Introduction to PEFCO

Private Export Funding Corporation (PEFCO) was created in 1970 to assist in the financing
of U.S. exports by supplementing the financing available from commercial banks and other
lenders.

PEFCO is a private sector, tax-paying entity incorporated under Delaware law and
headquartered in New York City. Shareholders include commercial banks, industrial
companies and financial services companies. Ownership of PEFCO shares are restricted to
institutions engaged in financing, producing or exporting U.S. goods or services.

PEFCO's Board of Directors includes senior managers from international lending institutions
and officers of major exporting companies.

PEFCO management includes persons with significant experience in export finance and the
programs of the Export-Import Bank of the United States (EXIM), and in finance company
management.

PEFCO was established with the support of the United States Department of the Treasury and
EXIM. EXIM cooperates with PEFCO through a variety of agreements and maintains a broad
measure of supervision over PEFCO's major financial management decisions. EXIM is
entitled to representation at all meetings of PEFCO's Board of Directors.

PEFCO achieves its objectives by offering a broad range of financing programs as a direct
lender and as a secondary market buyer of loans that finance the export sales of U.S. goods
and services and that are originated by lenders (PEFCO does not buy loans from exporters).

To be eligible for financing by PEFCO, all loans must be protected against nonpayment
under an appropriate guarantee issued by EXIM.

Key Objectives of PEFCO

1. Mobilizing Private Capital for Exports:

Objective: Encourage private lenders to participate in export financing by offering attractive

secondary market opportunities and minimizing perceived risks.

Explanation: Traditionally, commercial banks might hesitate to offer export loans due to
perceived risks and unfamiliar markets. PEFCO provides a secondary market for these loans,
allowing banks to free up capital for more loans. This increases the overall pool of private
capital available for US exports.

Real-life example: Bank A in New York initially hesitates to finance a US textile company
exporting to South Africa due to unfamiliarity with the market. PEFCO purchases the loan
after disbursement, freeing up Bank A's capital for a domestic loan while still supporting the
US textile export.

2. Expanding Access to Financing:

Objective: Make export financing more accessible to both large and small exporters, catering
to diverse needs and risk profiles.

Explanation: PEFCO's secondary market purchases and direct lending allow for larger
financing amounts for complex deals inaccessible to individual banks. Additionally, their
Small Business Initiative connects smaller exporters with willing lenders or directly finances
their transactions, addressing their specific needs.

Real-life example: A startup tech company struggles to secure financing for exporting
software to Europe. Through PEFCO's program, they connect with a venture capital firm
specializing in export financing, enabling their international expansion.

3. Promoting US Exports and Economic Growth:

Objective: Support US exports by facilitating financing, ultimately contributing to job

creation and economic growth.

Explanation: Increased access to financing leads to more exports, benefiting US

manufacturers, service providers, and agricultural producers. This translates to job creation,
higher incomes, and overall economic growth for the nation.

Real-life example: PEFCO's financing enables a US aircraft manufacturer to secure a major

export deal with an airline in Asia. This translates to thousands of jobs sustained in
production and related industries, boosting the local economy.

4. Collaborating with EXIM and Other Stakeholders:

Objective: Work effectively with the Export-Import Bank (EXIM) and other partners to
create a comprehensive export financing ecosystem.

Explanation: PEFCO collaborates with EXIM to leverage their respective strengths. EXIM's
guarantees and insurance mitigate risks, while PEFCO provides financing flexibility. This
combined approach empowers US exporters to compete effectively in the global market.
Real-life example: PEFCO and EXIM partner to support a US medical equipment company
exporting to a developing country. EXIM provides a guarantee on the loan, while PEFCO
offers competitive financing terms. This collaboration secures the transaction and benefits
both the US exporter and the developing country.

Roles of PEFCO
While PEFCO doesn't interact directly with individual exporters, its roles in the ecosystem
are crucial for facilitating and encouraging US exports. Here's a breakdown of their key roles:

1. Expanding Financing Options:

1.1 Secondary Market Purchases: PEFCO acts as a secondary market participant, buying
export loans originated by commercial banks and other lenders. This frees up capital for these
institutions to make more loans to exporters, leading to a wider pool of financing options.

Real-life example: Bank A in Chicago finances a US electronics company exporting to

Mexico. After disbursement, Bank A sells the loan to PEFCO, freeing up capital for further
export ventures in the region.

1.2 Direct Lending: For specific large transactions, PEFCO can directly lend to foreign
buyers or partner with other lenders. This provides access to financing for complex deals that
might not be feasible for individual banks.

Real-life example: PEFCO partners with a group of US and European banks to directly
finance the sale of a Boeing aircraft to an airline in Southeast Asia.

2. Supporting Small and Medium-Sized Exporters:

2.1 Small Business Initiative: PEFCO offers programs connecting smaller lenders with
exporters or even directly funding their transactions. This overcomes challenges faced by
smaller exporters in securing financing from traditional channels.

Real-life example: A US craft brewery struggles to find financing for exporting to Japan.
PEFCO connects them with a regional bank willing to participate in the transaction, securing
their export expansion.

2.2 Pre-Export Financing: PEFCO provides financing to cover production costs before
shipment. This helps smaller businesses manage cash flow, especially for large orders or
those requiring significant upfront investments.
Real-life example: A US textile manufacturer needs financing to produce garments for a
major retailer in Australia. PEFCO's pre-export financing ensures production continuity
before export shipment.

3. Enhancing Exporter Competitiveness:

Competitive Rates and Terms: PEFCO offers competitive rates and terms on loan
purchases and direct lending, making financing more affordable for exporters compared to
traditional commercial loans.

Real-life example: A US medical equipment manufacturer receives a better financing rate

from PEFCO compared to their local bank, allowing them to offer more competitive prices in
an international tender.

Partnering with EXIM: PEFCO works closely with the Export-Import Bank of the United
States (EXIM) to support exports. This combines PEFCO's financing expertise with EXIM's
guarantees and insurance, offering a comprehensive risk mitigation package for exporters.

Real-life example: A US agricultural exporter seeking to expand sales to Africa benefits

from a combined PEFCO-EXIM package, reducing perceived risks for foreign buyers and
facilitating the deal.

4. Contributing to the Economy:

Job Creation: By supporting exports, PEFCO indirectly contributes to job creation in US

manufacturing, agriculture, and service industries.

Economic Growth: Increased exports translate to economic growth, benefiting communities

nationwide and enhancing US competitiveness in the global marketplace.

Real-life example: PEFCO's financing enables a US software company to expand its

services to Latin America, leading to job creation in their development team and boosting US
software exports as a whole.