, Conn.-based export management company that helps small businesses with go-to-market strategies for exporting. Some of Sabbah's clients don't require services like credit insurance, which allows business owners to give their international customers between 30 and 60 days to pay on their orders. That's because his clients' customers typically pay up front.
In other cases, Sabbah says his customers don't use the Export-Import Bank because they simply don't qualify: Products that qualify for the export agency's support must meet the 51 percent U.S. content rule, and products sold into the military don't qualify either. Also, a qualifying international business must be in operation for at least one year, with a positive net worth.
"Without Ex-Im, it's very hard [to maintain cash flow] - I should say, for smaller companies, impossible," Ajmal says. "Everybody who is a small business owner, I would recommend them to join Ex-Im - immediately."
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