BUSINESSPLANNING:AGUIDETOEXPORTING
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EXPORTFINANCING
Yourcompanyhascompletedthecontractnegotiationsandisabouttoclosethesale.Youareexpecting
paymentforyourgoodsimmediately,oratleastassoonaspossible.Youneedthecashtomaintainoperations
andsellmoreproductsoverseas.Thebuyer,ontheotherhand,wantstodelaypaymenttoyouaslongas
possible,oratleastuntilheorshereceivesthegoods.Howdoyoubridgethisfinancialgapbetweenthebuyer
andtheseller?Mostexporterslooktoexportfinancingasasolution. Exportfinancingisanimportanttool
usedbyexporterstocompleteatransactionandaccommodateabuyer’sneeds.Inthecompetitiveglobal
marketplace,financingmaygivetheexporteranedgeinsellingitsproducts.
WhyFinance?
Thereareavarietyofreasonswhyacompanywouldwanttofinanceanexporttransaction.Asalready
mentioned,financingmaygivetheselleranedgeincompetingwithcompaniesprovidingsimilargoodsand
services.Favorablefinancingtermsmayinducethebuyertopurchaseyourproductevenifyourpriceis
slightlyhigherthanyourcompetitors.Anotherreasonforfinancingmaybethelengthoftimethebuyerneeds
tomakepayment.Thebuyermaynothaveimmediateaccesstothecashneededtocompletethetransaction.
Withfinancing,aspecifictermcanbearrangedthatwillsuittheneedsofthebuyer.Anotherreasoncompanies
secureexportfinancingistoensureadequateworkingcapital.Ifthecompanyreceivesalargeorder,orit
receivesseveralorderswithinashortperiodoftime,theavailabilityofsufficientworkingcapitaltofulfillall
theseordersmaybecompromised.Thisconstrictionofworkingcapitalmaypreventacompanyfrompursuing
newcustomersorevenrespondingtoinquiriesfrompotentialbuyers.Itmayhamperthefulfillmentof
domesticordersaswell.
CreditInsurance
Riskmayalsoplayafactorindeterminingyourneedtofinanceatransaction.Abuyermaybelocatedina
countryorregionthatissubjecttoeconomic,politicalorculturalinstability.Purchasingexportcreditinsurance
willoffsettheriskassociatedwiththesefactors.Mostcreditinsurancepolicieswillprotecttheexporterfrom
non-paymentduetodefault,insolvencyandbankruptcybyreimbursingthemaccordingtothetermsofthe
policy.Theinsurancenotonlymitigatestheriskofnon-paymentofacompany’saccountsreceivables,italso
canbeusedbythecompanyascollateraltoobtainaloanorlineofcredit.Thistypeofsecuredfinancingis
attractivetothelender,increasingthelikelihooditwillextendcredittotheexporter.Premiumsforcredit
insuranceareusuallychargedmonthlysinceitismostlyusedforshort-termtransactions.Thepremiumsare
calculatedasapercentageofsalesorasapercentageofoutstandingreceivables.
Export-ImportBankoftheUnitedStates
ManycompaniesuseTheExport-ImportBankoftheUnitedStates(Ex-ImBank)tomitigaterisk.Ex-Im
BankisanindependentU.S.governmentagencythatadministersexporttradefinancingandexportcredit
insuranceprograms.Ex-ImBank’sprogramsencourageexportingbusinessesandfinancialinstitutionsto
activelypursuetradeopportunitiesoverseas.Thebank’sloanguaranteeandcreditinsuranceprogramsare
designedtoreducecommercialandpoliticalriskassociatedwithexportingthatcouldresultinnon-payment.
Ex-ImBankoffersbothpre-exportandpost-exportfinancingtoassistexporterscompletetheir
transactionsandgetpaid.Regardingpre-exportfinancing,theworkingcapitalguaranteeenableslendersto
providefinancingforexporterstopurchaseorproduceaproductforexport,aswellastofinanceshort-term
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32
accountsreceivable.Iftheexporterdefaultsonaloanguaranteedunderthisprogram,Ex-ImBankreimburses
thelenderfortheguaranteedportionoftheloan.Higherguarantypercentagesareavailableforqualifiedloans
tominority,woman-ownedandruralbusinesses.Theworkingcapitalguaranteecanbeusedeithertosupport
ongoingexportsalesortomeetatemporaryneedforcashflowarisingfromasingleexporttransaction.
