United States General Accounting Office
GAO Report to Congressional Requesters
February 1997
EXPORT FINANCE
Federal Efforts to
Support Working
Capital Needs of Small
Business
GAO/NSIAD-97-20
United States
GAO General Accounting Office
Washington, D.C. 20548
National Security and
International Affairs Division
B-275002
February 13, 1997
The Honorable Christopher S. Bond
Chairman, Committee on Small Business
United States Senate
The Honorable Donald A. Manzullo
Chairman, Subcommittee on Procurement, Exports,
and Business Opportunities
Committee on Small Business
House of Representatives
As you requested, we reviewed the current government programs that
provide export working capital for small- and medium-sized enterprises
(SME). This report (1) describes federal and state approaches for providing
export working capital, (2) assesses federal efforts to harmonize the
export working capital programs of the U.S. Export-Import Bank
(Eximbank) and the Small Business Administration (SBA), (3) discusses
issues associated with increasing the number of cooperative agreements
with lenders and devolving greater responsibility for export working
capital programs to the states, and (4) examines the potential implications
of transferring SBA’s export working capital program to Eximbank.
According to the Trade Promotion Coordinating Committee (TPCC),1 one of
Background the greatest obstacles to increased U.S. exports faced by SMEs is the lack
of sufficient working capital. Working capital is used to finance the
manufacture or purchase of goods and services. Eximbank and SBA have
programs designed to increase the availability of export working capital to
SMEs from the private sector by encouraging greater lender participation in
export financing. These programs provide loan repayment guarantees that
reduce the risk associated with such loans. Some states also have
programs to assist SMEs in obtaining working capital.
Eximbank facilitates export financing through its Working Capital
Guarantee Program, which is authorized by the Export Trading Company
Act of 1982 (P.L. 97-290, Sec. 206, Oct. 8, 1982). During fiscal year 1995,
Eximbank guaranteed almost $302 million in export working capital loans,
which represented about 3 percent of Eximbank’s total dollar
authorizations for the year. Over 97 percent of the exporters assisted by
1
TPCC is an interagency group responsible for developing and coordinating U.S. export promotion
programs.
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Eximbank through the program during fiscal year 1995 were self-certified
as small businesses, as defined by SBA regulations (13 C.F.R. Part 121).
SBA developed its Export Working Capital Program (formerly known as the
Export Revolving Line of Credit) in response to a requirement in the Small
Business Export Expansion Act of 1980 (P.L. 96-481, Sec. 112, Oct. 21,
1980). SBA’s program falls within the statutory authority of the agency’s
regular business loan guarantee program, known as the 7(a) program.2
Under the 7(a) program, SBA guarantees private lender loans to small
businesses that have been unable to obtain financing. During fiscal
year 1995, SBA guaranteed about $69 million in export working capital
loans, which represented less than 1 percent of SBA’s total 7(a) program.
All exporters assisted through SBA must qualify under the agency’s
definition of a small business. During fiscal year 1995, over 90 percent of
the businesses assisted through SBA’s working capital program had less
than 50 employees.
In its 1993 report to Congress, TPCC made a series of recommendations to
increase the effectiveness of U.S. export financing programs.3 One
recommendation called for the establishment of one-stop shops, that is,
the U.S. Export Assistance Centers (USEAC), as a single point of contact for
all federal export promotion and finance programs.4 Another
recommendation called for federal agencies to encourage qualified state or
local export finance entities to enter into cofinancing arrangements in
which risk is shared. A third recommendation called for streamlining and
harmonizing key features of Eximbank and SBA’s working capital
guarantee programs to make them more customer-focused and take
advantage of the agencies’ comparative strengths. According to TPCC,
harmonization was to give SMEs access to working capital through a
broader nationwide network of lenders on a more consistent, efficient,
and effective basis. Key features to be harmonized included developing
uniform applications, accompanying documentation, and underwriting
standards. Harmonization was also to include a market segmentation plan.
2
This program is named after section 7(a) of the Small Business Act (15 U.S.C. 636).
3
Toward a National Export Strategy, Trade Promotion Coordinating Committee, September 1993.
4
The Department of Commerce, Eximbank, and SBA have assumed primary responsibility for
establishing and operating these centers. For more information on the implementation of USEACs, see
U.S. Export Assistance Centers: Customer Service Enhanced, But Potential to Improve Operations
Exists (GAO/T-NSIAD-96-213, July 25, 1996).
