SBA EXPORT LOAN PROGRAMS

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1 SBA EXPORT LOAN PROGRAMS Patrick Hayes, Regional Manager SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH

2 National Export Initiative Double Exports in five years Expand U.S. government s export promotion efforts (Trade Promotion Coordination Committee (TPCC) consisting of19 agencies Provide access to credit Eliminate barriers that prevent open and fair access to foreign markets

3 Export.gov U.S. Government s export portal market research trade events trade leads County Commercial Guides Much, much, much more

4 SBA Export Loan Products Export Working Capital Program (EWCP) Up to $5 Million; 90% guaranty for short term loans and lines of credit for export purposes. Export Express Up to $500,000. Term loans and/or lines of credit for export purposes streamlined processing procedures. International Trade Loan Up to $5 Million: now with a 90% guaranty. Term loans for facilities, equipment, and working capital that will enhance export ability. Refinancing of existing debt is also available.

5 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) Ex-Im Bank has no restrictions for size. In business 12 months or proven expertise No U.S. content requirement; Military sales allowable Other SBA eligibility provisions Criminal history, previous loss to govt. etc

6 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

7 Two Types of EWCP Loans EWCP Transaction Based Asset-Based

8 Transaction Based EWCP Self Liquidating Line of Credit Pay Down EWCP Export Order EWCP Advance Invoice Payment Inventory Finished Goods 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

9 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

10 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.

11 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)

12 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.

13 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

14 Two Types of EWCP Loans EWCP Transaction Based Asset-Based

15 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.

16 Asset Based EWCP MAXIMIZING THE BORROWING BASE ASSET-BASED FACILITY SBA EWCP GUARANTEE Amount % Advance Collateral % Advance Collateral Exportable Inventory Raw Materials $200, $80, $150,000 Work-In-Progress 200, ,000 Finished Goods 600, , ,000 Subtotal $1,000,000 $380,000 $750,000 Foreign Accounts Receivable Open Account $400,000 0 $0 90 $360,000 L/C Backed A/R 600, , ,000 Subtotal 1,000, , ,000 Total Borrowing Base $2,000,000 $800,000 $1,650,000

17 EWCP Fees One time guaranty fee of ¼ of 1% of the guaranteed portion for loans with a 12 month or less maturity. This fee is reduced by half for veteran owned businesses. Deals initially booked for 12 months or less can be reissued for ¼ of 1% the following year 51.9 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

18 EWCP Loans - How to Apply EWCP loans are submitted to the local Lender who submits them to the SBA. The application is the 84-1, a joint application used by SBA and Ex-Im Bank

19 Export Express Loans and Lines of Credit up to $500,000. 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.

20 Export Express The maximum loan amount under SBA Export Express is $500,000. Processed using the existing SBAExpress processing procedures Eligibility: applicant in business for at least 12 months proceeds are to be used to develop or expand their export (direct and indirect) markets Borrower can provide estimate of exports for next 12 months.

21 Export Express Proceeds may be used for any of the following purposes: transaction-specific financing of export deals, including standby letters of credit general lines of credit for export purposes export development activities such as brochure translation or participation in a trade mission term loans for permanent working capital, machinery and equipment, or real estate

22 SBA Export Express Fees Gross loan Amount 12 months or less More than 12 months $150,000 or less 0.25% of guaranteed portion* 2% of guaranteed portion* $150,001 - $500, % of guaranteed portion** 3% of guaranteed portion** *This fee is waived on loans under $150,000 if approved before September 30, 2015 **This fee is reduced by 50% for veteran owned businesses. Export Express loan recipients also receive a 25% discount on their Ex-Im Bank Small Business/Express Credit Insurance premiums.

23 Export Express How to Apply Apply at any bank with SBA Export Express Authority. Export Express Loans are processed in the same way that SBA Express Loans are processed.

24 International Trade Loan (ITL) The maximum loan is $5 million with a maximum SBA guarantee portion of $4.5 million. Lender gets a 90% guaranty. 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

25 International Trade Loans (ITL) 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

26 International Trade Loans (ITL) How to Apply Apply directly at your bank for International Trade Loans. Your bank can process through Preferred Lender processing or through normal 7(a) processing.

27 Getting Started New To Export SBA s Export Business Planner A free downloadable tool to save and customize How to determine your export readiness Worksheets for global market research Financing information and options Customizable export and marketing plan templates

28 Thank You! Patrick Hayes, Regional Manager SBA Export Solutions Group U.S. Export Assistance Center 600 Superior Avenue, Suite 700 Cleveland, OH