Guaranteedworkingcapitalloansaresecuredbyexport-relatedaccountsreceivableandinventoryconnected
toanexportorder.
Ex-ImBankoffersexportcreditinsurancetooffsetthecommercialandpoliticalrisksthataresometimes
associatedwithinternationaltrade.Undermostofthepolicies,theinsuranceprotectsanexporter’sshort-term
creditextendedforthesaleofconsumergoods,rawmaterials,commodities,sparepartsandotheritemsfor
whichpaymentisexpectedwithin180days.Ifthebuyerfailstopay,Ex-ImBankreimbursestheexporterin
accordancewiththetermsofthepolicy.Themajorityofthepaymenttermsareupto180days,withsome
transactionsqualifyingfortermsupto360days.Withpriorwrittenapproval,anexportercanassigntherights
toanyproceedsfromanEx-ImBankinsurancepolicytoalenderascollateralforfinancing.Exportersmust
meetU.S.contentrequirementsand,undersomepolicies,mustinsurealleligibleforeignsales.Private
insuranceisalsoavailabletoestablishedexporterswhohaveaprovenhistory.
Ex-ImBankalsooffersaguaranteetoencouragebanksandotherlenderstomakeexportloanstocredit-
worthyforeignbuyersofU.S.goodsandservices.Ex-ImBank’sguaranteesupportsfinancingforequipment
deliveryandinstallationorforheavyequipmentandcapitalprojects.Asanalternativetoguarantees,Ex-Im
Bankalsooffersmediumandlongtermloans.Theloansaremadeonthesametermsandconditionsas
guaranteesexceptthebanksetstheinterestrateinaccordancewithinternationalagreements.Formore
informationonEx-ImBankprograms,visitwww.exim.gov.
TheUnitedStatesSmallBusinessAdministration
TheSmallBusinessAdministration(SBA)alsoprovidesfinancialassistancetoU.S.exporters.Throughits
partnershipwithnational,regionalandcommunitylenders,theSBAprovidesloanguaranteesforexport
workingcapitalandacquisitionofplantandequipment,aswellascapitalforenablingsmallbusinessestostart
orexpandexportactivity.
SBA’sExportWorkingCapitalProgram(EWCP)willguarantee90percentofloansupto$5million.The
EWCPprovidesworkingcapitalforexporttransactionsandfinanceexportreceivables.Theloanscanalso
supportstandbylettersofcreditusedasbidorperformancebonds.Theycanbesetuptosupportindividual
transactionsorasrevolvinglinesofcredit.Interestratesarenegotiatedbetweentheborrowerandthelender
andmaybefixedorvariable.TheEWCPusesaone-pageapplicationformandstreamlineddocumentation.
SBAandEx-ImBankjoinedtheirworkingcapitalloanprogramstoofferaunifiedapproachtothe
government’ssupportofexportfinancing.
TheSBA’sInternationalTradeLoanProgram(ITL)isdesignedtohelpsmallbusinessesenterandexpand
intointernationalmarketsandmaketheinvestmentsnecessarytobemorecompetitive.TheITLoffersa
combinationoffixedasset,workingcapitalfinancinganddebtrefinancingwithamaximumguaranteeof90
percentonloansupto$5million.ApplicantsmustmeetthesameeligibilityrequirementsasfortheSBA’s
standard7(a)LoanProgram.Applicantsmustalsoestablishthattheloanwillallowthebusinesstoexpandor
developanexportmarket,ordemonstratethatthebusinesshasbeenadverselyaffectedbyimportcompetition.
TheExportExpressLoanProgrammaybeusedforbusinesspurposesthatwillenhanceacompany’s
exportdevelopment.TheSBAdelegatestheauthoritytoapprovedlenderstounilaterallyapproveSBA
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33
guaranteedloans.Thelenderscanusetheirownformsandcanprovideananswerinthirty-sixhoursorless.