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Eximbank and SBA have programs that provide guarantees to facilitate
Results in Brief export working capital loans for small- and medium-sized enterprises;
however, the agencies emphasize different delivery approaches. Eximbank
implements its program primarily through a specific division within the
agency and a network of lending institutions that have been delegated with
authority for approving the agency’s working capital guarantees. SBA, on
the other hand, relies primarily on specialists with lending authority that it
has assigned to the USEAC network and on the agency’s 69 district offices to
implement its working capital program. Also, both Eximbank and SBA have
established other arrangements with state and local offices to help
administer their working capital programs. In addition, eight states have
export guarantee programs specifically geared to assisting small
businesses.5 The state programs provide a wide range of funds, staff, and
activity levels involving export financing for SMEs. For example, in fiscal
year 1996, the value of loans guaranteed ranged from $55,000 in Georgia to
$39.5 million in California.
Eximbank and SBA have harmonized certain aspects of their export
working capital guarantee programs, including the guarantee coverage,
application form, and initial application fee. While harmonization was
underway, Eximbank and SBA made other changes aimed at improving
their own export finance assistance programs for small businesses. These
efforts to harmonize and improve their programs appear to have helped
simplify the lending process, increase the number and value of loans
guaranteed, and expand the number of exporters and lenders who
participate in the programs. However, some program differences remain.
For example, there are differences in Eximbank’s and SBA’s credit
qualification requirements and fees for processing guarantees.
To leverage federal funds and provide SMEs with more export financing,
Eximbank and SBA have set up cooperative arrangements with both the
private and public sectors. Eximbank also has a pilot program underway
that delegates lending authority to six state export finance organizations.6
However, the potential to further expand the use of such cooperative
agreements would be affected by various factors, such as the need for
oversight and monitoring obligations at the federal level, legal prohibitions
that may prevent states from offering state-backed guarantees, and varying
amounts of state commitment to the area of export financing.
5
States that provide export working capital guarantees are California, Florida, Georgia, Kansas,
Maryland, Massachusetts, Minnesota, and South Carolina.
6
The six states in Eximbank’s pilot program are California, Florida, Georgia, Maryland, Massachusetts,
and Minnesota.
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TPCC proposed transferring SBA’s Export Working Capital Program to
Eximbank if harmonization efforts were unsatisfactory. We found that
Eximbank and SBA have made progress in harmonizing their programs. We
identified a number of factors that would need to be considered before
any transfer of program responsibility from SBA to Eximbank were to take
place. These factors are (1) some exporters currently served by SBA may
not be served by the Eximbank, (2) the Eximbank and its network of
delegated authority lenders may not be accessible to some SMEs currently
assisted by SBA, and (3) the consolidation of the programs may lead to only
minimal cost savings.
Eximbank and SBA emphasize different delivery approaches for facilitating
Eximbank, SBA, and their programs. Eximbank relies on its U.S. Division and network of
States Use Various delegated authority lenders, whereas SBA relies primarily on staff with
Delivery Approaches lending authority it has assigned to the USEACs and on its network of
district offices. Eight states also have export finance programs that
provide working capital guarantees. Levels of financing and contractual
arrangements for these guarantees vary considerably among the states.
Eximbank Relies Heavily Eximbank’s U.S. Division, staffed with six loan officers and one vice
on Delegating Authority to president, has primary responsibility for administering the Working
Lenders Capital Guarantee Program as well as some marketing responsibility. This
division processed all the agency’s export working capital guarantees until
the beginning of fiscal year 1995. Over the past couple of years, the
division has expanded its outreach to SMEs through its Delegated Authority
Program. Under this program, a private lender and Eximbank enter into an
agreement that allows the lender to approve Eximbank guaranteed loans
to exporters without first having to submit individual applications to
Eximbank for approval. During fiscal year 1996, delegated authority
lenders approved 192 loans, 69 percent of the agency’s export working
capital guarantee transactions. These transactions represented 55 percent
of the $413 million in loans guaranteed under Eximbank’s program. (See
app. I for a map showing the locations of Eximbank’s U.S. Division and
delegated authority lenders.)
Although the U.S. Division and delegated authority lenders are central to
Eximbank’s Working Capital Guarantee Program, the agency has other
resources and arrangements for marketing and supporting the program.
These include the following:
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• Eximbank’s Business Development Division promotes and markets the
agency’s small business programs, including the Working Capital
Guarantee Program. This group includes Washington-based staff and five
regional offices,7 four of which are collocated within USEACs. According to
the Eximbank official responsible for regional office operations, the
agency’s limited regional staff of 21 employees is expected to focus
primarily on increasing the participation of banks, brokers, and other
intermediaries in these programs.
