What are SBA Trade and Export Loans?
The Small Business Administration has Programs that are set up to provide guarantees on financing, made by either Traditional Banks and Non-Bank Lenders that specialize in Trade or Export to U.S Business.
The SBA Trade and Export Loans Programs are meant to support the U.S. Businesses who engage in trade and export activity, seeking a Commercial Loan or Business Line of Credit to grow and expand their businesses, or looking to purchase assets to support their companies growth in the international markets .
Typical SBA loan guarantees range from 50% to 75% of the loan amount. However SBA guarantees on loans for Trade or Export can go all the way up to 90% of the loan amount. Most banks either have apprehensions or outright restrictions towards lending for international trade.
For example a lender may not accept export receivables as collateral for working capital, or have limitations on letters of credit, perhaps they do not finance purchase orders, or maybe hesitations to finance the purchase of assets that support solely an international expansion of the business.
Regardless of the reasons, the goal of the SBA Trade and Export Loans Programs is to motivate some of those lenders via the loan guarantee of up to 90% of the loan amount, to extend capital to U.S. Small and Mid-Sized Businesses. In order to help them grow their companies through trade and export.
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What Companies could use the SBA Trade and Export Loan Programs?
Companies in sectors like Agriculture products, Forest products, Chemical products, Textile and Apparel, Machinery, Manufacturing, Transportation Equipment and many more that export or trade are best suited to capitalize on SBA Trade and Export Loan Programs.
According to the US International Trade Commission (USITC), U.S. General Imports grew 3.4 percent to $12,345,187 billion showcasing U.S. Businesses that rely on International Trade are actively increasing their orders. At the same time U.S. exports grew 3 percent) to $1,623.4 billion, as exports in 9 of the 10 sectors that focus the most on exports, are taking advantage of global demand for their products. Businesses that trade or export their goods internationally may be able to benefit from one of the SBA Trade and Export Loan programs. When they are seeking to grow their companies in the global markets.
The 3 Main SBA Business Trade and Export Loans Programs that we focus on are:
SBA Export Express Loans
SBA International Trade Loans (ITL)
SBA Export Working Capital Loans (ECWP)
What is the SBA Export Express Loan Program?
As with all SBA Loans it is the lender that processes the financing applications, reviews the businesses requested documents, sets the underwriting standards that apply to these loans, and if approved secures any collateral that may be required for the SBA Export Express Program.
Once a company has cleared those hurdles the lender prior to the funding of the financing will furnish the full file to the SBA for review and final approval confirmation. From there the program has set guidelines it will follow during funding. The SBA guarantees a lender up to 90% of the Export Financing funded up to $350,000 and guarantees up to 75% of the Export Financing funded between $351,000 and $500,000. The maximum funded amount available under the SBA Export Express Program is $500,000.
The SBA has established three specific programs that are intended to help small to mid-sized companies navigate through the international markets while growing their U.S. businesses.
All of the programs work to back up financing from a lender to U.S Businesses, for companies to expand in either direct or indirect trade and export activities. The three SBA Programs that back loans that support Trade and Export are the SBA Export Express Loans Program, the SBA International Trade Loans (ITL) Program, and the SBA Export Working Capital Loans Program (ECWP).
Any U.S. based company that exports to to run or grow their businesses can potentially benefit from using the SBA Export Express program.
Whether the company requires capital to properly function in the foreign market place.
Can benefit companies looking to acquire machinery or equipment to be used in the production of goods for export.
This product can provide an advance against an export sales order or export letters of credit, or something simple like attending a foreign trade show.
These are just a handful of the benefits the SBA Export Express Loan program could offer to export related company seeking help to make the best use of the SBA to expand their businesses
Like all SBA Loans the actual lending portion of financing is funded by a bank or non-bank lender. The SBA Export Express Program provides the guarantee of the loan. This means the SBA will rely on the lender to set the vast majority of the needed Eligibility Requirements for Export Express Financing. Each lender may have specific set requirements. The SBA has only one additional eligibility requirement for the Export Express Financing program.
Any business that is applying for the SBA Export Express Loan Program, that the business has been in operation for the 12 most recent months. The rule is not mandatory,meaning the Export Express program allows business owners to use their industry experience if the business itself is less than 12 mos old.
