Financing assistance is a vital part of the U.S. economy. Many small businesses may feel that they are too small or cannot afford to compete in the global market. This is where export financing becomes an option. Deciding which financing option to pursue can be a daunting choice, so we have provided a few tips to help.
The Small Business Administration (SBA) can help those in the export business to find private lenders. The agency does not lend money itself but has a set of guidelines for the lenders it approves. The SBA guarantees these loans and has an established set of eligibility requirements. These requirements range from income, character and location of the business.
Positive aspects of these loans include low down payment and no required collateral for some loans. Negative factors include the need for business equity and requirements that the business not receive funds from other lenders.
U.S. Export-Import Bank
As a federal credit agency of the U.S., the Export-Import Bank (Ex-Im) guarantees financing to those export traders who do not qualify for loans with private lenders. The agency does very little lending itself, but pushes the deals through to private lenders after approval. Ex-Im lending is backed by the U.S. government and can provide up to $100 billion in export credits.
This financial institution is a good option if a business has been unable to finance their exports, due to economic, geo-political, or commercial risks. One huge downside with this type of lending is the requirement that 51% of the export product’s content must be produced in the U.S. This high percentage severely limits the amounts and types of products allowed to be exported.
Overseas Private Investment Corporation
The Overseas Private Investment Corporation (OPIC) is an agency that helps U.S. businesses invest overseas. The concentration for this company is primarily in emerging marketing. The loan terms are medium-to long-term and will guarantee a stake in a foreign market.
This organization is a good option if a business is wanting to develop a market within a country where commercial lenders will not approve their loans. OPIC provides exporters’ insurance, which is a very positive cost-saving measure. The biggest downside of this agency is its limiting geographic and economic markets.
Grants and Contracts
In addition to the popular above-mentioned financing choices, businesses also have the option for grants and contract opportunities. Grants and contracts both require a long application process and they also have restrictions. Depending on the organization, it can be used for energy, transportation, products specific to emerging economies, and environmental aspects.
The amounts available vary significantly, from $2,500 to $1 million per grant. Either of these options are strong choices for growing your business, but the downside is the extremely competitive nature of actually receiving the money. As one can imagine, the process is long, in-depth, and the chances of receiving a grant or contract frankly aren’t very high.
Now Is the Time to Export!
There has not been a better global market for exporting in years. The dawn of 2018 has revealed a calm political and economic environment in all the major global markets. The U.S., France, Latin America, and all of Asia currently have growing regional economies. If your business has ever considered expanding to the global market, experts are recommending doing so soon. The markets will continue to grow for the next few years and can be just what your business needs!
If you are looking into trade financing, Drake Finance is an excellent choice. We serve manufacturers and exporters of products made in the U.S. When you choose us, we will provide you with risk mitigation tools, guidance for export processing, as well as advice on how you can pass your financial costs onto customers. Drake Finance does not participate in risky cash payment or irrevocable Letters of Credit.
We will make sure that your business will see growth in the global market. Your business can also offer our financing to buyers to most countries in the world. All export transactions are reviewed by international trade finance experts, so you can be confident in the work we accomplish for you!