• Eximbank has established partnerships with state and local government
offices and private sector organizations under its City/State Program.
These partners are to act as liaisons with their export communities,
market Eximbank programs, and submit applications on behalf of small
businesses. During fiscal year 1995, however, only 8 of Eximbank’s
31 partners reported working capital activity under the program. Effective
in April 1996, Eximbank initiated a pilot program to strengthen its program
by paying its local partners a packaging fee for applications submitted
directly to the agency and a finder’s fee for referrals to delegated authority
lenders that result in working capital loans. In September 1996, Eximbank
initiated another pilot program to delegate authority for approving
guarantees to six state partners.
• Eximbank has an agreement with the Private Export Funding Corporation,
a private consortium of commercial banks and other users of Eximbank,
in which the company (1) acts as the lender of last resort for exporters
that obtain a preliminary working capital commitment from Eximbank but
are unable to obtain financing from commercial sources and (2) purchases
Working Capital Guarantee Program loans made by small and regional
banks that require help in supporting small business exporters.
Under the Working Capital Guarantee Program, Eximbank guaranteed
179 loans valued at almost $302 million during fiscal year 1995. As of
June 1996, the default rate for exporters whose loans were guaranteed
during fiscal year 1995 was 2.2 percent (4 defaults out of 179). The agency
estimated that the cost associated with administering the program during
fiscal year 1995 was about $912,000. This estimate included the costs for
compensation, benefits, and overhead attributable to the U.S. Division.
SBA Relies on USEACs Although SBA’s Office of International Trade is responsible for overseeing
and District Offices its Export Working Capital Program, the agency relies primarily on USEACs
and their district office network to implement the program. SBA has staffed
the 15 USEACs with 20 international trade and finance specialists. These
7
Eximbank’s regional offices are located in Chicago, Houston, Long Beach, Miami, and New York.
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specialists help SBA’s 69 district offices reach their Export Working Capital
Program goals by marketing and promoting the program and working
directly with the exporting and lender communities to structure loans and
package applications for loan guarantees. Applications are sent to 1 of
25 district offices designated as export working capital processing centers,
where they are reviewed and approved or rejected. An SBA official
estimated that the specialists’ spend about 85 percent of their time on the
program and the remaining 15 percent on other trade-related activities.
(See app. I for a map showing the locations of the USEACs and SBA district
offices.)
Even though SBA works primarily through USEACs and district offices, it has
other resources and arrangements that help market and support the
program. These include the following:
• SBA has coguarantee agreements with California, Kansas, and Florida.
Under these agreements, SBA and the states guarantee a portion of the
export working capital loan and share, on a proportional basis, any
resulting losses and recoveries. California has been by far the most active
state, with 25 export working capital loans valued at $8.8 million.
• SBA has agreements with at least 26 local private sector entities to
encourage them to act as packaging intermediaries for its Export Working
Capital Program.8
• SBA uses staff from its small business development centers, about 30 of
which have established separate international trade centers, to help
market its financial products, including export working capital guarantees.
• SBA’s Preferred Lender Program, which is part of its Export Working
Capital Program,9 is similar to Eximbank’s Delegated Authority Program.
However, according to an SBA official, only 1 of about 12 preferred lenders
had provided export financing under the program, as of August 1996.10
Under the Export Working Capital Program, SBA guaranteed 190 loans
valued at about $69 million during fiscal year 1995. As of August 1996, the
default rate for exporters whose loans were guaranteed during fiscal
year 1995 was 1.6 percent (3 defaults out of 190). The agency estimated
8
These agreements are separate from SBA’s packaging intermediaries for its domestic programs.
9
This program is separate from SBA’s Preferred Lender Program for its domestic programs.
10
Although the guarantee rate for Eximbank’s program has been 90 percent, the guarantee rate for
SBA’s Preferred Lender Program was 70 percent during fiscal year 1995 and legislatively mandated at
75 percent during fiscal year 1996. According to SBA, its lower guarantee rate was not as attractive to
lenders that could obtain a 90-percent rate from Eximbank. As of fiscal year 1997, SBA’s guarantee rate
has been legislatively restored to 90 percent for its entire Export Working Capital Program.
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that costs associated with administering its program during fiscal year
1995 totaled $461,667. This estimate includes an allocated portion of SBA’s
costs related to staffing and supporting USEACs.