ExportExpressloanshaveacapof$500,000.Tobeeligible,abusinessmustbeinoperationforatleastone
yearandmustshowthatitwillenterintoorincreaseitsexportsalesasaresultoftheloan.Eligibleuseof
proceedsincludesfinancingofexportdevelopmentactivities,transaction-specificfinancingforexportorders,
revolvingexportlinesofcredit,fixedassetloansandfinancingofstandbylettersofcreditusedasbidand
performancebonds.FormoreinformationonSBA’sprograms,visitwww.sba.gov.
TheUnitedStatesDepartmentofAgriculture
TheForeignAgriculturalService(FAS)oftheU.S.DepartmentofAgriculture(USDA)providesseveral
programstoassistinthefinancingofexportsofU.S.agriculturalgoods.
TheUSDA’sCommodityCreditCorporation(CCC)administersexportcreditguaranteesforcommercial
financingofU.S.agriculturalproducts.Theguaranteesencourageexportstobuyersincountrieswherecredit
isrequiredtomaintainorincreaseU.S.salesbutwherefinancingmaynotbeavailablewithoutCCC
guarantees.
TheExportCreditGuaranteeProgram(ECGP)underwritescreditextendedbytheprivatebankingsector
toapprovedforeignbanksusingdollar-denominated,irrevocablelettersofcredittopayforfoodand
agriculturalproductssoldtoforeignbuyers.Theprogramcoverscredittermsuptothreeyears.
TheSupplierCreditGuaranteeProgram(SCGP)isdesignedtomakeiteasierforexporterstosellU.S.
foodproductsoverseasbyinsuringshort-term,openaccountfinancing.UnderSCGP,U.S.exportersbecome
morecompetitivebyextendinglongercredittermsorincreasingtheamountofcreditavailabletoforeign
buyerswithoutincreasingfinancialrisk.Foreignbuyersbenefitbecausetheycanincreasetheirpurchasing
powerandprofitopportunitiesandcangainsignificantcashflowmanagementadvantages.
TheFacilityGuaranteeProgram(FGP)providespaymentguaranteestofacilitatethefinancingof
manufacturedgoodsandservicesexportedfromtheUnitedStatestoimproveorestablishagriculture-related
facilitiesinemergingmarkets.Bysupportingsuchfacilities,theFGPisdesignedtoenhancesalesofU.S.
agriculturalcommoditiesandproductstoemergingmarkets,wheredemandforsuchcommoditiesandproducts
maybeconstrictedduetoinadequatestorage,processingorhandlingcapabilitiesforsuchproducts.Formore
informationontheForeignAgriculturalServiceprogramsoftheU.S.DepartmentofAgriculture,visit
www.fas.usda.gov.
OverseasPrivateInvestmentCorporation
TheOverseasPrivateInvestmentCorporation(OPIC)isafederalagencythatfacilitatesU.S.foreigndirect
investmentindevelopingnationsandemergingmarketeconomies.OPICisanindependent,financially
self-supportingcorporationthatisfullownedbytheU.S.government.
OPICencouragesU.S.investmentprojectsoverseasbyofferingpoliticalriskinsurance,all-riskguarantees
anddirectloans.OPICcanofferupto$400millionintotalprojectsupportforanyoneproject–upto$250
millioninprojectfinancingandupto$250millioninpoliticalriskinsurance.OPICalsoprovidesservicesto
facilitatewiderparticipationbysmallerU.S.businessesinoverseasinvestment,includingacomputerizeddata
bank,investmentmissions,andinvestorinformationservices.FormoreinformationonOPICprograms,visit
www.opic.gov.
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34
StateandLocalExportFinancePrograms
Severalcitiesandstateshavefundedandoperateexportfinancingprograms,includingpre-shipmentand
post-shipmentworkingcapitalloansandguarantees,accountsreceivablefinancingandexportinsurance.Tobe
eligiblefortheseprograms,anexportsalemustbemadeunderaletterofcreditorwithcreditinsurance
coverage.Acertainpercentageofstateandlocalcontentmayalsoberequired.
