Last month the U.S. Congress left Washington for the 4th of July recess without reauthorizing the U.S. Export-Import Bank, which supports international trade by providing financing for large and small companies. This lapse froze more than $9 billion in import-export transactions, including more than $3 billion in loan guarantees. As Congress returns from their summer break, the partisan battle over the Export-Import Bank is set to continue. With the future of the bank in doubt, many large and small businesses are exploring short and long-term options for financing international transactions. Non-bank commercial lenders, which offer loan products such as purchase order financing and contract financing, are a valuable option.
The battle over the Export-Import Bank arose from a partisan fight in Congress. Conservatives, who successfully blocked the reauthorization of the bank in June, argue that the bank’s loans are a form of corporate welfare and cronyism. While Democrats and moderate Republicans maintain the bank plays a vital role in facilitating international trade and creating jobs here in the United States. The two sides will resume the fight in late July.
Regardless of how the political battle plays out, Congress’s failure to act is having a real impact on business as companies that buy and sell goods overseas are already feeling the pain. Reuters reported recently that General Electric had put a $350 million order on hold and Boeing has as much as $9 billion of deals in flux this year because of the lapse in the reauthorization of the Export-Import Bank.
These large companies have access to a variety of financing options and will be able to address this challenge over the short and long term. What about the thousands of small companies that also rely on the Export Import Bank to finance their transactions?
For these companies, the best option may be non-bank commercial lenders like Abington Emerson Capital. These lenders offer flexible lending products such as purchase order financing, which can help fund international transactions. These loans are generally underwritten based on the value and strength of the transaction, rather than the credit profile of the company. This allows companies that may not qualify for traditional financing to obtain the liquidity they need to complete a transaction. This type of transaction-based financing can help a company that previously relied on the Export-Import Bank to fund the buying or selling of goods internationally.
It is unclear how the battle over the Export-Import Bank will be resolved in the coming months. In the meantime, companies that trade internationally will need to find alternative ways to finance transactions. For small companies, this may mean exploring other forms of financing from non-bank commercial lenders.