USDA’s trade finance programs provide U.S. exporters with options to safeguard financial transactions while encouraging exports of U.S. agricultural products.
The USDA Foreign Agricultural Service (FAS) provides trade finance solutions for exporters of U.S. agricultural products to developing markets. International sales into these markets can pose financing challenges, as U.S. banks may be reluctant to assume the associated credit risk.
FAS administers two programs to help overcome some of these challenges and encourage the expansion of U.S. agricultural exports.
1. Export Credit Guarantee Program (GSM-102)
The GSM-102 program offers credit guarantees to encourage commercial financing of exports of U.S. agricultural products. Under this program, FAS guarantees payments due from foreign banks under letters of credit (LCs). Because payment is guaranteed, U.S. banks of exporters can offer competitive credit terms to the foreign bank that issues the letter of credit.
U.S. exporters who apply for this guarantee must pay a risk-based fee. FAS covers up to 98 percent of the loan principal and a portion of the interest for terms up to 18 months. The U.S. exporter can be paid at the time of export by assigning the guarantee to an approved U.S. bank. Most agricultural products are eligible for coverage, including bulk commodities, intermediate goods, and consumer-oriented goods.
2. Facility Guarantee Program
The Facility Guarantee Program (FGP) provides guarantees to finance commercial exports of U.S. manufactured goods and services that will be used to establish or improve agriculture-related facilities in emerging countries. Agricultural exports to many such countries are limited by their inadequate storage, processing or handling capacity. FGP provides a way to finance these goods and services, if it determines there is a downstream benefit to U.S. agricultural exports.
Some examples of potential FGP-eligible projects include: construction of a soybean crushing facility for U.S. soybeans; construction of a corn silo for imported U.S. corn; cold storage for U.S. seafood products.
Every fiscal year, USDA makes $5.5 billion in guarantees available for over 130 destinations. To find out more about GSM-102 or FGP, including eligibility requirements, visit https://www.fas.usda.gov/topics/export-financing, call 202-720-5711, or email firstname.lastname@example.org.
For a more detailed article on USDA Trade Finance Programs click here.