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PRACTICAL MATTERS; Staying Small, Going Global:
How Uncle Sam Can Help

By BERNARD STAMLER (NEW YORK TIMES)
Published: September 20, 2005

THE government wants to help the little guy sell more goods not just in America but around the world. And many loan-guarantee and insurance programs exist to give small businesses more incentives to push their products abroad.

Just ask Paul Ibañez about his shake tables. His company, Anco Engineers of Boulder, Colo., employs five people. It produces shake tables, which are machines that simulate earthquakes to test the structural integrity of small-scale building models. It sells them worldwide.

Last year, Anco received a contract to sell a shake table to a government agency in Romania. The price was $1.1 million, with a short delivery date.

To build the table, Anco needed about $600,000 in working capital, half of which it needed to borrow. So Mr. Ibañez went to some big commercial banks, seeking a $300,000 line of credit.

''They strung me along for weeks,'' he said, before deciding they did not want to be bothered with so modest a sum. Ditto for ''several other lending companies,'' all of which wanted to charge enormous fees.

Ultimately, Mr. Ibañez turned to the Small Business Administration. Besides its general loan guarantee program, it also offers loan guarantees for those involved in international trade.

''They worked with incredible speed,'' Mr. Ibañez said of the private lender recommended by the Small Business Administration. ''Their fees were low and they were very professional.'' They gave him his line of credit, and Anco delivered the table on time, while the United States made a tiny dent in its balance-of-payments deficit.

Which was exactly the point in this era of the North American Free Trade Agreement, Central American Free Trade Agreement and globalization in general, when foreign trade is important to the American economy. About $300 billion in small- and medium-size exports contribute to the economy annually, said James Morrison, president of the Small Business Exporters Association of the United States.

But most small businesses still shy away from foreign trade, primarily because ''there's no one to tell them what to do,'' said Manuel A. Rosales, the associate administrator for the Small Business Administration's Office of International Trade, which oversees the program used by Anco.

To help, the Commerce Department has established 108 Export Assistance Centers around the country. The Small Business Administration has a staff person in about 20 of them.

Mr. Rosales said the guarantees generally covered up to 90 percent of a loan's value, higher than the 75 percent loan guarantees generally offered for domestic loans, he said. Although the maximum amount guaranteed is normally $1.5 million, under certain circumstances, through an agreement with the Export-Import Bank, the nation's export-credit agency, the guarantee can go higher, up to 90 percent of a $2 million loan.

Ex-Im runs programs that aim to ease the purchase of American goods and services abroad. The most important is export credit insurance, which encourages lenders to provide money to American exporters who want to extend credit to their overseas customers by letting them buy now and pay later, called an open account. Traditionally, lenders shy away from such transactions because small-business borrowers have little or no collateral except their foreign receivables.

In such cases, ''small businesses can get up to 95 percent coverage, with no deductible,'' said James H. Lambright, acting chairman of the Export-Import Bank. The insurance is generally good for sales on terms of up to 180 days, although 360-day policies are also available under exceptional circumstances.

Besides its joint loan guarantee program with the Small Business Administration, Ex-Im has its own program guaranteeing loans to American businesses for cash flow needs related to exports. It also guarantees and insures medium-term and long-term loans to foreign buyers of American products. By law, the bank must reserve 20 percent of the total value of its financing to small businesses.

The Reinke Manufacturing Company of Deshler, Neb., has worked with Ex-Im Bank in ''several different ways,'' said Bob Frank, the company's vice president for international sales.

For example, Reinke, which manufactures irrigation equipment, sells to distributors on open account outside the United States. ''About 25 to 30 percent of these sales are insured by Ex-Im,'' Mr. Frank said, totaling up to $3 million annually.

Another government source for help with international transactions is the Overseas Private Investment Corporation, or OPIC. It provides loan guarantees and offers political risk insurance for investors involved in projects in developing countries. To qualify, a business must be 25 percent American-owned.

A division of OPIC is devoted exclusively to small- and medium-size businesses. Last year, it provided an $8.5 million investment guarantee to a Botswana company, the Kalahari Gas Corporation, so it could borrow money to buy equipment for drilling natural-gas wells. Kalahari is partly owned by Covalent Energy Inc., in Arlington, Va.

Covalent went to OPIC, said John Kelafant, its president, primarily because loan terms, made by a private American lender and guaranteed by OPIC, were much better than those that had been discussed with lenders in Africa.

The federal government's efforts to support small-business exporters are not without critics. Despite claims by agencies that they are committed to small businesses, ''there's still a temptation to go with the bigger deal,'' said Mr. Morrison, of the Small Business Exporters Association. ''That's always going to be an issue with Ex-Im and OPIC.'' Critics in Congress have charged repeatedly in recent years that Ex-Im has not lived up to its 20 percent small-business requirement.

An Ex-Im spokeswoman, Marianna Ohe, said that sometimes a large deal or two would cause the total dollar amount of the bank's small-business transactions to dip below 20 percent of the total.

But small businesses still find the government's international trade programs useful.

''We were on the verge of defaulting on our contract before we got involved with the Small Business Administration,'' said Mr. Ibañez, of Anco Engineers. ''They saved us.''

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