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WHERETOFINDHELP
Thechallengesyouwillfaceinestablishinganexportprogramwillrequireyoutoseekassistanceatsome
pointintime.Therearemanysourcesofassistanceavailabletoyou.Therearegovernmentagenciestasked
withtheresponsibilityofassistingbusinesseswiththeirexportoperation.Therearepublicorganizationsthat
offerexportassistancetobusinesses.Thereareworldtradecentersandchambersofcommercethroughoutthe
world,allservingtheirmembersandbusinessesintheirquesttodevelopinternationaltraderelationships.
Therearealsoprivate,for-profitbusinessesthatprovideabroadarrayofinternationaltradeandexporting
servicesonafee-for-servicesbasis.
Itisnotpossibletolistalloftheseresourceshere,butwewillbrieflydescribetheservicesofafewofthe
majorplayersintheinternationaltradearena.
U.S.CommercialServiceExportAssistanceCenters
TheU.S.CommercialServiceoftheU.S.DepartmentofCommercemaintainsanetworkofinternational
tradespecialistsintheUnitedStatestohelpAmericancompaniesexporttheirproductsandconductbusiness
abroad.Eachexportassistancecentercanofferinformationaboutthefollowing:
• Servicestolocateandevaluateoverseasbuyersandrepresentatives,distributorsandpartners
• Internationaltradeopportunities
• ForeignmarketsforU.S.productsandservices
• Foreigneconomicstatistics
• Exportdocumentationrequirements
• U.Sexportlicensingrequirementsandimportrequirementsofforeignnations
• Exporttradefinanceoptions
• Internationaltradeexhibitionparticipationandcertification
• Exportseminarsandconferences
Formoreinformationontheirservices,ortolocateanExportAssistanceCenternearyou,pleasevisit
www.export.gov.
U.S.SmallBusinessAdministration(SBA)
PartoftheSBA’smissionistohelpsmallbusinessesstartorexpandexportoperations.SBAhas
internationaltradeandfinancemanagersatU.S.ExportAssistanceCenterswhocanadviseyouonSBAexport
financeprogramsandotherfederalgovernmentexportassistanceprograms.SBA’sdistrictofficeshave
internationaltradespecialistsineverystateandterritory.Counselingandtrainingprogramsareavailable
throughSmallBusinessDevelopmentCenters(SBDC),manyofwhichhaveaninternationalfocus;the
SCORE–CounselorstoAmerica’sSmallBusiness;andWomen’sBusinessCenters(WBC).Formore
information,visitwww.sba.gov.
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NewYorkStateSmallBusinessDevelopmentCenter
TheNewYorkStateSmallBusinessDevelopmentCenter(NYSSBDC)isthepremierbusinessassistance
organizationfundedbytheSBAandtheStateofNewYork.Theprogramprovidesarangeofassistanceand
servicestostart-upandexistingbusinessesacrossthestate.
TheInternationalBusinessDevelopment(IBD)program,adivisionoftheNYSSBDC,assistssmall
businessestotakeadvantageoftradeandbusinessdevelopmentopportunitiesthatexistintheglobalmarket-
place.TheIBDprovidesdirectassistanceforbusinessestoenter,expandanddeveloptheirbusinessandtrade
inacost-effectiveway.Assistanceincludesabetterunderstandingofcultural,linguistic,businesspracticeand
regulatorymattersinthelargestandfastestdevelopingcountriesintheworld.
TheIBDoffersthefollowingservices:
• Exportinformationandopportunities,tradeshows,evaluationandselectionofmarkets
• Counselingoninternationalbusinesspractice,businessnetworks,cultureandcustoms
• Identificationofmatchmakingofpartners,suppliers,manufacturers,distributorsandagents
• Assistancewithinvestment,jointventure,outsourcing,co-productionandexportprocessing
• Internationalconferences,seminars,trainingprogramsandmatchmakingmeetings
• Organizedbusinesstrademissionstoforeigncountries
• Assistancewithentryvisasandarrangedmeetingswithgovernmentofficialsandeconomic
developmentrepresentatives
• Internationalbusinessinvestmentandtradecooperationwithforeigncountries
• ReceivingforeignbusinessdelegationsintheU.S.
FormoreinformationontheNewYorkStateSmallBusinessDevelopmentCenterInternationalBusiness
DevelopmentProgramvisitwww.nyssbdc.org/services/international/international.html.