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What is the SBA International Trade Loan (ITL) Program?
The SBA International Trade Loan (ITLs) is a program that supports loans made by either banks or non-bank lenders that finance international trade. SBA (ITL’s) use the structure of the 7(a) Loan program and raise the loan guarantee percentage to secure up to 90% of the capital funded by the lender to a U.S Businesses to finance International Trade. The program’s 90% SBA guarantee on the loans financed by the lender may be secured by either equipment, real estate, and permanent working capital.
These loans can also be used to buy, build or remodel facilities and equipment involved in international trade, or for working capital, and it can be used to refinance existing loans.
Any businesses who either produce goods in the U.S. and export them for trade or for U.S Businesses that have been negatively affected by trade related issues like being impacted by imports. Also companies looking to purchase assets to support an international expansion for the business.
The SBA International Trade Loan (ITL) Program provides a guarantee of 90% of the Loan amount for loans of up to $5 million for fixed assets and working capital.
Made by banks and non-bank lenders that specialize in financing for International Trade to U.S. small and mid-sized businesses that plan to start or continue exporting. SBA ITL’s loan proceeds can be used to start or continue exporting internationally or to purchase commercial real estate, construct, improve or expand facilities and acquire equipment to be used in the U.S that produce goods or services involved in international trade.
Another use is repatriation meaning loans to cost involved in bringing back production facilities to the U.S. The ITL Programs 90% loan guarantee is the maximum allowed loan guarantee percentage the Small Business Administration offers.
A U.S Business that exports or that have been negatively impacted due to competition from importers, that has first qualified for the SBA 7(a) loan program. Can then convert their financing application with their lender to the SBA International Loan Program.
On top of the SBA ITL Programs 90% guarantee on loans up to $5mm. The program also has very long borrowing terms. The SBA ITL program can go up to 7 years in term for lines of credit, up to 10 years in term for loans for working capital and equipment and terms can go all the way up to 25 years for loans for commercial real estate.
The SBA International Trade Loan program has a loan guarantee fee. It is normally between 2 percent and 3.75 percent of the loan amount, depending on the size of the loan and the fee can be added to the loan funded amount. For U.S. businesses that are entering or expanding into international markets the SBA ITL Programs 90% loan guarantee is meant to entice lenders to actually offer capital to finance International Trade.
The program can help exporters secure a combination of fixed asset loans, working capital financing and debt refinancing. Depending on local markets being different and fluctuations in the Fed Funds Prime Rate, Interest Rates on SBA International Trade Loan Program loans typically range from 6.7% to up to 9.25% APR which is on average (2.25% to 4.75% above the Prime Rate)
If a business has been approved for a SBA 7(a) that participates in international sales, is expecting to expand into international sales, or can demonstrate that the loan proceeds will improve their competitive position against companies that import, then this is probably a great program to look into.
With lenders getting a 90% loan guarantee from the Small Business Administration SBA International Trade Loans tend to fund faster than other SBA Loan programs.
Plus the interest rate on the loan can be negotiated between the borrower and the lender, which can lower than the originally offered 7(a) interest rate.
The SBA International Trade Loan Program could be used to acquire, construct, renovate, or expand facilities. It could also be used to refinance, improve, and modernize equipment.
SBA ITL funds are to be used in the United States to produce goods or services involved in international trade and to develop U.S Business so they can sell in foreign markets.
SBA ITL Terms can range from 7 to 10 years all the way up to 25 years term depending on the use of loan proceeds and collateral.
The first requirement for those seeking for an SBA International Trade Loan must first be eligible for a standard SBA 7 (a).
The must business must-be located in the U.S
The company must operate as a for-profit business.
Due to the extra business risks associated with investing in the global markets: the owners of the business must have good to great personal credit scores
The business owners must be able to showcase strong company financials, and be willing to possibly have to conform the final loan amount to the SBA size standards for their particular industry, only if needed Collateral can be either equipment, property, or business assets; it must be in the form of a first lien is required for an SBA International Trade Loan Program and it must be located in the United States.
Companies seeking an SBA International Trade Loans on the grounds that the business has been hurt by international trade must be able to effectively demonstrate in detail how obtaining an SBA ITL can make the business more competitive.
