Today, we live in a highly competitive global business environment – an environment where businesses of all types must consistently develop new strategies to outsell their competitors beyond domestic market borders. While some companies continue to serve regional or national domestic markets, the evolving global economy has heightened awareness among business owners of the significant growth opportunities available via exporting their products and services overseas. Expanding into overseas markets is not a new concept by any means, but it is a significant strategy shift for many smaller business owners who are already capital constrained and believe exporting products and services can only be successfully accomplished by large companies. On the contrary, the majority of U.S. exporters are actually small businesses.
This strategy shift presents opportunities for lenders to provide new and innovative financing options to customers and prospects by improving their overall competitive position in global markets. One vehicle is through a little known program created by the Small Business Administration (SBA) called the International Trade Loan (ITL). The ITL program assists borrowers impacted by import competition and those seeking to enter the export market or expanding existing export sales.
The ITL program can finance a combination of debt refinancing, working capital, and fixed assets with the benefit of the SBA’s maximum 90% guaranty on the full loan amount.
A common misconception is that the ITL program is limited to traditional exporters (manufacturers or distributers); however, many service companies can qualify such as IT Consulting Firms, Web Developers, and even Hotels with significant tourist volume. A business can even qualify if its products are exported indirectly through its customers!
As lenders, we are all facing hyper-competitive forces in the market. The SBA’s ITL program provides the unique ability to minimize lending risk and assist borrowers with meeting their growth objectives.
To follow is a brief “primer” for lenders on the SBA’s International Trade Loan program.
Highlights of SBA’s ITL Program:
- $5.0 million in total financing.
- SBA Guaranty of 90% of the loan amount – up to $4.5 million.
- 7-10 year term/amortization for working capital.
- Up to a 25-year term/amortization on real estate.
- Capital equipment financing up to 10 years.
Lender Eligibility and Interest Rates:
- Any approved SBA 7(a) lender is eligible to offer the ITL program.
- Lenders must take a first lien position (or first mortgage) on assets financed.
- Interest rates are negotiated between the lender and the borrower and are subject to SBA’s statutory limits.
- Applicants (borrowers) must meet the same eligibility requirements as the SBA’s standard 7(a) Loan Program.
- Fixed assets purchased must be located in the United States.
- All applicants must demonstrate, via a detailed business plan, how utilization of the ITL program will allow their business to increase exports or overcome import competition and improve its overall competitive position in the global market place.
Of course, there’s the other side of the relationship – the buyers. In order to qualify for this program, buyers must be located in countries where the Export-Import Bank of the U.S. can provide financial assistance.
The question is: Do you know a company involved in or impacted by International Trade that may be in need of such a financing program?
To learn more about the International Trade Loan program, please give the IFS team a call.