Attributed to: Jeff Deiss, Export Finance Director West, Office of International Trade
U.S. Small Business Administration
SBA lending is poised to return to something much closer to pre-pandemic conditions. FY2021 SBA lending was amped up with lots of COVID-relief stimulus – zero fees, across-the-board 90% guarantees, and Section 1112 debt relief payments. All of those special incentives designed to get small business financing through the COVID-induced slump ended in September 2021. SBA lending in FY2022, which starts October 1, will signal a return to SBA-business-as-normal.
Most 7(a) loan programs will return to their pre-pandemic 75% loan guarantee levels. The exception will be SBA export programs – International Trade Loan, Export Express, and the Export Working Capital Program. These 3 programs each have always provided 90% guarantees, which is their unique value proposition and not tied to any temporary stimulus incentive.
International Trade Loan (ITL)
For lenders primarily focused on term loan lending, the International Trade Loan (ITL) program is the most obvious pathway for claiming a 90% guarantee on loans up to $5 million. The ITL program is similar to the Standard 7(a) program, with the same underwriting and collateral rules, and ITL confers the same authority to use delegated PLP approvals provided a first lien is being obtained on what the ITL will finance. The documentation requirements are virtually identical, except that the business must complete a brief export business plan. The core difference that entitles the lender to a 90% ITL guarantee is that the business demonstrates that it intends to increase or begin exporting (i.e., selling to foreign buyers) as a result of the loan. There is no absolute export sales threshold required provided projected exports will be meaningful to the business.
For businesses seeking smaller loans of $500,000 or less – whether term loans or revolvers – Export Express is a powerful alternative. While beginning October 1, SBA Express will permanently be able to finance such ≤ $500,000 loans, it will revert to a 50% guarantee maximum. Export Express by contrast provides 90% guarantees on loans up to $350,000, and 75% on larger loans up to $500,000 – significantly more than regular SBA Express. Just as ITL mirrors regular 7(a), Export Express and SBA Express operate on substantially similar rules, the key distinguisher being that an Export Express borrower must intend to use the loan at least in part to develop their exporting activities, as documented in an export questionnaire. The fact that SBA fees will continue in FY2022 to be zero for loans of $350,000 or less means that the closest a lender can get to enjoying the incentive-rich SBA offerings of FY2021 will be via 90% guaranteed Export Express loans of that size.
Export Working Capital Program (EWCP)
The 90% Export Working Capital Program (EWCP) lending opportunity will continue to deliver a working capital solution for larger exporters who need dedicated export lines of credit up to $5 million. The groundbreaking EWCP fee structure unveiled in FY2021 – of 0.25% for 1 year; 0.525% for 2 years; and 0.8% for 3 years – will again be offered in FY2022. And SBA’s nationwide support team of Export Finance Managers are ready to help lenders structure and gain approval for EWCP’s, whether as asset-based loans, transaction-specific loans, or when needed for standby letters of credit needs.
So if you’ve still got a case of FY2021 nostalgia with that hankering for a 90% guarantee, contact your local SBA’s Export Finance Manager to learn more about the opportunities to use SBA export loan guarantees in FY2022.