SBA EXPORT LOAN PROGRAMS

From the President

“We need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America. So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America. To help meet this goal, we're launching a National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security.”

President Barack Obama State of the Union Address

January 27, 2010

Exporters Perform Better

• Exporters grow 22% faster than non-exporting companies

• Firms engaged in exporting are 20% more productive, 9% less likely to go bankrupt, and experience 20% job growth

• Wages paid by exporting companies are 15% higher, and benefits paid are 11% higher than non-exporting firms.

• One in five manufacturing jobs depends on Exporting

World Market

• 95% of the world’s population reside outside the United States of America

• Two Thirds of the world’s purchasing power is outside the United States.

• Why eliminate most of the world’s market in an attempt to sell U.S. goods and services

• There is significant demand for high-quality U.S. goods and services

US Exports

$500

$700

$900

$1,100

$1,300

$1,500

$1,700

$1,900

2003 2004 2005 2006 2007 2008 2009

Source: Bureau of Economic Analysis website, National Economic Accounts, GDP, NIPA Table 1.1.5

Estimated Small Business Exports*

$250

$300

$350

$400

$450

$500

$550

2003 2004 2005 2006 2007 2008 2009

(billions estimated)

* Bureau of Economic Analysis website, Table 1.1.5 data on GDP. Although the Profile indicates 29% of exports are from small businesses, it excludes services. Applying the 29% to the BEA data gives a larger amount of small business exports as compared to the Profile. The two agencies methods of counting exports are not strictly comparable, so the figures in this graph are estimates.

Exports as Proportion of the Economy

Source: Bureau of Economic Analysis website, Table 1.1.5, GDP

Proportion of Economic Growth Attributable to Exports

0%

20%

40%

60%

80%

100%

120%

140%

160%

2003 2004 2005 2006 2007 2008

Exports Contribution to GDP

Source: Bureau of Economic Analysis website, National Economic Accounts, Table 1.1.2, Contributions to Percent Change in Real GDP

National Export Initiative

• Double Exports in five years• Expand U.S. government’s export

promotion efforts (Trade Promotion Coordination Committee (TPCC) consisting of19 agencies

• Provide access to credit• Eliminate barriers that prevent open and

fair access to foreign markets

Separating Facts from Myths

Myth:• Small Businesses Don’t Export.

Fact:• Very small companies (fewer than 20 employees)

account for 70 percent of all exporting firms.• The share of U.S. merchandise exports accounted

for by small and medium-sized enterprises (SMEs) has remained around 30 percent.

U.S. Export Assistance CentersUSEAC

• Multi-government Agency Offices located throughout the United States

• Primarily Export-Import Bank of the United States (www.exim.gov), U.S. Department of Commerce (www.buyusa.gov) and SBA (www.sba.gov/international)

U.S. Department of CommerceU.S. Commercial Service

• Provides Small Businesses with export promotion assistance.– Locate potential foreign buyers and distributors – Gold

Key Service– Counseling and training on export logistics and

regulations– Background checks on potential foreign buyers– Foreign Market research– 108 Offices in United States (some co-located with SBA)

182 Overseas in 82 countries, including U.S. Embassies

Export Import Bank of the United States

Ex-Im Bank• Official Export Credit Agency of the United

States– Export credit insurance – protects against non payment

by foreign buyers – Export Working Capital Guarantees; harmonized with

SBA’s EWCP– Foreign Buyer fixed asset financing– Co-located with SBA at several USEAC Locations

throughout United States.

SBA Export Loan Products

• Export Working Capital Program– Up to $5 Million; 90% guaranty for short term loans and

lines of credit for export purposes.

• Export Express– Up to $500,000. Short term loans and lines of credit for

export purposes – processed through Express procedures.

• International Trade Loan– Up to $5 Million: now with a 90% guaranty. Term loans

Facilities, equipment, and working capital that will enhance export ability. Refinancing of existing debt is also available.

SBA Resource Partners

• International Trade Small Business Development Centers – SBDCs specializing in international trade

• SCORE– Many Chapters have counselors with extensive export

expertise. Encourage all chapters to recruit/maintain export counselors.

SBA Export Loan ProgramsExporter Benefits

• Increased Working Capital• Ability to enter new markets• Ability to offer competitive terms• Close more export sales• Spread of risk

SBA Loan Programs for Exporters

• Export Working Capital Program

• International Trade Loan

• Export Express

EWCP “Philosophy”

“A business should not lose a viable

export sale due to a lack of working

capital.”

Export Working Capital Program

• 90% Guarantee• $4.5 Million is maximum SBA guaranteed portion• Asset based or transaction based financing• No pre-determined minimum ratios • Single Project or Revolver• Quick turnaround time • PLP Processing Available

Export Working Capital Program Eligibility

• Company meets SBA size standards– Based on NAICS or Alternative Size Standard– NAICS -Manufacturing: under 500 employees

o can be as high as 1,500 employees– Alternative Size Standard: Net worth less than $15 million

and net profit less than $5 million (last 2 year average)– Ex-Im Bank has no restrictions for size.

• In business 12 months or proven expertise• No U.S. content requirement; Military sales

allowable• Other SBA eligibility provisions

– Criminal history, previous loss to govt. etc

Two Types of EWCP Loans

EWCP Use of Proceeds Asset Based and Transaction

Based • Working Capital for production of export goods

and services • Financing of existing export receivables and

export inventory • Portions of the EWCP loan may be used to fund

standby Letters of Credit when required as: Bid Bonds Performance Bonds Advance Payment Guaranties

Transaction Based EWCPSelf Liquidating Line of Credit

• Transaction Based EWCPs can be utilized for single export orders or multiple orders on a revolving basis. No funds are disbursed until there is an export order in place. Funds are used by the borrower to produce goods for a specific export order. SBA requires secure payment method from foreign buyer which will be directed to pay down the EWCP

Transaction Based EWCP Use of Proceeds

• To acquire/produce goods or services for export. EWCP funds can be used to finance up to 100% of exporter’s direct cost associated with a specific export transaction, not to exceed 90% of the overall export sale amount.

