Small business is the backbone of the U.S. economy. It’s also key to our economic recovery. Unfortunately, we don’t hear much about the large role small business plays in this country’s exporting efforts.

Laying Out the Facts

On June 30th, Senator Mary Landrieu of Louisiana, Chair of the U.S. Senate Committee on Small Business and Entrepreneurship, held a hearing in New Orleans at the Port Authority’s headquarters. The committee hearing was entitled Keeping America Competitive: Federal Programs that Promote Small Business Exporting.

Among those testifying were four top-level U.S. government officials: Karen Gordon Mills, Administrator of the Small Business Administration; Fred Hochberg, Chairman and President of the Export-Import Bank of the United States; Ambassador Ron Kirk, the U.S. Trade Representative; and Patricia Sefcik, a Deputy Assistant Secretary of Commerce in the International Trade Administration.

A number of interesting facts and viewpoints emerged from the hearing. For example, in her opening statement Sen. Landrieu noted that small businesses make up 97 percent of U.S. exporters and 29 percent of America’s export volume. At the same time, less than one percent of the United States’ 240,000 small firms are engaged in exporting. With more than 19 federal agencies involved in trade, she said, small companies often don’t know where to turn for help, or even that help is available.

Small Business Partners & Advocates

Sen. Landrieu called for the SBA, which is under her committee’s jurisdiction, to be a more active partner in export promotion. Among the proposals included in the Small Business International Trade Enhancements Act, which she recently introduced, Sen. Landrieu recommended the creation of an SBA Associate Administrator for International Trade.

The position would report directly to the Administrator and be responsible for overseeing all SBA trade policy, programs, and coordinating efforts with other agencies. She also called for an Assistant U.S. Trade Representative who would focus solely on small business and represent their interests during trade negotiations.

In her testimony, SBA Administrator Mills noted that the agency’s 18 Senior International Trade and Finance Regional Managers based throughout the country helped facilitate many of the 3,300 loans for exporters in FY 2008. She also stated that the SBA “is working tirelessly to continue our outreach and advocacy for small business exports.”

Ex-Im’s Commitment to Small Business Exporting

Ex-Im Bank Chairman Hochberg, who previously served as Deputy Administrator of the SBA, emphasized his commitment to making small business a priority. He also said small business is key to maintaining and increasing U.S. jobs.

Chairman Hochberg further stated that for the past two fiscal years, Ex-Im has exceeded its target set by Congress. Additionally, over the past decade, 85 percent of transactions were exclusively for small business. In addition, he noted that the Ex-Im Bank already has authorized more than $2.336 billion for the support of small businesses in the first eight months of FY 2009. This figure is up more than $1 billion compared to the same time last year.

Greater Assistance for Small Business

In his testimony, Amb. Kirk stressed that “improving small business access to new overseas markets is a priority for USTR.” He said the agency has made small business concerns a top priority in trade negotiating, including customs facilitation, non-tariff barriers to trade, and intellectual property rights. He also said USTR is seeking to further expand small business representation on its statutory trade advisory committees, as well as make trade information more widely available.

At the hearing, Patricia Sefcik said to better serve small and medium-sized companies, as well as those new to exporting, the U.S. Commercial Service instituted a new user fee schedule in May 2008. Instead of different fees for each foreign market, there now is one base fee for SMEs, and one for large companies.

The Commercial Service also offers new-to-export SMEs that are first-time users of the service a 50 percent discount on several of its core matchmaking and partner search services.

Content Requirement Issues

The SBA and Ex-Im Bank, among other government organizations, offer extremely helpful programs to small business. Nevertheless, some areas could be improved. For example, several companies have expressed increasing difficulty in complying with Ex-Im Bank’s content requirements. The problem: many components, such as electronics, are made abroad and simply not available in the United States. Most of the export credit agencies with whom Ex-Im competes, such as the U.K.’s ECGD, dropped or minimized content requirements years ago.

Lowering the U.S. content requirement to more realistic levels could help many small business exporters. In Ex-Im’s short-term programs, for example, a minimum of 50 percent is typically required. In Ex-Im’s medium-term programs, only U.S. content is eligible. In all cases, U.S. exporters’ profits are not considered part of the U.S. content. A meaningful improvement could be achieved by simply modifying the calculation to include the exporters’ gross profit.

Interestingly, the SBA, a sister agency in many ways, has no such local content requirement. This presents a major inconsistency within the federal government.

Other Issues at Hand

The SBA offers two relevant export programs: the line of credit program (Export Working Capital Program), and Export Express, a simpler program for smaller loans, including lines of credit and term loans.

Under the EWCP, the maximum export value is just $2 million. As a result, for most deals the exporter has to move up to Ex-Im Bank, where the exporter is then subject to constraining content requirements.

Export Express has a maximum loan of just $250,000, and the application process is quicker and easier. Plus, in this program, lenders have delegated authority to approve loans without prior review by the SBA of the credit.

Importantly, SBA’s EWCP loans top out at $2 million; yet many exporters may have larger needs. A doubling of SBA’s EWCP loan to $4 million would greatly remedy this problem.

Even though Ex-Im offers loans exceeding $2 million, Ex-Im’s programs do not reach nearly the number of small businesses that the SBA can reach. Thus, a doubling of the Export Express maximum loan to $500,000 would be very helpful.

The international department of many banks find small loans too costly and cumbersome. The SBA departments of these same banks, however, will underwrite the Export Express loans, utilizing a simple expedited process.

Our understanding is that the most widely used and extremely helpful service offered by the federal government is Ex-Im’s short-term credit insurance. Thousands of exporters use this insurance. Yet, once again the 50 percent minimum U.S. content requirement is a significant impediment. Many deals just are not possible as a result of this steep content requirement.

While private insurers have no such content restrictions, they unfortunately have little interest in small exporters with relatively small volume. Offering some content relief for Ex-Im Bank could make a big difference to the performance of small business.

Eugene Schreiber is Managing Director of the World Trade Center of New Orleans. For more information, contact Eugene at 504.529.1601 ext. 227 or This email address is being protected from spambots. You need JavaScript enabled to view it. . This article appeared in Impact Analysis, July-August 2009.

Eugene Schreiber
About The Author Eugene Schreiber
Eugene Schreiber is former Managing Director of the World Trade Center of New Orleans.

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