SBA EXPORT LOAN PROGRAMS

Toni Corsini, Regional ManagerSBA Export Solutions Group

U.S. Export Assistance Center33 Whitehall Street, 22nd flr

New York, N Y 10004 – 212-809-2645toni.corsini@trade.gov

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

National Export Initiative

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

promotion efforts (Trade Promotion Coordination Committee (TPCC) consisting of 19 agencies

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

fair access to foreign markets

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)

• In business 12 months or proven expertise

• No U.S. content requirement; Military sales allowable

Export Working Capital Program

• 90% Guarantee• $5 million maximum• Single project or revolver• Transaction or Asset Based• No pre-determined minimum ratios

Two Types of EWCP Loans

EWCP

Transaction Based Asset-Based

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

Export OrderEWCP

Advance

Inventory

FinishedGoods

InvoicePayment

Pay DownEWCP

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

EWCP

Transaction Based Asset-Based

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.

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.

• 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

SBA – Ex-Im Comparison

• SBA and Ex-Im Bank are partners that share a goal of increasing small business exports.

• The programs are quite similar, yet some differences exist.

• Some exporter’s needs are better met with Ex-Im WCG, others by SBA’s EWCP….

International Trade Loans (ITL)• Long-term loan.

• $5 Million Maximum Loan• 90% Guaranty• $4.5 Million Maximum guaranty portion

• Standard 7(a) eligibility requirements , plus • 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

applicant’s competitive position

International Trade Loans (ITL)

• Standard SBA 7(a) Fee Schedule• 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

Export Express

• Loans and Lines of Credit up to $500,000.• Streamlined approval process • Approved banks make their own credit decision,

use their own forms and receive a 90% SBA guaranty up to $350,000 and 75% on loans over $350,000 to $500,000.

• Proceeds may be used for any export-related expense, including standby LCs when required as a bid or performance bond for an export project.

Export Express

• Processed using the existing SBAExpress processing procedures

• Eligibility: Same as SBAExpress, plus– applicant in business for at least 12 months– proceeds are to be used to develop or expand their

export markets– Borrower can provide estimate of exports for next 12

months.

Export Express – Use of Proceeds

Proceeds may be used for any of the following purposes:

1. obtaining a standby letter of credit when required as a bid bond, performance bond, or advance payment guarantee;

2. participation in a trade show that takes place outside the United States;

3. translation of product brochures or catalogues for use in markets outside the United States;

4. obtaining a general line of credit for export purposes; 5. performing a service contract from buyers located outside the

United States;

Export Express – Use of Proceeds

6. obtaining transaction-specific financing associated with completing export orders;

7. purchasing real estate or equipment to be used in the production of goods or services for export;

8. providing term loans or other financing to enable a small business concern, including an export trading company and an export management company, to develop a market outside the United States;

9. acquiring, constructing, renovating, modernizing, improving, or expanding a production facility or equipment to be used in the United States in the production of goods or services for export; and

10.Any business expense that the lender determines will support a borrower’s export development activities

Export ExpressCollateral Requirements

• The same as regular express, with one exception. – If an Export Express line of credit over

$25,000 is used to support the issuance of standby letters of credit, the line of credit must have collateral (cash, cash equivalent or project) that will provide coverage for at least 25% of the issued standby letter(s) of credit amounts.

Maximum Maturities

• Line of Credit – 7 years• Permanent Working Capital – 10

years• Equipment – Useful Life• Real Estate – 25 years

Resources

• SBA Export Business Planner

www.sba.gov/exportbusinessplanner

• Video series www.inc.com/exporting

Thank You!

Toni Corsini, Regional ManagerSBA Export Solutions Group

U.S. Export Assistance Center33 Whitehall Street, 22nd flr

New York, NY 10004 – 212-809-2645toni.corsini@trade.gov