“Resources for Export Markets”

SME Conference 2014Embassy of Malaysia

October 15, 2014

Dennis R. ChrisbaumDirector, International Trade FinanceU.S. Small Business Administration

Washington, D.C.

Exporters Questions

1) How do I get paid?2) How can I reduce my payment risk?3) Are funds available to help me explore

international markets?4) How can I finance my export transactions?5) How can I finance my business expansion?

International Methods of Payments: Their Impact on Financing Needs

1. Who sets the method of payment?

2. Competitive pressures, customer relations, regional preferences and, sometimes, regulations

3. Method of payment will determine the financing needed for a transaction

Financing Export Development & Orders

Pre-Order Pre-shipment Shipment Post-Shipment

PERFORMANCE RISK FINANCIAL RISK

Trade Shows Production costs ReceivablesCertifications Material financingTranslations LaborProduct adjustmentsPackaging Buyer financing

Bid Bonds Performance bonds

What Might an SME Exporter Need?

Working Capital for Export Development:

• Attend trade shows

• Secure CE mark, international patent or trademark

• Meet potential business partners

• Vet potential buyers, agents or distributors and purchase foreign credit reports

• In-country promotions

• Translation of website/product literature and other marketing costs

Profile:• to $350,000 with 90% guaranty• $500,000 with 75% guaranty • Processed by SBA-approved Export Express lenders• Working capital: 7 years; Fix assets: up to 25 years

Required: •Entering or expanding in foreign market• In business for at least 12 months (can be waived by lender if

the applicant’s key personnel have export expertise and successful business experience and lender does conventional underwriting, not relying on credit scoring)

Solution: SBA Export Express

Proceeds may be used for any “export development activity,” such as:

1) export development including participation in a foreign trade show or translation services,

2) export transactions, including export purchase orders and foreign accounts receivables;

3) issuance of standby letters of credit that serve as performance bonds, completion bonds, and advance payment guarantees, and

4) fixed assets for equipment or real estate.

Solution: SBA Export Express

Working Capital to Produce Export Orders:

• Inventory, materials, labor, other production costs

• Foreign accounts receivable insurance

• Insurance and freight costs

• Bank fees related to the transactions

• Standby-letters of credit to guarantee bid, performance, or advance payments

What Might an SME Exporter Need?

Solution: CAPLine Working Capital Line of Credit

• Loan guarantee for 85% on lines of credit up to $150,000, and 75% of higher amounts up to $5,000,000.

• Small businesses may use the lines to provide credit terms to customers and to finance inventory.

• Advantage to businesses and lenders: Small business borrowers can pledge both domestic and foreign accounts receivable and inventory using one line of credit.

• Foreign accounts receivable must be covered by credit insurance.

• Guarantee is available for manufacturers, wholesalers, export trading companies, and service providers.

Solution: Export Working Capital Program - EWCP

• 90% guarantee on loans/lines of credit up to $5,000,000 • For small businesses that can generate export sales and

need additional working capital.• Must be used for export transactions only, including

100% of exporter’s costs of the transaction from purchase order to collections; can fund the entire transaction cycle

• Can be structured to fund:– single or multiple transactions or – as an asset-based line of credit with advances made against

a borrowing base of export inventory and foreign accounts receivable.

Export Working Capital Program

Advance rates: 75% against inventory, WIP up to 90% again insured A/RSBA: no US content requirement no prohibition on military sales only Small Business applicants Guaranty fee: ¼ of 1% on guaranteed amount, 12 monthsExim Bank: 51% US content, no military sales, any size applicant

Bid & Performance Bonds; Advance Payment Guarantees

• Standby letters of credit issued by a commercial bank can serve as a performance or bid bond or as an advance payment guaranty.

• Funding support for Standby Letters of Credit can be provided by the following guaranty loan programs:• Export Express • Export Working Capital Guarantee – EWCP (SBA)• Working Capital Guarantee Program (Exim Bank)

• The guarantee serves as an incentive to the bank to issue the standby letter of credit with less than full, 100% cash collateral.

