U.S. Small Business Administration
Just like domestic expansion; expansion into international markets requires capital. You need funds for inventory, receivables and promotional activities. Plus, if you intend to open foreign branches, you will also need capital for facilities and related operating costs.
Most owners of small business expanding overseas are unable to generate the additional funds themselves and must turn to outside financing. Your first stop should be your own bank. If it is a large one, it will have its own international department or loan officer responsible for handling foreign transactions. Banks not involved in foreign trade usually have correspondent relationships with banks that are.
When choosing a bank, you should ask what international services it provides. Services such as short-term and medium-term export financing, foreign credit and business information, commercial letters of credit, collection or discount export drafts, and purchase and sale of foreign exchange are very valuable when doing business overseas. In addition, many banks conduct market surveys and prepare trade reports and lists of prospective foreign distributors. They may also serve as advisers to companies contemplating business overseas.
If you are unable to find a bank that meets your needs, the federal government provides financial assistance through a number of agencies:
The Export-Import Bank of the United States (Eximbank), whose primary purpose is to facilitate the export of American products and services through its various financing programs. Those programs include direct loans, guarantees and discount loans. Eximbank also arranges financing for the overseas buyer and, consequently, underwrites the transaction.
The U.S. Small Business Administration Export Loan Guarantee Program, which guarantees up to $500,000 of commercial financing to companies that want to establish or expand their export operations. To qualify, you must meet the SBA criteria for a small business. Qualification requirements vary according to industry. (See your local SBA office for details.) In addition, the program also offers an Export Revolving Line of Credit, which can be used to finance pre-export production; purchase labor, supplies, materials and inventory; and fund marketing development.
The Overseas Private Investment Corporation (OPIC), which provides medium- to long-range financing for U.S. business ventures in some 100 developing countries through its direct loan and guaranteed loans programs. OPIC will make direct loans of $100,000 to $400,000 for projects sponsored by or involving U.S. small businesses (those having annual revenues of less than $22 million or net worth of less than $4 million). OPIC will also guarantee loans from U.S. financial institutions for projects with significant U.S. involvement.
The Private Export Funding Corporation (PEFCO), which is a private corporation owned by a group of commercial banks that works with Eximbank in using private capital to finance U.S. exports. Their loans are made to foreign borrowers who need medium- to long-term financing to purchase U.S. goods and services.
* Excerpted or reprinted with permission from Small Business Success, Volume 1, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.