Expand into Global Markets with an SBA International Trade Loan

April 18, 2018

According to the Small Business Administration (SBA), “Small businesses now constitute 34% of our nation’s total export dollars, and make-up about 97.8% of all exporters.” With more than 95% of consumers living outside of the US, it makes good business sense to capitalize on external markets — and it’s clear that plenty of small businesses are already taking advantage of this opportunity. But how do you get started? 

About International Trade Loans
The SBA’s International Trade Loan (ITL) provides small businesses with export financing options that help them enter the international export market and, in the face of adverse import competition, make investments to compete overseas. Small businesses can use this type of loan for fixed assets (like equipment and machinery), working capital, or debt refinancing. The ITL program allows loans up to $5 million, subject to SBA eligibility and the bank’s underwriting guidelines.

We asked Dennis David, Senior Vice President, Small Business Administration Lending Manager for TGB to answer a few of your most asked questions about SBA International Trade Loans in this brief interview: 

What is the major difference in SBA loans for businesses with international customers?   
International business risks vary and may include political and economic risks, currency risks, transportation risks, and payment collection risks. SBA International Trade Loans are guaranteed 90% by the SBA versus the standard 75% guaranty. The increased security helps to offset the higher risks to the bank when lending to borrowers that transact business internationally.

Exporting U.S. goods and services can significantly expand market opportunities and presence for a small business when the risks are properly managed. U.S. exports are strongly encouraged by our government due to the positive impact on our economy. The higher guaranty / lower risk  an ITL loan offers is an added incentive for the bank to lend to customers that might not qualify otherwise for conventional financing. While the higher guaranty percentage of an ITL translates to higher SBA guaranty fees, (a cost to the borrower), the increased business opportunities and cash flow to the business typically far outweigh the costs.

What if I already have an SBA loan and then decide to open sales up internationally, does anything need to change with my funding?  
Nothing needs to change unless your business needs new funds for the expansion. If the expansion is projected to require additional capital investment in fixed assets such as real estate or equipment, then a new ITL loan may be the best source. If working capital is needed, other export-related SBA loan programs can be considered.

Do I need to know when starting my business whether I plan to have customers worldwide before I apply for SBA funding?   
It is always best to plan ahead and put it in writing. By informing your lender of possible export revenues, we can explore all of the funding options matching your needs, including the SBA’s ITL program. This option could potentially increase your chances of loan approval.

LEARN MORE ABOUT THE STEPS TO APPLY FOR AN SBA INTERNATIONAL TRADE LOAN
A great first step for getting your application started is to meet or speak with one of Texas Gulf Bank’s SBA Lenders. Our lenders can help you determine if your business is eligible for ITL financing, and instruct you on the next steps to access this type of loan. It is advisable to come prepared with all of the documents and information required to apply. This information can be found on the SBA’s loan application checklist by CLICKING HERE.