By Michael F. Carmichael
Jan. 20, 2011
How’s business? Finally starting to do okay? Interested in opening up a new market? Think about exporting.
It’s not all that hard; you can even get help from the government — which has 17 agencies that want you to succeed as much as you do. Even better, there’s financing available — from getting started to getting paid — much of which is guaranteed by the U.S. Small Business Administration.
John O’Gara is a regional manager of the SBA. He says that overall, “Exports are up. It’s probably the only bright spot in the whole economic picture.”
A positive trend
The latest figures available show that U.S. exports in October rose 3.2 percent over September to $158.7 billion. That decreased the trade deficit by 13 percent to $38.7 billion compared with September. For the year exports were up 17 percent to $1,507 billion.
“The government has a heightened effort to promoting exports,” O’Gara continues. “And, it’s helped along with a relatively weak dollar so our products are more affordable in other countries. That’s a competitive advantage. We’re doing pretty well, but,” he cautions, “we can always do better.”
That’s where American small businesses play a part.
And, right now, they’re not doing their part. “Only about 1 to 2 percent of small businesses export,” says O’Gara. The reality is that the vast majority of exporting is done by large companies, and even then it follows the 80-20 rule: “80 percent of our exporting is done by 20 percent of the companies,” O’Gara continues. “There’s a lot of room for improvement.
“There’s a lot of opportunity for small business, but for a number of reasons — fear of the unknown, ‘it’s foreign,’ ‘how do I get paid?’ — they don’t do it. We at the SBA think that small businesses owe it to themselves to find out what kind of potential they have for exporting.”
Who’s a good candidate?
Are you and your business ready to take the plunge into uncharted waters? “First off,” says O’Gara, “if you have a product that has acceptance here in the States, even if it takes some modifications, chances are you’ve got an excellent opportunity in countries overseas.”
|
“The second thing,” O’Gara continues, “is that top management, the owners, have to have a commitment to developing the export business. It’s not get-rich-quick. It’s very much a long-term effort to build an international business. That commitment includes not only time but also money to make that happen.”
Enter Uncle Sam
That’s where O’Gara and the SBA come in. “Typically, small businesses have difficulty accessing capital — I think that can be said of all small businesses in general right now — but even before the recession the problem was to get a bank to finance an exporter, something that was simply difficult. Again, the problem was those perceptions. The big banks have a trade services division, but smaller banks want to ensure their borrower is going to get paid.” In other words, the smaller banks usually don’t have the experience in dealing with the export market process — no matter what the size of their customer.
O’Gara amplifies: “If I’m a bank and I issue you a line of credit based on your inventory and receivables, I usually exclude your foreign receivables from that borrowing base. If you default and have a foreign receivable, how do I, the bank, go over to Germany or wherever and collect $15,000 here and $20,000 there.”
The Small Business Administration, as well as the Export Import Bank of the United States (or Ex-Im Bank), provides tools to make banks more comfortable in extending financing to clients who are exporting.