1. SBA Export Express—to $500,000• Guaranteed loan• 7 years maximum working capital

2. Ex-Im Bank’s Global Credit Express—to $500,000• Direct loan, if credit is not available elsewhere• Six month or 12 month term

3. SBA’s Working Capital CAPLine—to $5 million• One line to support domestic and foreign sales• Ten year maximum

4. SBA’s Export Working Capital—to $5 million Exim Bank’s Working Capital—over $5 million• Guaranteed loan, export transactions only• Usually for 1 year, 3 year maximum

Export Working Capital Solutions

Term Loan for fixed assets:

•Machinery or equipment to expand production in order to meet foreign demand

•Retooling expenses necessary for metric production or to meet other standards

•Permanent working capital

•Real estate needed as a result of expanding export sales

What Might an Experienced Exporter Need?

International Trade Loan

• A loan guarantee for 90% of a term loan up to $5,000,000• To acquire, construct, renovate, modernize, improve, or expand

facilities and equipment in the United States to produce goods or services involved in international trade.

• Eligible borrowers are in a position to expand existing export markets or develop new ones.

• May also be used by a U.S. company that has been adversely affected by import competition and require financing to modernize or improve operations to become more competitive.

• Maximum term: ten years for working capital; 25 years for real estate acquisition.

• May be used for on-shoring production, if also expanding exports

Small Business Definition

• Manufacturers (<500 employees generally; can go as high as 1,500);

• Wholesalers, including export trading companies (<100 employees);

• Services companies are eligible based on annual sales ($7.0 million to $35.5 million);

• Or applicant can use the Alternative Size Standard: a firm with less than an average of $5 million in net income for the past two years and a net worth less than $15 million.

Indirect Exports

• Note: Both SBA and Exim Bank export loans can support “indirect exports.”

• Indirect exports occur when the borrower ships a product to another domestic company that in turn incorporates it into a final product for export or to an export trading company that exports it directly.

• Documentation must be provided by the exporter-of-record to the lender that the borrower’s product is, in fact, being exported.

SBA’s Network of Trade Finance Specialists at U.S. Export Assistance Centers

CHARLOTTETerritory: North Carolina, South Carolina, Eastern TennesseeDan Holt 704-333-4886 x226 CHICAGOTerritory: Wisconsin, Illinois, IowaJohn Nevell 312-353-8065 CLEVELANDTerritory: Ohio, Western New York, Western Pennsylvania, Patrick Hayes 216-522-4731 DALLAS/FORT WORTHTerritory: Texas, OklahomaRick Schulze 817-684-5506 DENVERTerritory: Colorado, New Mexico, Utah, WyomingBryson Patterson 303-844-6622 DETROITTerritory: Michigan, IndianaJohn O'Gara 313-872-6793 MIAMITerritory: Florida , Puerto Rico, Virgin IslandsMary Hernandez 305-526-7425 ext. 21 

ATLANTA Territory: Georgia, Alabama, Kentucky,

West/Central TennesseeSandro Murtas 404-815-1496 ARLINGTON, VATerritory: Virginia, Maryland, District of Columbia, West Virginia, DelawareWilliam Houck 202-557.4063 BOSTONTerritory: Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode IslandJohn Joyce 617-565-4305 CALIFORNIA IRVINE Territory: Southern California, Nevada Martin Selander 949.660-8935

LOS ANGELES Territory: Southern California, Arizona Pellson Lau 213-894-8267 SAN FRANCISCO Territory: Northern California – Bakersfield to the Oregon border, Hawaii, Guam Jeff Deiss – 415-744-7730

MINNEAPOLISTerritory: Minnesota, North Dakota, South DakotaCarlos Sosa 612-348-1642 NEW ORLEANS- Louisiana, Arkansas, MississippiReginald Harley 504-589-6730 NEW YORK CITYTerritory: New York City & 5 Boroughs, Eastern Upstate New York, New JerseyToni Corsini 212-809-2645 PHILADELPHIATerritory: Eastern PennsylvaniaRobert Elsas 215-597-6110  SEATTLETerritory: Washington, Alaska, Oregon, IdahoSandra Edwards 206-553-0051 ex.228 ST. LOUISTerritory: Kansas, Missouri, NebraskaJohn Blum 314-260-3788

Questions?

Thank You!

Dennis R. Chrisbaum, SBADennis.Chrisbaum@sba.gov

Tel: 202.205.6885www.sba.gov/international