SBA Export Loan Guaranty Programs

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2 SBA Export Loan Guaranty Programs December 4, 11 a.m. Eastern To listen by phone, dial then enter access code: ## For technical assistance, contact the AT&T Helpdesk at Thank You!

3 SBA Export Loan Guaranty Programs Daniel W. Holt Regional Export Finance Manager Office of International Trade U.S. Small Business Administration U.S. Export Assistance Center Charlotte, NC Cell (704)

4 SBA Export Loan Products Export Working Capital Program (Avg. $1.89 Million) Up to $5 Million; 90% guaranty for short term loans and lines of credit for export working capital. Export Express (Avg. $221,000) Up to $500,000. Short term loans and lines of credit for export purposes processed through Express procedures on E-Tran. International Trade Loan (Avg. $1.75 Million) Up to $5 Million with a 90% guaranty. Term loans for facilities, equipment, and working capital that will enhance export ability. Refinancing of existing debt is also available. 4

5 What Is a U.S. Export for SBA Financing Purposes? 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.? Yes No 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?

6 Indirect Exports Indirect Exports are considered exports for purposes of determining the eligible use of proceeds. The term indirect export applies to situations where, although the Borrower s direct customer is located in the United States, that customer will be exporting the items/services it purchased from the Borrower to a foreign buyer. In such cases, the Borrower must provide documentation to the lender from the Borrower s domestic customer (typically in the form of a letter, invoice, order or contract) that the goods or services are in fact being exported. 6

7 International Trade Loan (ITL)

8 International Trade Loans (ITL) Why? It is a 7(a) loan. You already know how to do 7(a) loans. Has a 90% guaranty. Sellable on the secondary market Can be done PLP 8

9 International Trade Loans (ITL) Use of Proceeds: Facilities Equipment Working Capital Debt refinancing is allowed (any debt that qualifies under Standard 7(a) Can not be used to purchase a business Business plan/application must document eligibility requirements (i.e. export projections ITL can be combined with a separate EWCP loan. Maximum working capital allowed is $4 million 9

10 International Trade Loans (ITL) Long-term loan. $5 Million Maximum Loan 90% Guaranty $4.5 Million Maximum guaranty portion Standard 7(a) eligibility requirements, plus The loan proceeds will significantly expand an existing export market or develop new export markets (Indirect exports are considered exports for purposes of determining eligibility); or or Upgrading facilities or equipment will improve the applicant s competitive position

11 International Trade Loans (ITL) How to Apply International Trade Loans can be approved PLP or through normal 7(a) processing Must use E-Tran. Not available via SBA One. PLP Processing is not available if the bank is not in a first lien position on assets being financed (i.e. building addition). These are still eligible but must be processed through standard 7(a) processing. 11

12 ITL Documentation Start/Grow Exports Standard 7(a) loan package plus the Small Business Applicant must submit an export business plan, including both a projection and narrative rationale that contains enough information to reasonably support the likelihood of expanded export sales. The plan should identify the amount of expected export sales.

13 ITL Eligibility The loan proceeds will help the Small Business Applicant expand existing export markets or develop new export markets.

14 ITL Eligibility SBA does not specify the structure or length of such a business plan

15 ITL Eligibility at a minimum the plan should identify existing and targeted export markets, projected sales into those markets, historical sales in the prior year, a discussion of plans and strategies for expansion/entry into existing/new markets, and how the loan will help finance that activity

16 How detailed does the export business plan have to be? As stated above, while there is no prescribed format, the export business plan should be sound, descriptive and grounded in fact.

17 ITL Eligibility the Small Business Applicant and the loan officer s report must be able to demonstrate that the loan will allow the Small Business Applicant to improve its competitive position.

18 ITL Eligibility This is not an academic exercise that says, I know exporting will help my company. I ve done some research and, if I get a loan, I m going to start exporting to maybe two or three countries.

19 Early Stage Exporter would require a review of the competition, an analysis of targeted markets, market entry strategies, including any barriers to trade and required product adjustments, any pending or signed distribution agreements or orders, and sound sales projections at a minimum plus an explanation of how loan proceeds will be used to support this export initiative

20 Current Exporters a discussion of markets, distribution, and historic and projected export sales should be provided, as well as an explanation of how the funds will support the sales expansion.

21 What percentage of sales are needed to qualify? There is no statutory threshold SBA s regulations require that the loan proceeds will be used to significantly expand an existing export market or develop new export markets.

22 Example an applicant with $3 million in annual sales is requesting a $1 million loan for plant and equipment expansion to support export sales that will grow from $5,000 to $10,000 over the next three years No

23 On the other hand the business plan shows a need for specialized production equipment to meet metric standards in the U.K. and other European markets and funding for an aggressive international marketing campaign that will grow exports from $100k to $200k in two years with projections for $350k in export sales in four years, it would pass the reasonable test, even if this final figure might not represent a high percentage of total sales.

24 ABC Corporation manufactures industrial packaging equipment but does not currently export discovered that, in order to compete in the international marketplace, they need to modify their production line and produce to metric standards.

25 They have lined up distributors in both the United Kingdom and Mexico that project first year sales of $200k and potential third year sales of $400k if their product can be produced to metric standards Although new-to-export, they have distributors in place and firm projections of future export sales volume.

26 Acme Corporation indirect export Acme has received a purchase order from the High-End Sound Corporation of Dayton, Ohio, for components that will be incorporated into High-End Sound Systems going to China.

27 the additional volume will strain their cash flow They have an existing ten year term loan that was used to purchase initial production equipment, but the note has a three-year balloon.

28 They are requesting a seven-year loan to refinance this note in order to free up monthly cash flow They anticipate indirect export sales of $150,000 in the next 12 months, with additional export sales growth anticipated by their customer

29 Refinancing is an acceptable use of funds, as long as all other eligibility criteria are met

30 The term indirect exports applies to situations where, although the Borrower s direct customer is located in the United States, that customer will be exporting the items/services it purchased from the Borrower to a foreign buyer.

31 Indirect exports are considered exports for purposes of determining eligibility.

32 the borrower must provide a certification from the exporter-ofrecord to the lender (typically in the form of a letter, invoice, order or contract) that the goods or services are being exported

33 Thank You! Daniel W. Holt Regional Export Finance Manager Office of International Trade U.S. Small Business Administration U.S. Export Assistance Center Charlotte, NC Cell (704)

34 LRS Contact Info Mike Rossi Dana Winston x227 Lisa Denson x247 Maria Lloyd Leo Lopez Rick Haney Karen Hoskins Frank Anderson Or contact your local LRS