Small Business Administration export lending resumes

The US Small Business Administration is “back in business” — making export loans to small companies — after a “team effort” push, that included the Small Business Exporters Association, convinced Congress to restore the programs. SBA provides short-term and export working capital loans to small business exporters. The agency had suspended nearly all of its lending in January, when it ran out of Congressionally-approved funds. Congress now has agreed to restart SBA’s loan programs with fresh funds. SBA export lending appears likely to be capped at $1.66 million per loan, with a maximum federal guarantee of $1.5 million per loan. The agency had cut back to a $750,000 per loan cap in December of 2003, before shutting down altogether in January. Congress rejected the agency’s request to make the $750,000 cap permanent. However, borrowers will now pay an additional fee for SBA loan guarantees above $1 million.

SBA also had asked Congress to lower the federal guarantee on all of its lending from 75-85% to 50%. Thanks to hard work by the Small Business Exporters Association and others, Congress also turned back this request, although it did permit SBA to test the 50% guarantee level in a pilot program using SBA’s various “Express” windows, including the “Export Express” program.

The new legislation keeps SBA export lending alive through early June, during which time Congress will work on a longer range solution.

The Small Business Exporters Association is fairly satisfied with this outcome. We had urged Congress to maintain these export lending programs, which are vital to many smaller exporters, and not to lower the federal guarantee percentage, since few if any banks would make export loans at the lower guarantee level. On those points we succeeded. (We will be surprised if the “Export Express” program finds many takers at the 50% guarantee level.) However, the longer-term picture at SBA remains uncertain. We will continue to monitor the situation.