Government Programs Help Small Export Businesses
Programs for Small Export Businesses
If you’re a small-business owner and want to start exporting your products, the federal government offers programs to help you expand. Most of these programs can stand alone or work in conjunction with other programs to help increase sales.
SBA and EX-IM
The two main programs available to help small business start exporting are the Small Business Administration and the Export-Import Bank of the United States. A plethora of information on these two programs is available online, through seminars, and from one-on-one contact.
Utilizing SBA and EX-IM services
To best utilize the services of the SBA and EX-IM, businesses need both solid credit ratings and good business plans. Many colleges work hand-in-hand with the SBA to help develop solid business plans satisfying the SBA’s requirements. A business plan for the EX-IM needs to have the same elements along with a focus on the exporting plans of the company.
Both start-up businesses and expanding businesses can benefit from services offered by the SBA. These services include helping to find financing for start-up or expansion, qualifying as a minority business, acquisition of minority-based projects, and disaster assistance.
The EX-IM acts as an insurer for the seller on foreign sales. Basically once accepted, the foreign buyer submits the invoice to the EX-IM, along with the necessary information and fees. The EX-IM then runs a credit check on the buyer and determines whether it meets the criteria for financing the goods to be purchased. The EX-IM was established by the government to facilitate exports to foreign countries. Generally it will finance 90 percent of the purchase.
When working with both the EX-IM and the SBA the seller may then borrow on its SBA revolving credit line to purchase and produce the product it is selling. Once this is shipped, the seller may borrow up 75% of the total sale, if needed prior to payment from the purchaser. At this point the seller’s receipts can also be run through a factoring company.
Here’s an example of how the process works. John Doe has a contract to produce 100,000 boxes of peanuts for export to an approved country. He takes his contract, adds in shipping costs for a final amount, fills in the paperwork, and submits this along with information about the buyer to his contact at the EX-IM. The EX-IM then runs a credit check on the information. If the credit check is approved, and if John Doe is strapped for cash, he takes his paperwork to the SBA where he has an account and borrows enough money to produce and ship the peanuts.
Once the product has been shipped, John Doe takes the receipts to either the SBA or a factoring company where he can borrow up to 80 percent of the total amount, after deducting any previously borrowed amounts. He won’t want to borrow more than he needs, as he will have to pay interest on this money when he pays off the loan with the proceeds of the sale. He can then begin the process over again.
This basic overview of the services offered by the SBA and EX-IM provides an idea of some of the export-assistance options available to small businesses. Most major cities in the United States have an SBA office. The offices cover regions and the people who work there will travel throughout the region for appointments.
The EX-IM has contact numbers and seminars offered throughout the country listed on its website. Both agencies are knowledgeable about what small businesses need in order to expand into the export market, and will offer suggestions to better facilitate their services.