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Revised International Trade Loans

International Trade LoansA newly revised International Trade Loan by the US Small Business Administration can provide small businesses with enhanced export financing options for their export transactions.

The International trade Loan was set up to help small businesses enter into international markets or expand their current export efforts. It helps those businesses affected by import competition, and makes the investments necessary to better compete. It offers a combination of fixed asset, working capital financing and debt refinancing. The maximum loan amount is $5,000,000 in total financing. The guarantee coverage is 90 percent.

Term of the Loan

Typically, the maturities on the working capital portion of the loan are typically limited to 10 years. Unless the useful life of equipment exceeds 10 years, the maturities are up to 10 years as well. If a loan has a mixed use of fixed asset and working capital, the financing has a blended-average maturity.

Interest Rates for the Loan

As published in the “Wall Street Journal,” lenders may charge between 2.25 to 2.75 percent above the prime rate. This depends on the maturity of the loan. If your loan is $50,000 or less, the interest rates can be slightly higher.

Exporter Eligibility

Applicants for the revised loan must meet the same eligibility requirements as for the SBA’s standard 7(a) Loan Program. They must also establish one or more of the following reasons for the loan proving that the loan will:

  • Allow the business to expand
  • Develop or expand market
  • Demonstrate that the business has been adversely affected by import competition and that the ITL will allow the business to improve its competitive position.

Using Proceeds for the Loan

The proceeds of the facilities and equipment portion of the loan may be used to acquire, construct, renovate, modernize, improve or expand facilities or equipment in the U.S. to produce goods or services involved in international trade. Working capital is allowable for the proceeds. The proceeds may also be used for refinancing of debt structured with unreasonable terms and conditions, including debts qualifying for refinancing under the standard loan program.

Collateral Requirements

Collateral that is located in the US, including its territories and possessions, is acceptable. It requires first lien on property or equipment financed by the ITL or on other assets of the business. An ITL, however can be secured by a second lien position if it is determined by the SBA that there is adequate assurance of loan payment. If appropriate, additional collateral, including personal guaranties and those assets not financed with ITL proceeds may be required.

Application Process

If you are a small business exporter who would like an ITL, you must apply to an SBA-participating lender. An Application for Business Loan or SBA Form 4, including all exhibits must be submitted by the lender to the SBA. If you are a small business exporter who wants to see if they qualify as adversely impacted from import competition, you need to submit supporting documentation that explains that impact. You must also include a plan with projections that explains how the loan will improve the business’ competitive position.

 

 
 
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