WorldTradeCenters
WorldTradeCentersarelocatedaroundtheworld,providingservicestobusinessesthatpromote
prosperitythroughinternationaltradeandinvestment.Thecentersoffertradeinformationandmarketresearch.
Theyalsoofferavarietyofbusinessservicestotheirmembers,includingtradeeducationservices,grouptrade
missions,WorldTradeCenterclubsandmore.SinceWorldTradeCenterservicesarereciprocal,memberscan
accessthematanylocationaroundtheworld.Formoreinformation,visitwww.wtcaonline.com.
ChambersofCommerce
Achamberofcommerceisatradeorganizationdesignedtopromotecommerceforitsmemberswithinthe
communityitserves.Servicesincludetrainingevents,networking,advocacyandotherbusinessservices.
Beingamemberofachamberprovidesadegreeofcredibilitytoabusiness.Formoreinformationabout
chambersofcommercetoidentifyyourlocalchamber,visitwww.uschamber.com.
BUSINESSPLANNING:AGUIDETOEXPORTING
37
OtherSources
Therearemanyothersourcesofexportassistanceandinformation.Thesesourcesincludestateandlocal
governments,districtexportcouncils,Export-ImportBankoftheUnitedStates,bankswithinternational
operations,industryandtradeassociations,privateinternationaltradecompaniesandinternationaltrade
consultants.Whenchoosingatradecompanyorconsultant,besuretoresearchtheserviceprovider’s
knowledgeandexpertiseinthefield.Someprovidersaremoreexperiencedandspecializedthanothers.
BUSINESSPLANNING:AGUIDETOEXPORTING
38
YOURBUSINESSPLAN
Everybusinessrequiresaplan.Whyshouldyougototheeffortofcreatingawrittenbusinessplan?There
arethreemajorreasons:
• Theprocessofputtingtogetherabusinessplan,includingthethoughtyou u putinbeforehand,forcesyou
totakeanobjective,critical,andunemotionallookatyourbusinessprojectinitsentirety.
• Thefinishedproduct—yourbusinessplan—isanoperatingtoolwhich,whenusedproperly,willhelp
youbettermanageyourbusinessandworktowarditssuccess.
• Thecompletedbusinessplanisawaytocommunicateyourideastoothersandprovidesthebasisfor
yourfinancingproposal.
Theimportanceofplanningcannotbeoveremphasized.Bytakinganobjectivelookatyourbusiness,you
canidentifyareasofweaknessandstrength,pinpointneedsyoumightotherwiseoverlook,spotproblemsas
theyarise,andbeginplanninghowyoucanbestachieveyourbusinessgoals.Itmayevenhelpyoutoavoid
someproblemsaltogether.
Thisguidehasbeendesignedwiththeseconsiderationsinmind.Itisimportantthatyoucompleteasmuch
oftheworkaspossible.Aprofessionallypreparedbusinessplanwon’tdoyouanygoodifyou’renotfamiliar
witheveryaspectoftheplan.Thisdeepunderstandingcomesfrombeinginvolvedwithyourplan’s
developmentfromtheverystart.
Nobusinessplan,nomatterhowcarefullyconstructed,willbeofanyvalueunlessyouuseit.Goinginto
businessisaveryseriousmatterintermsofyourfutureandyourfamily’sfuture—overhalfofallnew
businessesfailwithinthefirsttwoyearsofoperation.Amajorreasonforfailureislackofplanning.
Useyourplan.Don’tputitinabottomdrawerofyourdeskandforgetaboutit.
Abusinessplancanhelpyouavoidgoingintoaventurethatisdoomedtofailure.Itcanhelpyouseeif
yourproposedventureismarginal.
Finally,yourbusinessplanprovidestheinformationothersneedtoevaluateyourventure,especiallyifyou
needtoseekoutsidefinancing.Athoroughbusinessplanautomaticallybecomesacompletefinancingproposal
whichwillmeetrequirementsofmostlenders.
