Categories: Case Studies

Author

Andy Cagle

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Accessing affordable and predictable working capital is essential for any company looking to navigate today’s complex supply chains. So when a large commodities exporter needed to improve its cash flow, a partnership between the Export-Import Bank of the United States (EXIM) Huntington Bancshares, Incorporated, and LSQ created an innovative supply chain finance (SCF) program to keep production humming, workers employed, and product moving – for the exporter and its suppliers.

SCF delivers the working capital necessary to run a business. The goal for a successful SCF program is to improve cash flow certainty for suppliers by providing payments for delivered goods and services earlier than the agreed terms with the exporter. SCF offers stable, on-demand, early payments that reduce risk, improve resiliency which facilitate healthier relationships between sellers and buyers.

Working Capital Crunch for the Exporter and Their Suppliers

Even prior to the pandemic, the exporter was seeking to improve their working capital position and support the small-to-medium suppliers that made up their supply chain. The pandemic made (and is still making) it very challenging to find a traditional, bank-led SCF program. The challenges ultimately trickled downstream to suppliers who relied on visibility on order flow from the exporter.

Without working capital, companies on both sides of the supply chain were in jeopardy.

Enter the EXIM Supply Chain Finance Guarantee

Given the perfect storm of industry concerns, lack of credit enhancements for the commodity industry, and the pandemic, the exporter’s options were limited until connections were made between EXIM, who had been working with the exporter to find a solution, and LSQ.

That connection led to an engagement with Huntington and a proposal to use the EXIM SCF Guarantee Program. The program provides a guarantee of payment from the U.S. government of up to 95 percent of receivables, thus incentivizing lenders to fund SCF finance programs for U.S. exporters by reducing risk, increasing availability, and lowering costs.

In August 2020, EXIM’s Board unanimously approved a 95 percent guarantee of a $200 million SCF facility from LSQ and Huntington.

EXIM’s guarantee of the 12-month facility would support the purchase of the exporter’s accounts receivable from to 50 to 60 of its U.S. suppliers. EXIM would guarantee payment of the receivables, thereby extending its support to the exporter and its network of suppliers across the United States.

Results

Through the EXIM/Huntington/LSQ partnership, the exporter has been able to maintain a healthy supply chain, supporting 700 jobs for small-to-medium businesses in Alabama, California, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New York, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.

EXIM renewed the guarantee for another year in November 2021, and, given the improvement to the industry and the buyer, were able to reduce the guarantee to 90 percent.

Export-Import Bank of the United StatesHuntington National BankAbout the Partners

EXIM

contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations have directly supported small businesses.

LSQ is the leader in end-to-end working capital and payments solutions, combining innovative and intuitive technology, on-demand financing, and a data-driven understanding of credit and risk. LSQ simplifies commercial finance through accelerated payment terms, clear visibility into the entire AR/AP process, and flexible credit decisioning.

Founded in 1866 as The Huntington National Bank, today Huntington Bancshares Incorporated still operates from the same Columbus, Ohio founding location in the heart of the Midwest. As of June 9, 2021, TCF National Bank joined The Huntington National Bank. The combined company has approximately $175 billion in assets, $142 billion in deposits, and $116 billion in loans, based on March 31, 2021 balances.

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