Taking Your Small Business Customers International
As SBA Administrator, I’m always hearing stories of a business that gets a call or an email from a customer that’s seen their website and wants to buy their product... and it turns out the customer is in China, India or Brazil. Now more than ever, small businesses are turning to overseas markets as a way to expand. Globalization, the Internet, and e-commerce have made it easier than ever for small businesses to reach the 95 percent of consumers that don’t live in the United States. Exporting gives small businesses the opportunities to tap into new markets, increase sales, generate economies of scale, and improve inventory management, as well as help maintain American competitiveness and create jobs.
The President has called for the doubling of U.S. exports in five years, from $1.57 trillion in 2009 to $3.14 trillion in 2014. To achieve this goal, he launched the National Export Initiative, with the goal of linking, leveraging, and aligning federal resources to increase our country’s exports. To support that mission, I serve on the Export Promotion Cabinet and the President’s Export Council. Together we are working to increase available financing for exports, remove barriers to trade, and promote sustainable growth through exporting—particularly among small businesses because they are the sector of the economy that’s most poised for growth through exporting.
Since 2003, America’s small business exports have grown by about 80 percent. They now account for nearly $500 billion in annual export sales. However, small businesses are only responsible for about 30 percent of America’s export revenues, and more than half of small business exporters only ship to one country. That’s why at SBA, our goal is to increase both the number of small business exporters and the number of countries they ship to. We’re doing that through a four step process:
Identifying small businesses who are interested in exporting, through online marketing and increased outreach from our field offices and resource partners.
Preparing small businesses as they work to begin exporting, using our counseling and training network.
Connecting small businesses to international markets through matchmaking and trade events.
Supporting small businesses that begin exporting with financing and counseling.
Of course, we can’t support small business exporters without help from our lending partners. SBA has a suite of lending programs that you can use to help your small business customers grow their business and expand into exporting. These loans are there to support that first big order from abroad, or provide working capital while a small business exporter completes a large contract. In 2009, SBA supported about 1,500 export loans to small business, totaling more than $580 million. These loans generated more than $1.6 billion in sales.
Any SBA lender can offer our export loans, and loan specialists in our district offices or at a U.S. Export Assistance Center (USEAC) can to walk you through the process for any of export loan products (also available online at http://sba.gov/aboutsba/sbaprograms/internationaltrade/index.html) , which include:
Export Working Capital Loans (EWCP) are short-term loans—12 months or less. These loans provide a line of credit for suppliers, inventory, or production of goods. We don’t want small businesses to lose out on an opportunity to export just because they don’t have working capital. As a result of the Small Business Jobs Act, the SBA guarantee on these loans remains 90 percent, and the size of EWCP loans will be increased to $5 million.
Export Express Loans help out small businesses that need capital fast to take advantage of a possible overseas sale. They can help cover marketing materials, translation, or travel costs for a trade mission. Any lender that participates in the SBA Express program automatically qualifies as an Export Express lender. With these loans, you can use your own forms, negotiate a fixed or variable interest rate, and get approved by SBA within 36 hours. The Small Business Jobs Act made this pilot program permanent, with increased loan sizes up $500,000, a 90 percent guarantee for loans up to $350,000, and a 75 percent guarantee for loans larger than $350,000. As we work to implement the law, these terms may change. Check with your district office or a USEAC SBA staff member for up-to-the-minute details.
International Trade Loans help businesses invest in real estate and working capital to support exporting over the long term. These loans can be used for expansion, renovation, and modernization of facilities, or in some cases refinancing existing loans. Usually, these loans are needed when a few big orders from abroad start to flow in, and the business needs to expand to a larger location or buy equipment to meet demand. International Trade Loans can be for up to $5 million. They currently carry a 90 percent guarantee, and maturity is usually 10-to-15 years for machinery or 25 years for real estate.
SBA’s suite of export loans offers a variety of ways to help you meet the needs of your small businesses customers. An Export Working Capital Loan helped Nidek Medical Products, Inc—manufacturers of medical nebulizers and oxygen concentrators for 25 years. The Birmingham, Ala.-based company currently has 40 employees. Recently, the company has focused largely on international sales, even establishing distribution warehouses in South America and Europe. But carrying the receivables for export sales had created a cash crunch and put the company’s finances in jeopardy. With assistance from SBA’s Alabama District Office, the company received a $1.3 million Export Working Capital Loan from Red Mountain Bank in Birmingham The loan solved their cash flow difficulties, brought them back to solvency, and saved 40 jobs.
This type of loan also helped Cascadia International Group, which imports and exports seafood for American, South Korean, Japanese and Chinese markets. When the Bellevue, Wash.-based company’s export volume to Japan increased in 2003, the company’s revenues more than doubled. In 2004, they began selling to China. The growth from sales to China meant Cascadia International Group needed more working capital. Working with Center Bank in Lynnwood, WA, they secured a $1.6 million revolving Line of Credit using SBA’s Export Working Capital Program. This loan will support $14 million in export sales over the next year.
I know that the goal of doubling U.S. exports over the next five years is achievable. Many of you are already partnering with us to help do that, and I hope even more of you will. In the meantime, when small business customers turn to you for help, ask them if they’ve considered exporting as a next step to grow their business.