Most American Entrepreneurs think that their Businesses are too small for them to participate in exporting activities. However, figures reveal that 97% of all exporters are Small Business owners. Yet we see an average small business owner continues to feel daunted by the idea of exporting.
This is mostly driven by the lack of funds. Exporting activities require heavy financing and banks do not give loans against foreign receivables which is demotivating for business owners. Fortunately, this is where “The Small Business Administration” comes in and bridges the gap that exists between small business owners and their desire to export.
The Small Business Administration (SBA), established in 1953, is a United States government agency which provides support to small businesses by counselling and assisting their interests.
SBA also strives to aid companies which are planning to enter the export market and further make the transaction process easier for them. These loans provide the necessary funding needed for these businesses to participate in export activities.
When it comes to export, SBA offers three loan programs. The export loans are only available for small businesses. SBA has set very clear guidelines for what business it considers as a “Small Business”. The business must have a tangible net worth of no more than $15 million with net income over the last two years of less than $5 million.
How It Works
The export activities are either directly or indirectly financed by SBA. Direct export activities include the first-hand export development processes of businesses who plan to expand through export of their own goods, while the indirect export activities include industries like tourism or selling goods to clients who further export them.
It is vital to note that SBA does not directly lend loans to business owners but rather works with lenders and community development organizations. This has it benefits such that the lenders face less risk while also having easy access to capital.
The Lender Match Tool helps you find an SBA lender in your area. The SBA approves your loan much faster than a lender approves your loan. For this reason, you need to keep a time frame for a few months before getting your final approval in your mind.
The following three Export Loan programs are made available by SBA:
- Export Express Loan Program
- Export Working Capital Program (EWCP)
- International Trade Loan (ITL)
Export Express Loan Program
What is it?
Export Express Loan is particularly for small loans. It is considered the best for its over simplicity and flexibility. This program can be used to finance any export related development activity including financing any specific export orders or for expanding your production facilities.
You can get up to $500,000 in financing and you work directly with your bank in obtaining the loan. With an eligible application you can get approved in just 36 hours or less!
Am I Eligible?
The loans must help you enter or expand into new or existing export markets. Your small business must be in operation for at least a year. One year Export Business plan should also be provided entailing how the proceedings from the loan will be used with the forecasting of export sales.
These requirements can be waived off in the instance that the key personnel possess commendable business experience and expertise in export.
Export Working Capital Program (EWCP)
What is it?
This program guarantees cash advances mainly pertaining to the orders and receivables of exporter. The funding through EWCP program can go up to $ 5 million. Most popular use of proceeds is in Working Capital to support foreign account receivables, particularly for long payment cycles.
Am I Eligible?
In addition to having export development activity going on in your business, it must also be operating for at least 12 months prior to the application. It is possible to get this required waived off in case, as a business owner, you possess vast business experience and expertise in export.
International Trade Loan (ITL)
What is it?
This program is for the companies which plan to expand by exporting. The loans are protected by equipment and permanent working capital. Funds can be used to refinance the preexisting loans, but they are popularly used to buy, build, or remodel facilities used in International Trade.
ITL provides a much higher loan guarantee percentage than any other conventional loan program offered by SBA. The maximum amount can go up to $ 5 million.
Am I Eligible?
Businesses hoping to obtain this loan program are required to show how they are willing to enter export market or how adversely they have been affected by competition and thereby need assistance to gain Competitive Advantage. Expected export sales and financial statements are also required to be submitted.
The Application Process is a simple four-step process:
- Contact your existing lender to determine if it provides SBA Export Express Loan
- Submit Application material and SBAs borrower information form to your lender
- If your request is approved, the lender will submit eligibility information to SBA
- SBA will review your information and if approved, guarantees your loan
For Export Express Loan, your lender must also submit the Supplemental Export Express lender agreement to SBA so confirm its submission with your lender at the time of application process.
The SBA hopes for U.S. exports to rise, and it believes that by helping small businesses it can encourage them to participate in export and hence achieve this goal. The programs put forward by them are proving this motive and by their looks, they do seem worth giving a shot.
Every small business owner who wishes to step into the world of exporting in hopes of expanding their business should explore these programs as they will find something tailored to their business needs and requirements.
Moreover, the eligibility requirements for Export loan programs set forward by the SBA are pretty much like those for other loan programs offered by them. This with the easy and concise process shows how much they are willing to help. At the end, its your call and all about what your prospects regarding your business are.
Lastly, if you have any more queries, you can also contact your local US Export Assistance Center and get any details you need.