Private Export Funding Corporation - Explained
What is a Private Export Funding Corporation?
Written by J. Mance Gordon
Updated at April 18th, 2022
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Table of Contents
What is the Private Export Funding Corporation?How Does the Private Export Funding Corporation Work?What is the Private Export Funding Corporation?
The private export funding corporation, also known as PEFCO, is a private-sector for financing the exports from the United States. PEFCO was established in 1970 by the United States treasury and Export-Import Bank. Its shareholders consist of consortium commercial banks who are part of the export financing, financial service companies, and companies involved in exporting U.S. goods and services.
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How Does the Private Export Funding Corporation Work?
PEFCO provides a wide range of export finance programs, as a buyer in the secondary market and as a direct lender that funds the United States exports with the support of Export-Import Bank. Its main aim is to arrange money for organizations and companies in the rest of the world that aspire to buy goods and services from the United States. For a company or organization to qualify for PEFCO financing, the United States Export-Import Bank (Ex-Im Bank) must guarantee the loans against nonpayment. The primary business of PEFCO is to make loans to foreign importers so that they can be able to finance the goods and services they purchase from the United States. It also aims to supplement the financing available via commercial banks, Ex-Im Bank, including other institutions. Note that PEFCO offers loan types that match almost all guarantee or insurance that Ex-Im Bank provides. For instance, they have long-, medium- and short-term funding. However, there are different features attached to each fundings maturity type. Note that PEFCO does not carry out its own foreign countries economic appraisal, credit risk evaluations, or reviews of other factors to give loans. It instead relies on the Export-Import Bank and other United States government institutions to extend its loans to borrowers since they are the ones who guarantee these loans. PEFCO had assets worth $7.6 billion as of 30 June 2017. However, over the preceding year, the assets fall by $1 billion. It is a result of Ex-Im Bank currently not having board members quorum, meaning that it cannot authorize financial transactions that exceed a certain amount. So, these consequent limitations of what PEFCO can guarantee negatively impacted the PEFCOs transaction volumes it can carry out. The situation led to the new loan commitments by PEFCO dropping from $292 million in 2016 to $165 in 2017.