U'S' Small Business Administration

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U.S. Small Business Administration

• Financing
• Your
• Exports

Helping you start, grow and succeed.
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Ohio Global SummitAugust 26, 2009 - Columbus,
Ohio

• Patrick Hayes
• Regional Export Finance Manager
• U.S. Small Business Administration
• U.S. Export Assistance Center
• Cleveland, Ohio
• patrick.hayes_at_sba.gov
• 216-522-4731

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Small Businesses Dont Export.
Separating Facts from Myths
Myth

• 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.

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Trade Finance

• Finding the right mix for your Company of
• Payment assurance
• Workable cash flow
• Winning customers increasing sales

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SBA Loan Programs for Exporters

• Export Working Capital Program
• International Trade Loan
• Export Express

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EWCP Philosophy

• A business should not lose a viable export sale
  due to a lack of working capital

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Export Working Capital Program

• 90 Guarantee
• 1.5 Million is maximum SBA guaranteed portion
• SBA-Ex-Im Co-guarantee
• Transaction financing
• No pre-determined minimum ratios
• Single Project or Revolver
• Quick turnaround time
• Preliminary commitment availability

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Export Working Capital Program Eligibility

• Company meets SBA size standards
• Based on NAICS
• Manufacturing under 500 employees
• can be as high as 1,500 employees
• Ex-Im has no restrictions for size.
• Product is titled and shipped from U.S.
• No U.S. content requirement, Military OK
• In business 12 months or proven expertise
• Other SBA eligibility provisions
• Criminal History, Previous loss to govt. etc.

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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.

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EWCP Use of Proceeds

• Loan proceeds to acquire/produce goods or
  services for export, the accounts receivable of
  such foreign sales or standby letters of credit.
• Pre-shipment Guarantee
• Labor and Material costs
• Post-shipment Guarantee
• Foreign Accounts Receivable financing
• Combination Guarantee

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EWCP Use of Proceeds

• Portions of the EWCP Line of Credit may be up
  to fund standby Letters of Credit when required
  as
• Bid Bond
• Performance Bond

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Expansion of Your Existing Collateral Base

• MAXIMIZING THE BORROWING BASE
• EX-IM BANK/
  
  ASSET-BASED
  FACILITY SBA
  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
• Line Increases from 800,000 to 1,650,000
  (106)

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EWCP Its the Transaction

• Exporters ability to perform
• Transaction evidenced by Purchase Order, L/C or
  signed contract
• Acceptable payment by foreign buyer
• Cash in Advance
• Letter of Credit
• Open Account (insured)
• Open Account (no insurance)

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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.

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Discounted Credit Insurance

• The Export-Import Bank of the United States
  (Ex-Im Bank) and the SBA have joined together to
  provide SBA export loan recipients with a 25
  discount on export credit insurance premiums.
• Ex-Im Banks export credit insurance protects
  your company against nonpayment and enables you
  to sell on competitive open account terms. You
  can enter new markets and increase sales in
  existing markets and have the ability to match
  the credit terms offered by your foreign
  competitors.
• Ex-Im Bank provides up to 95 coverage for both
  commercial risks (i.e. buyer insolvency and
  default) and political risks (I.e. war,
  revolution and the cancellation of an export or
  import license).

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EWCP - Advance Rates

• Determined on a case-by-case basis
• Pre-shipment - limited to exporters cost of the
  product being exported (materials, labor and
  overhead).
• Post-shipment - NTE 85 on Receivables (no more
  than 60 days past due) and 90 on usance L/Cs
• Adequate Lender collateral management system
  required

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EWCP - Collateral

• Self-liquidating loan
• First lien on all assets being financed
• Personal guarantees of all owners of 20 or more
  who are active in the business
• Other collateral on a case-by-case basis

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EWCP Fees

• One time guaranty fee of 1/4 of 1 of the
  guaranteed portion for loans with less than a 12
  month 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)
• 55 basis point on-going fee paid by lender
• Business and lender negotiate Interest rate and
  fees, lender is required to disclose this
  information to SBA

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EWCP - How to Apply

• Apply with a commercial loan officer at your
  existing bank. The Bank will forward your
  application to SBA for approval if SBA support is
  needed for the transaction.

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International Trade Loan (IT)

• The SBA guarantee portion can go as high as 1.75
  Million for IT loan customers. eligibility
  requirements
• The loan proceeds will significantly expand an
  existing export market or develop new export
  markets or
• The applicant business has been adversely
  affected by import competition
• AND
• Upgrading facilities or equipment will improve
  the applicants competitive position

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International Trade Loans

• Use of Proceeds is limited to
• Facilities
• Equipment
• Debt refinancing is allowed (if the original debt
  qualified for ITL financing).
• Business plan/application must document
  eligibility requirements (i.e. export projections
  or evidence of adverse impact).

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International Trade Loans - How to Apply

• Apply directly with a commercial loan officer at
  your existing bank of account. Application must
  include projections that will demonstrate
  increased export sales and activity as a result
  of the loan.

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Export Express

• Loans and Lines of Credit under 250,000.
• Banks that are currently authorized under the
  SBAExpress program are automatically approved for
  Export Express.
• Approved banks make their own credit decision,
  use their own forms and receive up to a 90
  guarantee from the SBA.

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Export Express

• The maximum loan amount under SBA Export Express
  is 250,000.
• Processed using the existing SBAExpress
  processing procedures
• Eligibility
• applicant in business for at least 12 months
• proceeds are to be used to develop or expand
  their export markets

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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

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Export Express Fees

• One time guaranty fee of 1/4 of 1 of the
  guaranteed portion for loans with less than a 12
  month maturity. The American Recovery and
  Reinvestment Act of 2009 eliminated the guaranty
  fee on loans with a maturity in excess of 12
  months (previously between 2 and 3.5).
• Maximum maturity
• Line of Credit 7 years
• Term Working Capital 10 years
• Machinery Useful life
• Real Estate 25 years
• 55 basis point on-going fee paid by lender
• Business and lender negotiate Interest rate

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SBA and Ex-Im Bank functions
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E-Mail Distribution List

• The SBA at the Cleveland USEAC periodically
  distributes information regarding developments in
  SBAs international programs. Please drop off a
  business card or e-mail address to be included on
  this list.

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www.sba.gov/oit
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www.sba.gov/oit
A free resource guide that provides a
comprehensive guide to exporting.