What Is SBA Export Working Capital Loan?
Export Working Capital loans are one of the many types of SBA loans available for businesses. It is meant specifically for those companies that mainly generate their revenues through exports. The loan is intended for delivering assistance and support for furthering such sales.
Examples of businesses who can apply for Export Working Capital Loan include companies that manufacture goods locally but mainly sell them to the international market.
How does SBA Export Working Capital Loan Work?
SBA Export Working Capital Loan works by delivering up to $5 million to the small business. The SBA loan works by guaranteeing over 90 percent of the loan as part of credit enhancement. The loan either matures in 12 months or less.
Small businesses can use the working capital loan for paying off the manufacturing cost of export goods. It can also be used to buy services for export or to finance account receivables accounts.
One needs to present a sufficient inventory of export goods as collateral for the loan. Any receivables that are resulted from the revenue generated from exports are also claimed by the SBA loan if the export sales were funded by the loan. Finally, for the SBA loan to be approved, one needs to show a personal guarantee from the owners of the business and any individual with more than 20 percent of shares in the company.
Advantages and Disadvantages of SBA Export Working Capital Loan
The benefits of the loan include:
- Alignment to business needs: You can choose from the three options of SBA loan depending on your funding requirement and business needs.
- Low-interest rates: Since SBA guarantees 90 percent of the loan, the interest rates are low.
- High approval rates among lenders: Owing to the low risk involved, these loans are likely to be approved.
The disadvantages of the loan include:
- The eligibility requirements are quite strict.
- The loan application process is quite tedious.
Who Qualifies for SBA Export Working Capital Loan?
To qualify for the loan, the borrower must prove that the funding taken will be solely used for supporting export sales. Moreover, your business must be running for 12 months at least. This requirement can be waived if the company in question has demonstrated expertise in their field.
How to Obtain SBA Export Working Capital Loan for My Business?
To obtain an SBA Export Working Capital loan, contact the local lender of your area and research whether they have the credentials to underwrite such loans. Find such an individual and get your loan approved before conducting export sales. Once you do so, you will have enhanced flexibility in negotiating the payment terms of the export process.
What are the Costs Associated with SBA Export Working Capital Loan?
Costs include the following fee:
- Guarantee fee of 0.25 percent (this is viable in the portion of the fund that is guaranteed)
- Late payment fee (5 percent)
- Assumption fee (1 percent)
- Early repayment fee (1 to 5 percent).