Michigan State University Extension
Extenstion International Trade Res. - 09269503
03/31/96
The U.S. Small Business Administration (SBA) provides financial and business development assistance to help small businesses take advantage of export markets.
a.Financial Assistance
The SBA assists businesses in obtaining the capital needed to explore, establish or expand international markets. Export loans are available under SBA's guaranty program. If your lender is unable or unwilling to make a loan directly, you should request that the lender seek SBA participation. The financing staff of each SBA district and branch office administers the financial assistance programs. You can contact the finance division of your nearest SBA office for a list of participating lenders.
i.Export Working Capital Program
The Export Working Capital Program (EWCP) provides short- term working capital to finance small business export transactions. The EWCP, which replaces SBA's Export Revolving Line of Credit Program, can support single transactions or multiple export sales. Under this program, SBA can guarantee up to 90 percent or $750,000, whichever is less, of a loan made by a partici-pating lender. Loan maturities are generally for 12 months; revolving credit lines may be renewed twice, up to a total of 36 months.
Use of Proceeds
Guarantees can be extended for pre-shipment working capital,post-shipment exposure, or a combination of the two. A pre-shipment guaranty is used to finance the production or acquisition of goods and services for export. A post-shipment guaranty is used to finance receivables resulting from export sales.
Interest Rates Under the Export Working Capital Program, the maximum interestrates are negotiable between the applicant and the lender.
Preliminary Commitments
Under the EWCP, you can apply directly to the SBA for a preliminary commitment for a guaranty. With SBA's preliminary commitment in hand, you can then find a lender willing to ex-tend the credit. The lender must apply to SBA for the final commitment.
ii.Regular Business Loan Program
Under this program, the SBA can guarantee up to 90 percent of a bank loan up to $155,000. For larger loans, the maximum guaranty is 85 percent or $500,000, whichever is less.
Use of Proceeds
Small businesses that need money for fixed assets or term working capital may be eligible for the SBA's regular 7(a) Loan Guaranty Program. Loan guaranties for fixed- asset acquisition have a maximum maturity of 25 years. Guaranties for general purpose working capital loans have a maximum maturity of seven years.
Eligibility
To be eligible, the applicant's business generally must be operated for profit and fall within size standards set by SBA. Export trading companies (ETCs) and export management companies (EMCs) also may qualify for the SBA's business loan guarantee program. Ineligible borrowers include businesses engaged in speculation or investment in rental real estate.
iii. International Trade Loans
The International Trade Loan Program provides long-term financing to help small businesses compete more effectively and to expand or develop export markets.Under this program, SBA's guarantee can extend up to $1.25 million. SBA's maximum share for facilities and equipment is $1 million; the maximum share for working capital is $750,000. Loan maturities cannot exceed 25 years, excluding the working capital portion of the loan.
Use of Proceeds Proceeds may be used to purchase or upgrade facilities or equipment, and to make other improvements that will be used within the United States to produce goods or services. No debt payment is allowed. Proceeds can be used to buy land and buildings; build new facilities; renovate, improve or expand ex-isting facilities; and purchase or recondition machinery, equipment and fixtures. The working capital portion of the borrowing could be in the form of either an EWCP loan or a portion of the term loan.
Eligibility
Applicants must establish either of the following to meet eligibility requirements: - Loan proceeds will significantly expand existing export markets or develop new ones; or
- The applicant's business is adversely affected by import competition.
Small Business Investment Company (SBIC) Financing A Small Business Investment Company (SBIC), approved and licensed by the SBA, may provide equity capital or working capital exceeding the agency's $750,000 statutory maximum. To be eligible for SBIC financing, at least half of the small business's assets and operations must be in the United States. Unlike the SBA,SBICs can invest in export trading companies in which banks have equity participation as long as other SBIC requirements are met.
b.Business Development Assistance
The SBA provides business development assistance to exporters, including trade counseling, training, legal assistance and publications.
c. Counseling
Counseling is available through SBA's resource partners: the Service Corps of Retired Executives (SCORE), the Small Business Development Centers (SBDCs) and Small Business Institutes (SBIs). SCORE is an organization of nearly 13,000 retired and active executives who volunteer their time to provide management and technical assistance to small businesses. A SCORE counselor can also assist you in developing an international business plan. The local SBA office can match you with a SCORE volunteer experienced in exporting.
SBDCs, located on college and university campuses, provide a wide variety of information services at more than 900 locations nationwide. SBDC services include, but are not limited to, financial guidance, marketing, production, organizational development, engineering and feasibility studies, and technical assistance. Some SBDCs have designated international trade centers; all SBDCs provide export counseling, referral and/or training.
In conjunction with colleges and universities across the United States, the SBA has established over 500 SBIs. Under the supervision of instructors, upper-level undergraduate and graduate business students provide intensive management assistance to small businesses that need special help.
d. Training
SBA district offices sponsor export training programs, often in conjunction with SCORE, SBDCs and other public and private trade groups. Offering something for the beginner as well as the more advanced exporter, topics range from export financing to joint ventures. You can also learn how to do business outside our borders through the various market- and region-specific workshops offered.
e.Publications
The SBA publishes books and fact sheets on international trade, including "Breaking Into the Trade Game: A Small Business Guide to Exporting," which takes you step-by- step through the export process.
f. Legal Assistance
Under the Export Legal Assistance Network (ELAN), your local SBA office can arrange a free initial consultation with an attorney to discuss international trade questions. This is possible through an agreement among the Federal Bar Association, the SBA and the U.S. Department of Commerce. Questions may include contract negotiation, agent/distributor agreements, export licensing requirements, credit collection procedures, documentation and much more.
g. Market Research
SBA's Automated Trade Locator Assistance System (SBAtlas) is a market research tool that can help you select the best markets for your particular product or service. Two types of free reports are available: product-specific and country-specific. The SBAtlas product report ranks the top 35 import and export markets for a particular good or service. The country report identifies the top 20 products most frequently traded in a target market.
h. Joint Ventures
SBA offers an on-line system for matching U.S. small businesses with potential international joint venture partners. Reach Strategic Venture Partners (RSVP) contains profiles of companies from around the world interested in developing partnerships with U.S. companies. RSVP is available through SBA OnLine, the SBA's electronic bulletin board at 1-900-463-4636 (9600, n, 8, 1)
Additional Information
The SBA has offices located throughout the country. For the one nearest you, consult the telephone directory under "U.S. Government," or call the Small Business Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (fax). For the hearing impaired, the TDD number is (202) 205-7333.