Small Aircraft Manufacturer Relies on Exports to Compete
Thrush Aircraft – Albany, Georgia
The Export-Import Bank is a key resource for businesses in Georgia and across the United States that export products worldwide. The Ex-Im Bank is the official Export Credit Agency of the Unites States. As such, it assumes credit and country risks that our private banking sector is unable or unwilling to accept. It also provides working capital guarantees, export credit insurance, loan guarantees and direct loans to overseas buyers. In sum, it significantly helps exporting manufacturers in the United States by matching or beating the financing other governments provide to their exporters.
Thrush Aircraft, for example, is a small manufacturer of agricultural aircraft that relies on exporting to overseas customers for 75 percent of the company’s business. The company’s aircraft is currently flying in over 80 different countries. Payne Hughes, Thrush President and CEO, says customer financing from Ex-Im Bank has made a lot of these sales possible, and without it, future sales would undoubtedly disappear—leading to reduced production at the factory, and the loss of many skilled jobs.
Thrush aircraft typically sells for just less than one million dollars. But, save for Ex-Im Bank, there is no private insurance today for export products valued at one million or below. Therefore, Thrush relies on Ex-Im’s medium-term insurance, which allows its customers to purchase an insurance policy to guarantee payment to a third party bank that purchases the company’s note—making a secured sale possible.
Another Ex-Im Bank program in which Thrush participates is the working capital guarantee that allows a bank to loan the company money through a line of credit—thereby purchasing a guarantee through a fee to Ex-Im Bank in exchange for a percentage of the loan in interest and a fixed fee.
Ex-Im Bank serves as the official U.S. Export Credit Agency (ECA), which is something almost every country that exports products has. An ECA is an advantage to all manufacturers simply because their available financing and guarantee programs make it easier to sell products overseas.
Why don’t all foreign customers get loans domestically from local banks? Unfortunately, some emerging markets don’t have a sound financial infrastructure in place to facilitate their purchases of vital infrastructure and equipment. This again means Ex-Im Bank is the financial enabler for virtually any smaller exporting companies. Losing this resource would cripple such businesses.
Thrush’s customers in countries with a more favorable banking situation, such as Canada and Australia, typically receive financing on a local level, and their local financing options generally cost less than using Ex-Im Bank. However, in overseas markets where the local banking conditions are unreasonable – or sometimes nonexistent – customers look to Thrush (and other exporters) to provide financing through Ex-Im Bank. In sum, in those countries where Ex-Im Bank funds or an Ex-Im Bank guarantee is used, it creates a lower cost of capital for the buyer and makes it possible for the customer to purchase a U.S. product.
Some who are lobbying to eliminate Ex-Im Bank say it serves only the biggest corporations, but Ex-Im Bank actually provides an invaluable resource for smaller exporting manufacturers like Thrush Aircraft, and thousands more nationwide.
“As a businessman, I sincerely believe Ex-Im Bank is a very good thing and that it is vital in helping small businesses thrive here in the United States,” said Hughes. “Should Ex-Im Bank be eliminated, I have no doubt another country will quickly offer a similar resource—which in turn will allow manufacturers in that country to grow, while those here at home wither.”
Keeping Ex-Im in place will ensure all business in the United States that are selling products overseas can continue to make significant contributions to our nation’s economy.