1 SBA Export Programs: Linking credit unions & small businesses in a world of export opportunity Jeff Deiss Regional Export Finance Manager SBA Office of International Trade San Francisco, CA
2 Why exporting? If you ve only got 4% of the world s people and you want to have 20% of the world s income, you better be selling something to somebody else. - Bill Clinton, Ex-Im Bank conference, 4/5/2012
3 Now is the time to consider exporting An emerging global market; a growing, worldwide middle class 96% of the world s consumers are outside the US 66% of the world s consumer buying power is outside the US 87% of world economic growth in the near term will take place outside the US
4 A growing, worldwide middle class OECD, Huffington Post, 12/24/2014
5 An emerging global market Americas Market Intelligence, Huffington Post, 12/24/2014
6 Where are small businesses positioned in relation to the export opportunity? 97% of US exporters are small businesses (representing 31% of total US export value)
7 Is this a market opportunity beyond the reach of credit unions? Avg. export revenue/year = $938,000 (for businesses with 20 employees) So typical exporting financing needs are likely $500,000 or less With SBA support, credit unions are ideally placed to address the need.
8 SBA s 3+ Export Programs Specialized 7(a) loans for financing your exporter: 1. International Trade Loan (ITL) Positioning the firm to export 2. Export Working Capital Program (EWCP) Fulfilling export orders 3. Export Express Smaller loans for either need CAPLine Working Capital Dual purpose WC (domestic & export)
9 SBA Export Lending the pinnacle of SBA lending 1. The highest % guarantee the Export Boost 2. Robust eligibility guidelines more deals than you think 3. A suite of SBA programs for nearly every need and niche
10 SBA Export Lending 1. The highest % guarantee the Export BOOST!
11 The EXPORT BOOST part 1 Typical federal (including SBA) loan guarantees range from 50% to 75% SBA export loans receive: 90% Why? Because exports are critical to national economic success
12 The EXPORT BOOST part 2 SBA Express : 50% guarantees on streamlined business lending The maximum SBA Express loan is $350,000 Export Express : 90% guarantees for loans up to $350,000 75% guarantees for loans up to $500,000 Export Express loans can be made in addition to regular SBA Express loans
13 SBA Export Lending 2. Robust eligibility guidelines There are more export deals than you might think
14 SBA s export eligibility What is an export? Goods or Services $$$ s Must be delivered from the US Can t be drop-shipped (e.g., China assembly to EU market, never entering the US) Export service providers (e.g., freight forwarders) are not exporters unless they have foreign customers.
15 SBA s export eligibility What is an SBA-eligible export? Must be shipped from the US Exporting goods or services No US-content requirement Licensed defense exports allowed
16 SBA s export eligibility INDIRECT exporters qualify for all 3 SBA export programs A firm that sells goods/services to a domestic customer who in turn incorporates them into their own export is an exporter too! Selling into an exporting supply chain Selling to an export broker Document this with a letter from the borrower s customer
17 SBA s export eligibility International tourism the overlooked export Tourism is an export of recreational services The foreign buyer brings foreign exchange into the US The foreign buyer picks up the service in person
18 SBA s export eligibility International tourism the overlooked export In 2014, international tourism generated $1.5 trillion in US receipts!
19 SBA s export eligibility Recap: What is an export? Goods Services Indirect exporters International tourism
20 SBA s export eligibility No go zones? SBA follows Export-Import Bank s Country Limitation Schedule prohibited countries. Currently just five countries are off limits: Cuba North Korea Iran Sudan Syria
21 SBA s export eligibility Exporting threshold for the borrower to qualify for SBA export programs? There is no absolute $ or % export test. * The firm must simply have: (1) an annual export revenue PROJECTION (2) an export PLAN product and target market(s) * Only 12% of exporting SME s report that exports are a majority of their sales. 54% of exporting SME s say exports constitute less than 10% of their sales.
22 SBA s export eligibility Exporting threshold for the loan to qualify for SBA export programs? For real estate, equipment, and refinancing loans the loan may support the borrower s domestic operations provided it contributes to the expansion of exporting too. For working capital loans International Trade Loan - the loan must contribute to the expansion of exporting Export Express 70% export-dedicated if General LOC EWCP 100% export-dedicated use
23 SBA s export eligibility Required borrower experience/history in exporting? Ideally, in business for 12 months If not, still eligible for export programs if key management has documented: Sufficient export expertise Substantial previous business experience New-to-export is okay
24 What Is a U.S. Export for SBA Financing Purposes? Yes No Goods shipped from the U.S. states and its territories? Goods sold to the U.S. military at a base overseas? Services provided drilling for hydrothermal resources in E. Africa? Consultancy services for a conference in, or to provide management advice to, a customer in U.K.? Marketing and expansion of U.S.-based hospitality assets to attract and serve foreign visitors from Germany? Selling logistics services to a Chinese company exporting to the U.S., i.e. freight and/or insurance and in-country (USA) transportation services? U.S. designed and ordered goods, manufactured in China and shipped directly to buyer in Japan?
