Most Important Considerations for Requesting SBA Export Working Capital
The program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1.5 million or 90 percent of a loan amount, whichever is less. A loan can support a single transaction or multiple sales on a revolving basis. Here are some considerations when requesting this funding.
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The program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1.5 million or 90 percent of a loan amount, whichever is less. A loan can support a single transaction or multiple sales on a revolving basis. Here are some considerations when requesting this funding.
- Must be in business for a year
You must be in business for a full year (not necessarily in exporting) at the time of application. The SBA may waive this requirement if the applicant has sufficient export trade experience.
- Must meet type of business and size requirements
The SBA has many rules about business types and size of business that must be met to apply for any of their loans. Check their website for more information.
- Proceeds must be used correctly
The proceeds of an EWCP loan must be used to finance the working capital needs associated with one or more transactions of the exporter. Proceeds may not be used to finance professional export marketing advice or services, foreign business travel, participating in trade shows or U.S. support staff overseas, except to the extent it relates directly to the transaction being financed. In addition, “proceeds may not be used” to make payments to owners, to pay delinquent withholding taxes, or to pay existing debt. You must establish that the loan will significantly expand or develop an export market, your business is currently adversely affected by import competition, or you will upgrade equipment or facilities to improve competitive position, and you must be able to provide a business plan that reasonably projects export sales sufficient to cover the loan.
- Requires cash-flow projections
You must submit cash-flow projections to support the need for the loan and the ability to repay.
- Continual progress reports
After the loan is made, the loan recipient must submit continual progress reports. The SBA does not prescribe the lender’s fees.
- Interest rates set by market conditions
The SBA does not prescribe the interest rate for the EWCP.
- Not all the money is guaranteed
The SBA guarantees up to 90 percent of an EWCP loan amount up to $1.5 million. For those applicants that meet the SBA’s credit and eligibility standards, the agency can guaranty up to 90 percent of loans (generally up to a maximum guaranty amount of $1.5 million). A borrower must give SBA a first security interest equal to 100 percent of the EWCP guaranty amount. Collateral must be located in the United States.
Source: Small Business Administration (www.sba.gov).
