U.S. Small Business Administration Export Finance Programs

1. U.S. Small Business AdministrationExport Finance Programs Global Business Club of Mid-Michigan Global Opportunities for Michigan Manufacturers March 24, 2011 John O’Gara Export Solutions Group U.S. Small Business Administration

2. U.S. Export Assistance Center(USEAC) “Yous-e-ack” • Created in 1995 • USEACs are located in more than 100 cities • U.S. Dept. of Commerce, SBA, Eximbank • Provide SME’s with hands-on export marketing and trade finance support • Work closely with federal, state, local, public, and private organizations

3. National Export Initiative (NEI) • President Obama’s goal of doubling exports over five years to support 2 million jobs in America (Jan 2010) • Three areas of focus: • Trade advocacy (educating firms about overseas, opportunities, connecting them w/new customers, advocating for their interests) • Improving access to credit (asks ExIm Bank to increase available financing for SMEs) • Continue rigorous enforcement of international trade laws

4. Canada $21.7 billion Mexico$ 7.4 billion China $ 2.2 billion Germany$1.5 billion Japan$1.2 billion Michigan Top Five Export Countries - 2010 2010 Michigan Exports Worldwide Total……$44.5 billion

5. Risks of International Trade • Commercial • Political or Country • Transit • Currency Fluctuation • Strikes, Riot, Civil Commotion • War

6. Methods of Payment • Cash in Advance • Letter of Credit Irrevocable vs. Revocable Sight vs. Time • Documentary Collections Cash Against Documents Documents Against Acceptance • Open Account

7. Export Finance Needs • Pre-shipment financing • Pay market development costs • Post bid/performance bonds • Acquire/manufacture goods • Post-shipment financing • Provide supplier credit ( Open account sale) • Post warranty bonds

8. Export Working Capital Program (EWCP) • “A business should not lose a viable sale due to a lack of working capital”

9. Export Working Capital ProgramFeatures • Supports single transactions or multiple transactions. • Guaranty fee ¼% of Guaranteed portion • Max. SBA Exp/Amt. = $ 4, 500,000/$5,000,000 • 90 % guaranty for the lender • No minimum U.S. content requirement. • Can support sales to military buyers. • Short turnaround time < 10 days. • Supports Standby L/Cs

10. Use of Proceeds • Standby Letters of credit for bid or performance bonds- • Acquire/produce goods or services for export • Accounts Receivable of such foreign sales

11. 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.

12. EWCP - Collateral Transactional financing has a self-liquidating aspect: • First lien on all assets being financed • Personal guarantees of all owners of 20% or more who are active in the business • Other collateral on a case-by-case basis

13. EWCP Fees • One time guaranty fee of ¼ of 1% of the guaranteed portion for loans with a maturity of 12 months or less. • 0.55% basis point on-going fee paid by lender • Exporter and lender negotiate Rate and fees;

14. What Do We Look for? • Exporter’s ability to perform • Purchase Order, L/C or signed contract • Creditworthiness of foreign buyer • Creditworthiness of exporter • Terms of sale and method of payment

15. Logistics & Export Documentation

16. INCO Terms

17. EXPORT EXPRESS • Fast turnaround • Streamlined application • Lender uses own forms • 90% guaranty up to $350,000 • 75% guaranty to max of $500,000 • Use of proceeds supports export activity

18. SBA Export Express Use of Proceeds • Export development activities such as marketing and trade shows • Transaction specific financing such as production cost of labor, materials and overhead • Revolving lines of credit for export purposes

19. SBA Export Express Use of Proceeds • Facilities or equipment to be used in the U.S. to produce goods or services for export • Loan proceeds may not be used to finance overseas operations • Lender must review Eximbank CLS to verify eligibility

20. Trade Finance Success Firm: Boat Lifts, Inc. Product: Boat hoists for pleasure craft other commercial applications Situation: Order from Norway for $440M Need: Pre-shipment working capital to fill a specific purchase order, payable by ILC. Solution: A $330M EWCP to support pre-shipment working capital needs. 20

21. Trade Finance Success Firm: Dynamic Manufacturing Product: Industrial wood chipping machinery Situation: Orders from multiple countries Need: Pre-shipment working capital to fill purchase orders Solution: A $2MM EWCP to support pre-shipment working capital needs 21

22. Trade Finance Success • Firm: Metal Plating, Inc. • Product: Anodizing and phosphating lines • Situation: 2 Contract(s) for $3MM with Egypt. Down payment of 30% for both ($900M) requiring Standby L/C’s. • Solution: A $1MM EWCP to support issuance of Standby L/C’s.

23. Trade Finance Success • Firm: Thumb Tool & Die • Product: Plastics processing machinery and strand pelletizing equipment. • Situation: Order from China $3.7M. • Need: Pre-shipment working capital to support standby L/C and manufacture of equipment. • Solution: 2 loans: A $500K EWCP to support Standby L/C- 18 months A $1.5M EWCP Co-Guaranteed by Eximbank- 1 year

24. State Trade & Export Promotion(STEP) Grant • Created by Small Business Jobs Act of 2010, Section 1207 • Three year program • Competitive grant applied for and administered by States • Goal • increase the number of small businesses exporting • Increase value of exports for small businesses currently exporting • Deadline for proposals, one from each State, April 26, 2011 • Anticipate availability Summer 2011

25. Contact Info: John R. O’Gara Regional Manager Office of International Trade U.S. Small Business Administration U.S. Export Assistance Center 8109 E. Jefferson Ave., Suite 110 Detroit, MI 48214 John.O’Gara@trade.gov (313) 226-3670