Small Business Administration - international financing programs

Business America, April 15, 1985

Small Business Administration (SBA)

Resources--Annual appropriations by Congress: $3.5 billion FY-85.

REGULAR (7A) BUSINESS LOAN GUARANTEE PROGRAM

Provides financing for the establishment, operation, or expansion of a small business, including those businesses engaged in exporting. 16,942 loans in FY-84 totalled $2.5 billion.

Eligibility--Firm, together with all affiliates or branches, must: (a) qualify as "small' under SBA size standards; (b) be independently owned and operated; and (c) not be dominant in its field. Applicant must show reasonable ability to repay the loan from earnings.

Current Interest Rates and Fees--The interest rate is set by the bank but may not exceed 2.25% over the prime rate on loans with a maturity of less than 7 years and 2.75% on loans with a maturity of 7 years or more. A guarantee fee of .25% will be charged on loans with maturities of 12 months or less or 1% if the maturity exceeds 12 months. A service fee up to 2% may be charged on that portion of the loan which may require extraordinary servicing. There is no prepayment fee. Direct and immediate participation interest rates are determined quarterly.

Maturities--The maximum maturity may be up to 25 years depending upon the use of loan proceeds. Working capital loans are generally limited to 7 yeas.

Guides for Exporters--By law, SBA may not make or guarantee a loan if funds are available on reasonable terms from a bank or private sources. The SBA can guarantee 90% of a bank line of credit up to $500,000. Direct and immediate participation loans are administratively limited to $150,000 for SBA share.

EXPORT REVOLVING LINE OF CREDIT GUARANTEE PROGRAM (ERLC)

Provides pre-export financing for the manufacture or purchase of goods for sale to foreign markets and to help a small business penetrate and/or develop a foreign market. 31 loans in FY-84 totalled $8.9 million.

Eligibility--Firm, together with all affiliates or branches, must: (a) qualify as "small' under SBA size standards; (b) be independently owned and operated; and (c) not be dominant in its field. Applicant must show reasonable ability to repay the loan from earnings. Applicant must have been in business for 12 months prior to filing the application. All loans must have bank participation.

Current Interest Rates and Fees--The interest rate is set by the bank but may not exceed 2.25% over the prime rate on loans with a maturity of less than 7 years and 2.75% on loans with a maturity of 7 years or more. A guarantee fee of .25% will be charged on loans with maturities of 12 months or less or 1% if the maturity exceeds 12 months. A service fee up to 2% may be charged on that portion of the loan which may require extraordinary servicing. There is no prepayment fee. Direct and immediate participation interest rates are determined quarterly. A commitment fee of .25% (minimum $200) of the total loan will be charged to the applicant.

Maturities--The maximum maturity is 18 months. There are no provisions to extend the loan maturity beyond the 18-month period.

Guides for Exporters--Loan proceeds may not be used to purchase fixed assets, equipment or to repay debt. Proceeds are limited to labor and material costs for pre-export production; purchase of goods for foreign resale; and/or to penetrate/develop a foreign market. Small business concerns must file their loan applications with the bank, which in turn will deal with the SBA.

EX-IM/SBA COOPERATIVE PROGRAM

Allows the SBA, in cooperation with the Export-Import Bank, to participate in loans between $200,000 and $1,000,000. Effective August 30, 1984.

Eligibility--Firm, together with all affiliates or branches, must: (a) qualify as "small' under SBA size standards; (b) be independently owned and operated; and (c) not be dominant in its field. Applicant must show reasonable ability to repay the loan from earnings. Applicant must have been in business for 12 months prior to filing the application. All loans must have bank participation.

Current Interest Rates and Fees--The interest rate is set by the bank but may not exceed 2.25% over the prime rate on loans with a maturity of less than 7 years and 2.75% on loans with a maturity of 7 years or more. A guarantee fee of .25% will be charged on loans with maturities of 12 months or less or 1% if the maturity exceeds 12 months. A service fee up to 2% may be charged on that portion of the loan which may require extraordinary servicing. There is no prepayment fee. Direct and immediate participation interest rates are determined quarterly. A commitment fee of .25% (minimum $200) of the total loan will be charged to the applicant.

Maturities--The maximum maturity is 18 months. There are no provisions to extend the loan maturity beyond the 18-month period.