SuggestedBusinessPlanOutline
CoverSheet
• Nameofbusiness
• Namesofowners
• Addressandphonenumbersofbusiness
BUSINESSPLANNING:AGUIDETOEXPORTING
39
StatementofPurpose
TheBusiness
• Descriptionofbusiness
• Market
• Competition
• Location
• Advertising
• Management
• Personnel
• ApplicationandExpectedImpactofLoan(ifneeded)
• Summary
FinancialData
SupportingDocuments
• Personalresumes
• Personalfinancialrequirementsandstatements
• Cost-of-livingbudget
• Creditreports
• Lettersofreference
• Jobdescriptions
• Lettersofintent
• Copiesofleases,contracts,legaldocuments,andanythingelserelevanttotheplan
CoverSheet
Thecoversheetshould:
• Identifythenameofthebusinessandthedateoftheplan
• Identifythelocationandtelephonenumbersofthebusinessorwheretheownerscanbereached
• Identifythepersonwhowrotethebusinessplan.
Thecoversheetshouldnotbeelaborate,butshouldbeneatandattractive.Ifyouhavealogo,useit.Ifthe
planistobesubmittedasafinancingproposal,useaseparatecoversheetforeachbankorcapitalsourceyou
wanttosubmititto.
StatementofPurpose
Thefirstpageshouldstatetheplanorproposalobjectivesassimplyaspossible.Ifforyoursoleuse,the
statementshouldbeabriefdescriptionofhowyouintendtousetheplan.
Iftheplanisalsotobeusedasafinancingproposal,thestatementofpurposebecomesmorecomplex.It
shouldincluderesponsestothefollowingquestions:
• Whoisaskingforthemoney?
• Whatisthebusinessstructure(soleproprietorship,partnership,corporation,etc.)?
• Howmuchmoneyisneeded?
• Howwillthemoneybeused?
• Howwillthefundsbenefitthebusiness?
BUSINESSPLANNING:AGUIDETOEXPORTING
40
• Whydoestheloanorinvestmentmakesense?
• Howwillthefundsberepaid?
Thedealyouareproposing—theloanorinvestment,itsuseandexpectedeffectsonthebusiness,and
howyouwillrepayit—shouldbesupportedbytherestoftheplan.
Ifyouarenotseekingaloan,theplanshouldstillsupportandjustifytheuseofyourownmoney(orthe
moneyofpartners,friends,family).
Keepthestatementshortandbusinesslike.Itwillusuallybenolongerthanhalfapage,butmaybelonger
ifnecessary.Useyourjudgment.
ContentsPage
TheContentsPageshouldfollowyourStatementofPurpose.Theremainderoftheplanshouldbedevoted
toelaboratingonandsupportingtheStatementofPurpose.Abusinessplan,evenforamodestproject,
generallyrunsto20pagesormore.
Therearethreemainsectionsofyourplan:
• TheBusiness
• FinancialData
• SupportingDocuments
DescriptionofYourBusiness
Thisisthemostimportant,mostcomplexpartofyourbusinessplan.Itshouldmakeaclearstatementof:
• Whatthebusinessis(orwillbe)
• Whatmarketyouintendtoservice,thesizeofthemarket,andyourexpectedshare
• Whyyoucanservicethatmarketbetterthanyourcompetition
• Whyyouhavechosenthisparticularlocation
• Whatmanagementandotherpersonnelareavailableandrequiredfortheoperation
• Why(ifappropriate)borrowedmoneyoranequityinvestmentwillmakeyourbusinessmoreprofitable
Thesesixconsiderationsarecrucial.Theyarethewrittenpolicyofyourbusiness—rulesyoushouldnot
deviatefromwithoutcompellingreasons.Sincepolicygivesstabilityanddirectiontoyourbusiness,itrequires
agreatdealofthoughtandplanning.
Yourbusinesswillreflectyourpersonalityandabilities—notsomeoneelse’s.Indescribingyourbusiness
idea,aimatclarityandsimplicity.Aruleofthumb:Ifyoucan’tdescribeyourideaclearlyandsimply,you
haven’tthoughtitthrough.
Decidingwhatyourbusinessis—andwhereyouwantittobeinfiveyears—isthemostimportantdecision
youwillhavetomake.Ifasmallbusinessisinvolvedinmorethanoneactivity,yourjudgmentofwhatthe
centralactivityorcentralactivitiesareiscrucial.Yourentireplanningeffortisbasedonyourperceptionof
whatbusinessyouarein.Besuretotakethetimetothinkthisdecisionthrough.
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