Trade and Project Financing in Israel

A Hot Tip about Banking, Lending, Leasing in Israel

Last updated: 13 Mar 2011

How Do I Get Paid (Methods of Payment)

 

When substantial investment and engineering (as required for custom-made products) are involved, it is not unusual for exporters to demand advance payment of a certain portion of the selling price. The Bank of Israel authorizes advance payment of up to 35% or $200,000, whichever is lower. The $200,000 limitation is not applicable for the importation of equipment.

 

Payment schedules vary. For raw materials, components and semi-finished goods, credit is usually limited to 60 days. For equipment and machinery, extended schedules may range from six months to two years.

 

The local banking system provides sources of short and long-term credit and access to venture capital. Some importers have preferred to seek U.S. Export-Import (ExIm) Bank financing. Eximbank has most of the leading Israeli banks as correspondents and may supplement private sources of export financing with medium and long-term loans.

 

How Does the Banking System Operate

Israel has a modern and sophisticated banking system. The remaining governmentowned shares of the largest bank, Bank Hapoalim, were sold in 2000. In 2000, Citibank was the first large international bank to set up a full branch in Israel. HSBC soon followed suit. Bank of America also has a representative office in Israel. The government does not interfere in the day-to-day management of the banks. Most types of loans and project financing traditionally available in industrialized countries are available in Israel.

 

Foreign-Exchange Controls

Israel abolished most of its foreign exchange controls in the 1990s. The last major restriction, on the amount Israeli institutional investors may invest overseas, was eliminated at the end of 2002.

 

U.S. Banks and Local Correspondent Banks

Most U.S. banks maintain correspondent relationships with Israel's three leading banks - Bank Leumi, Bank Hapoalim, and the Israel Discount Bank, as well as with the Mizrahi Bank and the First International Bank of Israel. Many Israeli banks have their own subsidiaries in major U.S. cities. Interested parties should contact their U.S. banker or the Israeli banks in the United States directly for more detailed information on their respective services. Major correspondent banks are Bank Hapoalim, Bank Leumi Le- Israel, First International Bank of Israel, Israel Discount Bank and United Mizrahi Bank.

 

Project Financing

The U.S. Export-Import Bank (Eximbank) and the U.S. Overseas Private Investment Corporation (OPIC) offer project financing and other financial services. Eximbank provides a range of financial programs ranging from medium and long term guarantees, insurance programs, working capital guarantee to project finance. The Project Finance Division provides financing to projects that are dependent on the project cash flows for repayment.

 

OPIC finances overseas projects through loans and loan guarantees that provide medium to long-term funding to ventures involving significant equity and/or management participation by U.S. businesses. OPIC also provides insurance against a broad range of political risks. Rather than relying on sovereign or sponsor guarantees, OPIC's project financing program looks for repayment from the cash flows generated by the project. For projects sponsored by U.S. small businesses or cooperatives, financing may be provided through direct loans. These loans generally range in amount from $2 million - $10 million. Loan guarantees, which typically are used for larger projects, range in size from $10 million - $75 million, but in certain instances can be as high as $200 million.

 

U.S. companies will find that Israel does not suffer from any lack of capital or trade financing. There are no unusual rules or regulations concerning export financing, apart from the foreign currency regulations noted above. Loans at market interest rates are available from commercial banks to finance the manufacture of exports including the import of raw materials and components for export products. Loans vary depending upon the raw material requirements, cost of conversion and collection timeframe.

 

U.S. exporters may find export financing and insurance available through commercial sources; City/State-sponsored export financing and loan guarantee programs; the U.S. Small Business Administration (SBA); the U.S. Export-Import Bank (Eximbank), which can provide U.S. exporters with export credit insurance, pre-export financing and working capital guarantees; and other sources. Eximbank can also provide established Israeli buyers with fixed-rate financing for their purchases from U.S. exporters. Eximbank’s Environmental Export Insurance Policy provides enhanced short-term insurance for medium and long-term loans and guarantees for environmental exports, projects and services. Israel does not receive PL-480 or similar U.S. Department of Agriculture (USDA) program commodity grants. USDA’s GSM-102 funds and supplier credit guarantees are available but not sufficiently attractive to most parties.

 

Bilateral Funding Organizations

There are four bilateral U.S.-Israel Government funded organizations, which provide financing for joint R&D and research projects.

 

U.S.-Israel Binational Industrial Research and Development Foundation (BIRD) BIRD supports joint industrial R&D projects designed to develop, manufacture, sell and support an innovative product. A pair of companies, one from each country, must conduct the project. BIRD often plays a proactive role in bringing together potential U.S. and Israeli strategic partners.

 

U.S.-Israel Binational Science Foundation (BSF)

The BSF supports cooperative research projects of mutual interest to the United States and Israel, concerned with science and technology for peaceful purposes. The research must be conducted jointly by U.S. and Israeli researchers and may be conducted in either country.

 

U.S.-Israel Binational Agricultural Research and Development Fund (BARD)

BARD funds, generated from a $100 million endowment, finance cooperative agricultural research between scientists of the United States and Israel on topics considered to be of mutual benefit to the agriculture of both countries. BARD also supports international workshops and provides post-doctoral fellowships.

 

 

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Posted: 19 August 2010, last updated 13 March 2011