U.S. SMALL BUSINESS ADMINISTRATION. Craig Jordan. Lead Lender Relations Specialist

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1 U.S. SMALL BUSINESS ADMINISTRATION Craig Jordan Lead Lender Relations Specialist

2 James Pipper International Trade Officer

3 GUARANTEED LENDING PROGRAMS UPDATE U.S. Government Export Financing Programs

4 How We Assist Small Business Business Development & Counseling Financial Assistance Procurement Assistance Business Plans Office of Advocacy Disaster Assistance

5 Why SBA Guaranteed Loans? SBA guaranty allows lenders to consider small businesses when typically prohibited SBA guaranty allows lenders to offer you better credit terms such as fully amortized loans (no balloon payments) SBA loans have the interest rate capped by law and most typical commercial loan fees are prohibited

6 Use of Loan Proceeds Eligible Working Capital Inventory Machinery & Equipment Land & Building Debt Refinancing Change of Ownership Floor Plan Financing Ineligible Real Estate held for investment Purchase a portion of the business Payment to Principals Delinquent Payroll Taxes Page 18

7 SBA Exporting Loans For small businesses In business at least one year Working capital or fixed asset financing Financing to support export orders or export transactions Long-term financing to support export expansion

8 Eligibility Must meet basic SBA criteria: Size standards for a small business Type of business Loan purpose Be a For Profit business Meet SBA s credit elsewhere test Must meet lenders credit requirements

9 Eligibility SBA s 7(a) size and ownership standards apply based on NAICs--Manufacturing: under 500 employees; can go as high as 1,500 employees Or Alternate Size Standards Net Worth less than $15 million and $5 million in average net income over the previous 2 years

10 Types of Businesses Eligibility These are Not Eligible Religious Teaching Sexual Materials Speculation Gambling Life Insurance Incarcerated, on probation or parole, or indicted for felony or moral crime Non-Profits Lenders Passive Owned Real Estate Foreign Business Pyramid Sales Defaulted on a Federal Loan resulting in a loss Page 1

11 Export Financing Be Prepared Develop an export business plan (export.gov and local resources) Understand finance options

12 US Government Finance Programs for Exporters 1. SBA s Export Express to $500, International Trade Loan to $5 million 3. Export Working Capital to $5 million

13 SBA Export Express 1. SBA s Export Express permanent program 90% guaranty up to $350,000 75% guaranty up to $500,000 Working capital: 7 years Fixed assets: up to 25 years

14 SBA Export Express Program Requirements for Export Express: Four Questions, Four Yes Answers In business for at least one year Entering a new or expanding in an existing foreign market Not financing offshore operations Not selling to a prohibited country Add: Anticipated annual export sales for the first year enter on SBA Form 1920C.

15 Export Express: Use of Proceeds Proceeds may be used for any of the following purposes: Export development expenses, such as brochure translation or participation in a trade show Transaction-specific financing of export deals, including standby letters of credit General lines of credit for export purposes Term loans for permanent working capital, machinery and equipment, or real estate

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

17 SBA Loans for Exporters 2. International Trade Loan (ITL) up to $5,000, Either: a) expanding because of exports, or b) adversely impacted by imports -- Maximum guaranty: $4.5 million, 90% (permanent) -- A combination of fixed assets/term loan with W/C * maximum Working Capital: $4,000, Maximum term: 25 years; 7 years for working capital -- Refinancing is allowed

18 International Trade Loan (ITL) Proceeds may be used for any of the following purposes: Term Loan for permanent working capital Equipment, facilities, land and buildings Debt refinance related to International Trade

19 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.

20 Export Working Capital Loan (EWCP) 3. Export Working Capital Loan 90% guaranty -- Maximum Loan amount: $5 million -- No minimum ratios Transaction-Based Financing (Purchase order financing) Single Order or Revolving Line Most supplier and production costs through collections Or, Asset-Based Line-of-Credit Working Capital for pre-shipment, post-shipment or both requirements Borrowing Base: inventory, WIP, (insured) A/R

21 Export Working Capital Eligibility Product shipped from U.S.A. or services provided and invoiced by U.S. entity 12 months of operating history or proven expertise Transaction- or asset-based loans

22 Export Working Capital Eligibility Disbursed against specific transactions and/or resulting (insured) receivables

23 Transaction-Based/Self-Liquidating EWCP 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. Funds are used by the borrower to produce goods for a specific export order. SBA requires a secure payment method from foreign buyer which will be directed to pay down the EWCP loan.

24 EWCP: Advance Rates and Collateral Typical Advance Rates: 75% against inventory, WIP 85-90% against insured, foreign A/R 90% against Letter of Credit

25 EWCP: Advance Rates and Collateral Collateral 1. Inventory and work-in-process 2. Resulting foreign A/R 3. Assignment of proceeds under: documentary letters of credit credit insurance policies 4. Other assets as required by the lender 5. Personal guarantees of 20% or more owners

26 Guaranty fee: EWCP Fees and Analysis Borrower and lender negotiate Interest Rate and fees; lender is required to disclose this information to SBA SBA loans have a Guaranty Fee that can be included in the loan amount. Fees range from 2% to 3 1/2% of the guaranteed portion. 1/4% of guaranteed amount if 12 months or less Servicing or Packaging fees are allowable. Pre-payment and late payments fees are allowed. Origination, commitment, bonus, broker, commission, or referral fees are not allowed.

27 Guaranty fee: Fees SBA loans have a Guaranty Fee that can be included in the loan amount. Fees range from 2% to 3 1/2% of the guaranteed portion. Servicing or Packaging fees are allowable. Pre-payment and late payments fees are allowed. Origination, commitment, bonus, broker, commission, or referral fees are not allowed.

28 Borrowers Eligible Borrowers - Manufacturers - Brokers - Trading companies - Services companies - Wholesalers or distributors - Indirect exporters

29 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

30 Resource Partners SCORE Small Business Development Centers Women s Business Centers SBA Microlenders and CDC s SBA Participating Lenders Chambers, Universities, Community Colleges, non profits, Incubators, State and Local Governments

31 Need More Answers? Export.gov provides government online resources and links to local assistance United States Export Assistance Centers located throughout the U.S., provides information for all federal export promotion and finance programs Look for export training programs offered in your area

32 SBA Loans for Exporters Contact Information: SBA USEAC - (213) SBA District Office (602) (602)

33 Thank You!