25 Exporting is not exotic It s more common that we think A sale to Canada is an export our #1 export partner! Can you find the Canadian?
26 Sampling of SBA export clients Emergency gear wholesaler Craft brewery Roller coaster contractor Heavy trucking contractor Parachute harness maker Seafood processor Data center services Food processor Aerospace parts maker Public relations & management consulting Wire fabric manufacturer Used & refurbished equipment vendor Medical device maker Computer software maker Video game designer Herbs & spices wholesaler Winery Specialty popcorn maker Fruit packer Boutique soap maker Wooden toys
27 Stake your export claim! Simple to document. Document your borrower s export eligibility: 1. Written 12-month export revenue target 2. Brief narrative plan reasonably explaining how to reach this target a. Product to be exported b. Countries to sell to 3. Explanation of how loan will enable business to enter new or expand existing export market(s) 4. If indirect exporter letter or other documentation from borrower s customer certifying they will export what they buy from the borrower
28 Stake your export claim! You must ask for it. Document the export eligibility of your borrower, then. International Trade Loan: In E-TRAN, be sure to request the guarantee under ITL, asking for the 90% guarantee Export Express: Be sure your institution has executed the Supplemental Export Express Lender Agreement EWCP: Be sure your institution has executed the EWCP Lender Agreement. Work directly with your local SBA export program manager
29 SBA Export Lending 3. A suite of SBA programs for your highest potential customers
30 SBA s export financing programs - #1 of 3 International Trade Loan (ITL) Positioning the firm for export It s just a 7(a) loan with a 90% guarantee! 90% guarantees on loans up to $5 million Financing for projects that improve the competitive position of US exporter so as to increase exporting Equipment, real estate, refinancing, permanent working capital (CAVEAT: No business acquisitions) Term loan: RE - 25 yrs; M&E or WC - 10 yrs Use your PLP authority for ITL approvals.
31 SBA s export financing programs - #2 of 3 Export Working Capital Program (EWCP) Working capital to fulfill the export order 90% guarantees on loans up to $5 million Pure export working capital (or standby letters of credit) Asset-Based or Transaction-Based lines; revolving Advance 80-90% on export A/R; 75% on export inventory SBA s lowest guaranty fee (¼%)! Typically 1 year loans; re-issued annually No SBA prescription on interest rate or fees Applications are underwritten by SBA export staff, not SBA Loan Center
32 SBA s export financing programs - #3 of 3 Export Express Fast-track approvals for smaller export-related loans 90% guarantees on loans up to $350,000 75% guarantees on loans up to $500,000 Express application, underwriting, approval Any export development activity fixed assets, market development, refinancing; WC if at least 70% is export-related Term loan or revolving line; standby L/C for export Simplest, most flexible export program
33 SBA s export financing programs bonus program! CAPLine Working Capital Working capital to fulfill domestic & export orders 75% guarantees on loans up to $5 million Generic working capital; no export requirement A nice solution when export WC need isn t large enough to justify a separate export line Asset-Based or Fixed Asset-secured lines; revolving Advance 80% on risk-mitigated export A/R; 50% on inventory Up to 10-year lines with annual renewals (1-time fee)
34 SBA s export programs Exporter's Need Position for Export Success Fulfilling the Export Order $5 MM Loan size ITL (International Trade Loan) EWCP (Export Working Capital Program) 90% %GL $500 K EXPORT EXPRESS 75% $350 K 90%
35 Welcome to the SBA export suite Export Working Capital Program Powerful; specialized for export orders Export Express Ideal for small loans; the ultimate flexible tool for multiple uses International Trade Loan good place to start; most accessible; it s just a 7(a) loan but with a 90% guarantee!
36 SBA s export focus Fine print Bear in mind that SBA charges its fees based on the guaranteed % of the loan, so 90% guarantees carry proportionally higher fees than 75% fees But: Fee relief for loans of $150,000 or less applies to SBA export loans as well. Veteran s Advantage fee relief applies to SBA export loans too.
37 Take-away lesson Consider making it your practice to ask each customer Do you export?
38 INDIRECT EXPORTERS TOO! Consider making it your practice to ask each customer Do you sell to anyone who exports?
39 Network of U.S. Export Assistance Centers 39
40 See you on the summit. Don t leave SBA export benefits laying on the table! Use SBA export programs to support your small business borrowers and enhance your own commercial portfolio.
41 But wait, there s more! (Next month, that is.) When: September 24, 2015 What: SBA Basics Loans Registration Open Now! Why: An SBA program for financing business real estate & heavy equipment at 50% LTV that requires just a 10% buyer down payment Who: Frank Keating, Fiscal Selling Agenda Eagle Compliance, LLC Linda Reilly, Chief 504 Branch, Small Business Administration
42 Export Finance Assistance Jeff Deiss Regional Export Finance Manager, SBA, San Francisco