$6 Billion in Small Business Export Funding About to Dry Up
BY KC Ifeanyi
The Ex-Im Bank is under threat of being tapped dry and is facing imminent stoppages for financing small-business exporting.
The National Small Business Association and the Small Business Exporters Association are urging for the reauthorization of the U.S. Export-Import Bank (Ex-Im Bank) and an increased lending cap. Ex-Im Bank, which is the official export credit agency for the U.S., provided more than $6 billion in financing and insurance guarantees for American small businesses in FY 2011—a record for the Bank and an almost $1 billion increase from FY 2010.
Congress failed to enact a long-term reauthorization plan for Ex-Im Bank in September 2011 when it was up for renewal. A short-term extension was put into place and is set to expire at the end of May 2012. However, small business owners and advocates are pressing for immediate legislation to raise the lending cap to $135 million from $100 million, and for a long-term authorization of four years.
Molly Brogan, VP of Public Affairs for the National Small Business Association, attributes the lull in action for such an important lifeline for small businesses to politics, especially now in an election year. “The primary holdup is predominately coming from the very conservative wing of the GOP in the House,” she says. “Republicans don’t want to give Democrats a win, and Democrats don’t want to give Republicans a win–and this, unfortunately, is one of those programs that’s getting caught up in that. I think that people are letting their ideology lead where policy should lead.”
And that, Brogan says, can have some “serious negative impacts on the overall economy.”
“When you look at the economic downturn and the fact that exporting was the only sector that continued to grow, and the fact that Ex-Im Bank has really enhanced their focus on small business exporters, it’s problematic because so many people are chanting the mantra of small business [publicly], but privately there’s all this politicking going on and they’re willing to allow programs to completely shut down and therefore shut down the growth of exports among small businesses,” she says.
It’s that growth Ex-Im Bank has seen, Brogan says, that validates its standing as an effective catalyst for the overall economic recovery. Ex-Im Bank supported $24 billion in export sales during fiscal year 2011, as well as 290,000 U.S. jobs at more than 3,600 companies. It’s also returned close to $3.5 billion to the government since 2006.
With the Ex-Im Bank’s pipeline at max capacity for the allowable business it can facilitate and the lending cap still at $100 million, the stage is set for the likely event of running out of money in March despite being authorized through May. Of course, small business owners involved in exporting can try to secure loans through traditional lenders, but, as Brogan mentions, it can be a futile process that ultimately underscores the importance of Ex-Im Bank’s status of being a last resort.
“They’re very risky loans and a lot of banks don’t want to make them to large companies and especially to smaller companies with fewer resources to ensure that supply line and cash flow come in,” she says. “Our hope is in the next couple of weeks, leadership stands up and says, ‘We say we support small businesses and here’s how we’re actually going to do it.’”
KC IFEANYI is a freelance contributor for Inc.com and Fast Co.Create and has worked as writer, editor, and social media manager for Fortune Small Business, Time, Inc. Content Solutions, and Howcast. He lives in Brooklyn. @kcifeanyi