The business will be required to furnish an export business plan that includes expected export sales and financial statements.
What are SBA Export Working Capital Program (EWCP) Loans?
SBA EWCP Program provides bank and non-bank lenders with up to a 90% guarantee on export financing of up to $5 million to U.S Businesses. The SBA EWCP Loan Program was put out by the Small Business Administration as a credit enhancement so that the lenders will make the necessary export working capital available. The funds can be issued out as either a business line of credit or a business term loan.
The SBA EWCP Loan Program proceeds can be used to finance inventory and goods related to export activities and they can also be used to finance suppliers. The SBA EWCP Loan program to the SBA International Trade Loans (ITLs) program, both programs offer loan amounts of up to $5 million, with an SBA guarantee of 90%. However, ECWP loans have a maximum term limit of 3 years for repayment, meanwhile SBA ITL’s can go up to 10 years in term.
The SBA EWCP Loan Program works directly between a bank or non-bank lenders that finance International Trade and the U.S. Businesses that are seeking capital. The SBA EWCP Loan Program provides the lenders guarantees up to 90% of the loan amount for the funding up to $5mm, linked to an exporter’s orders and receivables. The SBA uses the program as a tool to provide liquidity to the lenders, to motivate them to make the necessary export working capital available. To the US Businesses that grow their companies using international exports.
The SBA EWCP loans can either be issued as term loans or business lines of credit, though they are mostly issued as lines of credit. The SBA EWCP Loan Proceeds can be used to finance the issuance of standby letters of credit, it can be used as bid or performance bonds or down payment guarantees, funds have also been used for payments manufacturing costs of goods for export and costs associated with a specific export order Financing of foreign accounts receivable. Just to name a few of the biggest reasons we have seen.
The SBA also has resources to link companies to International Trade specialists, in order to help U. S Businesses increasing export sales and managing foreign payment risk.
This product provides liquidity to a very underserved area of the markets as many U.S. banks do not provide working capital advances on export orders, export receivables, or letters of credit.
This SBA Loan product could help to alleviate challenges for a company with growing export sales or when a single large export order is received.
SBA’s Export Working Capital Program is designed to make financing available so that qualified small business exporters do not lose viable export orders due to a lack of working capital.
Armed with the guarantee from the SBA through EWCP, U.S. exporters can compete for business by extending liberal sales terms, especially in underdeveloped markets that face high cost barriers for importers.
Exporters can apply for EWCP loans in advance of finalizing an export sale or contract.
With an approved EWCP loan in place, exporters have greater flexibility in negotiating export payment terms—secure in the assurance that adequate financing will be in place when the export order is won.
The funds from this SBA Loan product could be used to Finance suppliers, inventory or production of export goods.
SBA EWCP Loans also help U.S Exporters by providing the working capital to support the business during long payment cycle periods.
The program contributes to the growth of export sales by allowing the exporter to extend more liberal sales terms.
This SBA Loan program can also help a company increase their global competitiveness by helping a company to grow domestically with the SBA EWCP Loan program covering international sales. Allowing a company to focus their domestic capital reserves for the company’s sales within the U.S.
A Company must have been in business for at least one year.
A company must be entering or expanding in an existing foreign market and the funds must not be financing the offshore side of the operations, only the domestic side.
The company owners must provide a detailed export business plan predicting first-year export sales and describing how the loan proceeds will be used.
The one-year-in-business requirement can be waived if the business’s key personnel have demonstrated export expertise and previous successful business experience.
Companies must be willing to allow a first lien or second lien placed on their U.S. Based property, equipment, and other assets The SBA requires a completed Form SBA-EIB 84-1, plus any attachments or other SBA forms needed, to apply. The application decision from the SBA is given within five to 10 business days.
In closing, There is still a big charge by the United States Trade Commission (USTIC) to grow U.S. companies and the economy through international sales. Therefore the SBA is aggressively trying to make these loans. If you are certain which program you want to apply for a program now or have additional questions.
Troy Business Grouphas a team of seasoned Business Financing Consultants that specialize in providing clients with access to the SBA Programs for Trade and Export Loans. Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow internationally, and will guide you through the loan process each step of the way.