The Senate brought some holiday cheer this week to little residents of Whoville, passing new rules that force the Export-Import Bank to loosen its purse strings when it comes to small companies. If President Bush signs the bill reauthorizing the bank's charter, as expected, sledding through the export loan process will be a lot less bumpy for companies with fewer than 500 employees.
The bank is responsible for helping companies big and small that want to sell their goods and services abroad. It provides loan guarantees and insurance so firms can get the money they need to expand operations. But small companies say they have had a tough go of getting noticed amid the piles of applications from larger, savvier players.
The last time the bank's charter came up for renewal four years ago, Congress upped the amount of loans the bank must give to small companies from 10 percent to 20 percent of its total financing. But it didn't put in place a structure to make that happen. Since 2002, the bank has never met the 20 percent goal, according to the Government Accountability Office.
That's because many underwriters used to dealing with large public companies didn't understand how to evaluate a small-business balance sheet, says James Morrison, president of the Small Business Exporters Association. Meeting the 20 percent goal "should not be that big a hurdle," he adds.
More businesses have been dipping their toes into foreign waters. Websites and E-mail make selling abroad easier. Plus, a number of free-trade agreements have relaxed rules that were particularly onerous to small players. About 97 percent of exporters are small businesses, and they account for 30 percent of exports' dollar value, notes Morrison, whose group spent a year trying to get the changes written into the bill. Now with the value of the dollar falling and foreign competition invading the home turf, small companies have even more reason to do business abroad.
For his part, John Emens, the Ex-Im Bank's senior vice president for small business, says the biggest challenge in dealing with small business is that many entrepreneurs aren't aware the bank exists. About 84 percent of the bank's deals are with small business, Emens says. Last January, the bank made many of the changes outlined in the bill. It set up a small-business division, headed by four-year veteran Emens, who reports directly to the bank president. Now about 80 people at the bank, or 20 percent of its staff, are devoted to small-business issues, he says.
In June, the bank put its application process online. The bill goes one step further, requiring that businesses receive a response within five days after applying for assistance. The bank has also allocated an extra half-billion dollars for small-business issues. Small-business financing accounted for 26 percent of the dollar value of the bank's deals in the year ended September 30, says Emens.
Still, Morrison says, it is important that the Ex-Im Bank changes are to become law. The bill ensures that if a new chairman steps in or other priorities take precedence, the bank can't easily take back these gifts.