U S Small Business Administration Export Finance Programs
U. S. Small Business Administration Export Finance Programs Global Business Club of Mid-Michigan Global Opportunities for Michigan Manufacturers March 24, 2011 John O’Gara Export Solutions Group U. S. Small Business Administration
U. S. Export Assistance Center (USEAC) “Yous-e-ack” Created in 1995 USEACs are located in more than 100 cities U. S. Dept. of Commerce, SBA, Eximbank Provide SME’s with hands-on export marketing and trade finance support • Work closely with federal, state, local, public, and private organizations • •
National Export Initiative (NEI) • President Obama’s goal of doubling exports over five years to support 2 million jobs in America (Jan 2010) • Three areas of focus: – Trade advocacy (educating firms about overseas, opportunities, connecting them w/new customers, advocating for their interests) – Improving access to credit (asks Ex. Im Bank to increase available financing for SMEs) – Continue rigorous enforcement of international trade laws
Michigan Top Five Export Countries - 2010 Canada $21. 7 billion Mexico $ 7. 4 billion China $ 2. 2 billion Germany $1. 5 billion Japan $1. 2 billion 2010 Michigan Exports Worldwide Total……$44. 5 billion
Risks of International Trade • • • Commercial Political or Country Transit Currency Fluctuation Strikes, Riot, Civil Commotion War
Methods of Payment • Cash in Advance • Letter of Credit Irrevocable vs. Revocable Sight vs. Time • Documentary Collections Cash Against Documents Against Acceptance • Open Account
Export Finance Needs • Pre-shipment financing – Pay market development costs – Post bid/performance bonds – Acquire/manufacture goods • Post-shipment financing – Provide supplier credit ( Open account sale) – Post warranty bonds
Export Working Capital Program (EWCP) • “A business should not lose a viable sale due to a lack of working capital”
Export Working Capital Program Features • • Supports single transactions or multiple transactions. Guaranty fee ¼% of Guaranteed portion Max. SBA Exp/Amt. = $ 4, 500, 000/$5, 000 90 % guaranty for the lender No minimum U. S. content requirement. Can support sales to military buyers. Short turnaround time < 10 days. Supports Standby L/Cs
Use of Proceeds - Standby Letters of credit for bid or performance bonds- Acquire/produce goods or services for export - Accounts Receivable of such foreign sales
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.
EWCP - Collateral Transactional financing has a self-liquidating aspect: – 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
EWCP Fees • One time guaranty fee of ¼ of 1% of the guaranteed portion for loans with a maturity of 12 months or less. • 0. 55% basis point on-going fee paid by lender • Exporter and lender negotiate Rate and fees;
What Do We Look for? • • • Exporter’s ability to perform Purchase Order, L/C or signed contract Creditworthiness of foreign buyer Creditworthiness of exporter Terms of sale and method of payment
Logistics & Export Documentation
INCO Terms TERM Cost of Goods at Factory Transport to Dock Loading Onto Vessel Ocean or Air Freight Charges Shipping Insurance Unloading Charges EX-WORKS (EXW) X FREE ALONG X SIDE (FAS) X FREE ON BOARD (FOB/FCA) X X X COST + FREIGHT (CFR/CPT) X X COST + INS+ FREIGHT (CIF/CIP) X X X EX-QUAY (DEQ) X
EXPORT EXPRESS • • • Fast turnaround Streamlined application Lender uses own forms 90% guaranty up to $350, 000 75% guaranty to max of $500, 000 Use of proceeds supports export activity
SBA Export Express Use of Proceeds • Export development activities such as marketing and trade shows • Transaction specific financing such as production cost of labor, materials and overhead • Revolving lines of credit for export purposes
SBA Export Express Use of Proceeds • Facilities or equipment to be used in the U. S. to produce goods or services for export • Loan proceeds may not be used to finance overseas operations • Lender must review Eximbank CLS to verify eligibility
Trade Finance Success • Firm: Boat Lifts, Inc. • Product: Boat hoists for pleasure craft other commercial applications • Situation: Order from Norway for $440 M • Need: Pre-shipment working capital to fill a specific purchase order, payable by ILC. • Solution: A $330 M EWCP to support preshipment working capital needs.
Trade Finance Success Firm: Dynamic Manufacturing Product: Industrial wood chipping machinery Situation: Orders from multiple countries Need: Pre-shipment working capital to fill purchase orders • Solution: A $2 MM EWCP to support preshipment working capital needs • •
Trade Finance Success • Firm: Metal Plating, Inc. • Product: Anodizing and phosphating lines • Situation: 2 Contract(s) for $3 MM with Egypt. Down payment of 30% for both ($900 M) requiring Standby L/C’s. • Solution: A $1 MM EWCP to support issuance of Standby L/C’s.
Trade Finance Success • Firm: Thumb Tool & Die • Product: Plastics processing machinery and strand pelletizing equipment. • Situation: Order from China $3. 7 M. • Need: Pre-shipment working capital to support standby L/C and manufacture of equipment. • Solution: 2 loans: A $500 K EWCP to support Standby L/C- 18 months A $1. 5 M EWCP Co-Guaranteed by Eximbank- 1 year
State Trade & Export Promotion(STEP) Grant • • Created by Small Business Jobs Act of 2010, Section 1207 Three year program Competitive grant applied for and administered by States Goal – increase the number of small businesses exporting – Increase value of exports for small businesses currently exporting • Deadline for proposals, one from each State, April 26, 2011 • Anticipate availability Summer 2011
Contact Info: John R. O’Gara Regional Manager Office of International Trade U. S. Small Business Administration U. S. Export Assistance Center 8109 E. Jefferson Ave. , Suite 110 Detroit, MI 48214 John. O’Gara@trade. gov (313) 226 -3670
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