Example - Small business exporter lands a $1 Million export sale. The production costs for the exported item is $700,000 – bank can therefore advance the entire $700,000 under the EWCP program.

• To support Standby Letters of Credit used as performance and bid bonds

Transaction Based EWCP Indirect Exports

• Applicants who produce products or services that enter into the export channel, but do not directly export their products, are eligible for EWCP financing– Manufacturers using an Export Trading Company– Suppliers to other domestic manufacturers

• Requires certification from domestic customer that goods are in fact being exported.

Transaction Based EWCP Payment methods

• Transaction evidenced by Purchase Order, L/C or signed contract

• Acceptable payment by foreign buyer Cash in Advance Letter of Credit Documentary Collections Open Account (insured) Open Account (no insurance)

Two Types of EWCP Loans

Asset Based EWCP – Use of Proceeds

• To finance existing foreign accounts receivables. Advance rates up to 90%. Note: normally export credit insurance is required (foreign accounts receivable insurance)

• To finance existing foreign inventory. Advance rates up to 75%

• To support Standby Letters of Credit used as performance or bid bonds.

Asset Based EWCP MAXIMIZING THE BORROWING BASE

ASSET-BASED FACILITY SBA EWCP GUARANTEE

Amount % Advance

Collateral % Advance

Collateral

Exportable Inventory

Raw Materials $200,000 40 $80,000 75 $150,000

Work-In-Progress 200,000 0 0 75 150,000

Finished Goods 600,000 50 300,000 75 450,000

Subtotal $1,000,000 $380,000 $750,000

Foreign Accounts Receivable

Open Account $400,000 0 $0 90 $360,000

L/C Backed A/R 600,000 70 420,000 90 540,000

Subtotal 1,000,000 420,000 900,000

Total Borrowing Base $2,000,000 $800,000 $1,650,000

Open Account - No Insurance

No Insurance is required if:• Receivables are from financially sound

corporations, multinationals or highly-rated governmental entities in countries with minimal political risk (or)

• Exporter can provide favorable Ledger Experience with specific accounts over a significant period of time.

EWCP - Collateral

• Self-liquidating loan• First lien on all assets being financed

– Typically inventory, WIP and A/R

• Personal guarantees of all owners of 20% or more.

• Other collateral on a case-by-case basis

EWCP Fees

• One time guaranty fee of ¼ of 1% of the guaranteed portion for loans with a 12 month or less maturity. The American Recovery and Reinvestment Act of 2009 eliminated the guaranty fee on loans with a 12 - 36 month maturity (previously between 2% and 3.5%). The fee waiver expires 12/31/2010 per Jobs Act.

• Deals initially booked for 12 months or less can be “re-issued” for ¼ of 1% the following year

• 55 basis point on-going fee paid by lender• Business and lender negotiate Interest rate and fees

(there is no restriction on the fees), lender is required to disclose this information to SBA

EWCP Loans - How to Apply

• EWCP loans are submitted to the local Lender who submits them to the USEAC.

• The application is the 84-1, a joint application used by SBA and Ex-Im Bank

• The USEAC prepares the authorization and loan report for approval by National Guaranty Processing Center (NGPC).

• Sacramento 7(a) LPC forwards signed documents to the lender.

International Trade Loans (ITL)

• Use of Proceeds :– Facilities– Equipment– Working Capital– Debt refinancing is allowed.

• Business plan/application must document eligibility requirements (i.e. export projections or evidence of adverse impact).

• ITL can be combined with a separate EWCP loan. Maximum working capital allowed is $4 million

International Trade Loans (ITL) How to Apply

• International Trade Loans can be approved PLP or through normal 7(a) processing. Can be processed at a USEAC when submitted with a companion EWCP Loan.

Export Express

• The maximum loan amount under SBA Export Express is $500,000.

• Processed using the existing SBAExpress processing procedures

• Eligibility:– applicant in business for at least 12 months – no waivers

allowed– proceeds are to be used to develop or expand their export

markets– Borrower can provide estimate of exports for next 12

months.

Export Express

• Proceeds may be used for any of the following purposes:– transaction-specific financing of export deals, including

standby letters of credit– general lines of credit for export purposes– export development activities such as brochure

translation or participation in a trade mission– term loans for permanent working capital, machinery

and equipment, or real estate

Export ExpressHow to Apply

• Export Express Loans are processed in the same way that SBA Express Loans are processed.

Four questions from Express Eligibility Checklist - 1920c

___Loan is under SBA Export Express. If checked, answer the following questions. If “No” loan is not eligible.

1. The business has been operating, although not necessarily in exporting, for at least 12 full months. YES_X_NO___

2. Applicant has demonstrated to lender that loan proceeds will enable it to enter a new export market or expand an existing export market. YES_X_NO___

3. Proceeds will not be used to finance overseas operations, except for the marketing and/or distribution of products/services exported from the U.S. YES_X_NO___

4. If proceeds are being used to finance specific export transactions, lender has determined that U.S. companies are authorized to conduct business with the proposed country(ies) and has reviewed the Ex-Im Bank Country Limitation Schedule (CLS) to verify that the U.S. Government has not restricted trade with any foreign country that the applicant does business with (i.e., no country is identified on the CLS by Note #7). YES_X_NO___

Thank You