Expanding Your Agricultural Horizons: A Look at the USDA's GSM-102 Program
The international agricultural market presents exciting opportunities for small and medium-sized businesses in the United States. However, navigating unfamiliar territory can be daunting obstacles. Businesses looking to export might be wary of working with new buyers for fear of not getting paid, while importers in developing countries often face challenges in securing the financing necessary to purchase U.S. products.
This is where the USDA’s Export Credit Guarantee Program (GSM-102) steps in. Offered by the Foreign Agricultural Service (FAS), GSM-102 provides a vital tool for U.S. exporters of agricultural commodities by reducing financial risk, ultimately making it easier for you to get paid.
How Does GSM-102 Work?
GSM-102 functions by guaranteeing a portion of the credit extended by lenders in the United States to approved foreign financial institutions. This guarantee essentially acts as a safety net for the U.S. lender. If the foreign buyer defaults on their payment for the shipment, USDA will step in and cover a significant portion of the outstanding balance, typically up to 98% of the principal and a portion of the interest.
Benefits for U.S. Exporters: Lowering Risk and Expanding Opportunities
• Reduced Risk of Non-Payment: The GSM-102 guarantee significantly reduces the financial risk associated with international transactions. You’ll worry less about collecting payment and focus more on closing deals and fulfilling orders. This allows you to confidently pursue sales opportunities in new markets where there might be a higher risk of non-payment due to factors like a buyer’s financial situation or a less established business environment.
• Competitive Financing for Buyers: With the security of the government guarantee, U.S. lenders are more likely to offer competitive financing terms to foreign buyers’ banks. This makes your products more attractive by easing the financial burden on the importer, potentially leading to larger or more frequent sales.
• Program Flexibility: Whether you export high-value consumer-oriented products like fresh produce or meats, intermediate goods like hides and flour, or bulk commodities like grains and oilseeds, GSM-102 can be a valuable tool for securing financing solutions.
Real-World Example
A small business in Miami that exports produce to grocery stores abroad came to USDA looking for assistance. The business owner was eager to enter the Venezuelan market but needed a risk mitigation tool to finance a significant sale of apples. The Venezuelan importer, on the other hand, required a credit line to facilitate the purchase. Through GSM-102, the U.S. exporter secured coverage, allowing the Venezuelan importer to work with an eligible bank to obtain a credit extension with a manageable repayment schedule. This groundbreaking transaction in 2022 marked the first sale of U.S. agricultural goods to Venezuela under the GSM-102 program in three years. Even more importantly, the success of the initial sale paved the way for additional transactions. As of June 2024, this company has been able to export $300,000 and counting of apples to Venezuela under GSM-102.
Is GSM-102 Right for You?
The GSM-102 program offers a valuable opportunity for U.S. agricultural exporters to expand their reach, increase sales, and navigate the complexities of international financing. If you’re interested in learning more about program eligibility and how it can benefit your business, please reach out to one of the GSM-102 representatives found our Program Contacts page.