What You Should Know About Medium-Term Financing

medium term financing

For high-value and capital equipment export transactions, sellers who can offer flexible repayment options often win the purchaser’s business. Medium-term financing enables a purchaser to repay a debt over a period of two to 10 years. For some sellers and creditworthy purchasers, the right arrangement offers flexibility and reduces financial strain.

When to Consider Medium-Term Financing

A lender does not typically approve this type of financing for most export arrangements. Capital equipment, on the other hand, warrants this longer-term arrangement. Sellers specializing in industrial equipment, manufacturing machinery, vehicles, high-value furniture, computer hardware, medical and laboratory equipment, and other high-value products with long life expectancies should consider medium-term financing options for their customers.

Benefits of Medium-Term Financing

The ability to provide medium-term financing appeals to a broader range of international equipment purchasers, which give exporters the ability to acquire and retain business all over the world. Some foreign purchasers cannot access the capital to pay for large and high-value equipment purchases upfront. Others do not want to use in-country lenders and banks to fund import purchases. Medium-term financing available through American exporters gives purchasers the flexibility to buy valuable equipment needed for business growth and success.

Consider medium-term financing as a way to gain access to immediate cash flow for high-value purchases, and to offer competitive and relationship-building repayment terms to viable customers. Over time, the ability to offer medium-term financing gives exporters access to a wider range of international business opportunities and boosts global business reputations.

How Medium-Term Financing Works

In a medium-term financing arrangement, a lender and ExIm Bank evaluates the creditworthiness of the international purchaser in question to approve the financing arrangement. A foreign purchaser may need to submit audited financial statements for up to three years during the application review. Throughout the process, the exporter receives updates regarding purchaser eligibility. The exporter must typically provide the lender with copies of the bill of lading, purchase order, invoice, and an exporter’s certificate for payment.

Drake Finance can fund up to 85 percent of a total invoice at the time of shipment and engage in collection actions over the term of the purchaser payment plan. An exporter may receive payment for large purchase orders within 1 day of shipment document processing.

Working with Drake Finance

Drake Finance only approves medium-term financing arrangements for equipment featuring a minimum of 80 percent U.S. materials. Depending on purchaser needs and creditworthiness, we can accommodate financing terms as long as 10 years or more for certain products. As an EXIM Bank-approved lender, our export finance specialists help clients protect their export businesses from nonpayment with EXIM export credit insurance products and guarantees. Purchasers can take advantage of the financing agreement without submitting letters of credit, collateral, or other forms of payment guarantees.

To learn more about our medium-term financing program or to see if a foreign purchaser qualifies for financing, reach out to our managing principal, Richard H. Lopez, Esq. at rlopez@drakefinance.com or (305) 854-0101.

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