"CECA Supply & Services Inc., has been able to improve their cash flow and better navigate the public tender system in Algeria."
Learn how an Ex-Im Bank working capital guarantee can help your business post performance and bid bonds, improving your business' cash flow.
THE CHALLENGE
CECA Supply & Services Inc. is a Texas based supplier of oilfield equipment, whose primary customers are Algerian state-owned enterprises, which presents an export opportunity and a challenge.
The company must secure most of its business through the Algerian public tender system, which requires businesses to secure a bid bond from their lender with every bid and, if they win a contract, a performance bond. Bid and performance bonds require exporters to put cash up front as security, hurting their business' cash flow.
CECA Supply & Services recently secured a $5 million dollar contract to supply ENAFOR - the Algerian National Drilling Company - with materials from Derrick Corporation a Buffalo, NY based supplier. In order to ship Derrick's equipment, CECA Supply & Services had to provide ENAFOR with a performance bond at 10 percent of the total contract - in this case $500,000.
THE SOLUTION
In order to avoid tying up its cash flow, CECA Supply & Services used a working capital loan guarantee from the Export-Import Bank of the United States (EXIM) to access working capital financing from its commercial lender -Amegy Bank of Texas.
An EXIM working capital loan guarantee ensures commercial lenders that if CECA Supply & Services defaults on its loan, EXIM will cover 90 percent of the commercial bank's exposure-encouraging the bank to make loans to businesses like CECA Supply & Services that do business abroad.
With an EXIM guarantee in hand, CECA Supply & Services was able to secure financing through its bank using its export-related inventory and accounts receivables, as opposed to being required to put down cash that can be used for its operations and business development. EXIM's guarantee allowed CECA Supply & Services to improve its cash flow and use its foreign receivables as collateral to secure the financing it needed for the performance bond. This allowed CECA Supply & Services to keep its $500,000 to use to secure more sales.
THE RESULTS
Using an EXIM working capital loan guarantee CECA Supply & Services Inc. has been able to improve its cash flow and better navigate the public tender system in Algeria. The working capital loan guarantee has permitted CECA Supply & Services to bid for more business and bigger deals, without the fear of not being able to support bid and performance bonds, allowing its business to grow.