Eight State Programs We surveyed 24 states and 1 U.S. territory initially identified as having
Identified as Providing export finance programs and found 8 states that provide export working
Working Capital capital guarantees for SMEs.11 The eight state programs were designed
specifically to service small businesses. As shown in table 1, these state
Guarantees programs varied greatly in their level of staff resources, available funding
for guarantees, and program activity.
Table 1: Staff Resources, Available
Funding, and Loans Guaranteed for Dollars in thousands
States Identified With Export Working Number of Leveraged Number of Value of
Capital Guarantee Funds for Fiscal staff funding loans loans
Year 1996 State resourcesa levelb guaranteed guaranteed
California 12 $38,908 91 $39,498
Maryland 3 50,000c 15 15,900
Massachusetts 1 30,000 2 1,000
Florida 4 20,000 25 3,588d
Minnesota 3 3,674 10 1,550
Kansas 1 2,300 6 2,542
Georgia 2 2,000 1 55
South Carolina 1 850 0 0
a
The number of staff resources does not necessarily represent full-time equivalents.
b
The leveraged funding level is calculated by multiplying the allocated funding level by the
number of times the fund may be leveraged. This amount represents the maximum amount of
guarantees that may be outstanding at any one time.
c
This fund is available for domestic loans as well as export loan guarantees.
d
This amount represents the state’s total liability associated with the 25 loans guaranteed during
fiscal year 1996.
In addition, our survey identified programs in nine states and the one U.S.
territory that provided export finance assistance to small companies but
did not offer export-related working capital guarantees. Services provided
by these programs included export finance counseling; loan packaging for
Eximbank; and referrals to Eximbank, SBA, or lenders. The remaining
11
We used the National Association of State Development Agencies’ state export program data as well
as information from Eximbank and SBA to identify states with export finance programs.
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seven states surveyed did not have export finance programs. (See app. II
for additional information on state-level export finance programs.)
Eximbank and SBA have made progress harmonizing their export working
Harmonization Efforts capital programs. The agencies’ efforts to harmonize and, in other ways,
Are Incomplete but improve their programs appear to have increased the level of loans
Appear Beneficial guaranteed and the extent of exporter and lender participation. However,
the programs continue to have some differences. Furthermore, progress
toward harmonization was affected by a reduction in SBA’s guarantee rate
effective during fiscal year 1996. Despite remaining program differences
and the temporary reduction in SBA’s guarantee rate, both SBA and
Eximbank have been able to continue bringing new exporters and, to a
lesser degree, new lenders into their programs.
Efforts to Harmonize In response to TPCC’s recommendations, Eximbank and SBA began
harmonizing their export working capital programs in October 1994 to
simplify the loan process and make the programs more consistent for
exporters and lenders. They standardized such key features as the
application forms used by lenders or exporters, application fees, and
guarantee coverage. To standardize the guarantee coverage, Eximbank
reduced its coverage from 100 percent of principal and interest to
90 percent, and SBA raised its 85-percent guarantee to 90 percent. Both
agencies also streamlined their procedures for processing loan guarantees.
Additionally, they agreed to a market segmentation plan that (1) assigned
SBA primary responsibility for assisting small businesses whose export
working capital needs do not exceed SBA’s $750,000 exposure limit and
(2) made Eximbank responsible for assisting exporters who do not fall
within SBA’s small business standards or whose transactions exceed SBA’s
limit.
The effects of harmonization-related changes are difficult to measure
because many occurred when Eximbank and SBA were making other
changes aimed at improving export finance assistance for small
businesses. For example, in fiscal year 1995, SBA began to set export
working capital goals for each of its 69 district offices, and it developed
new coguarantee agreements with a few states. SBA also provided basic
export finance training to almost 300 of its staff and resource partners
(e.g., small business development centers) and more in-depth training on
transaction lending to its trade finance specialists. Likewise, during the
same period, Eximbank enhanced its Delegated Authority Program by
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increasing the limits on the aggregate amounts participating lenders can
provide to single borrowers annually12 and allowing lenders to retain all or
part of a loan fee, depending on the amount of the loan. Together,
Eximbank and SBA officials also conducted export finance seminars in 13
cities that were attended by about 1,300 bankers. In addition, the agencies
worked with the Department of Commerce to expand the USEAC network.
These program changes, including those related to the agencies’
harmonization efforts, appear to have helped expand the use of the
program, improve SME access to working capital, and increase the number
of lenders participating in export financing. During fiscal year 1995, the
number of export working capital loans guaranteed by SBA increased
167 percent, from 71 loans totaling $24 million in fiscal year 1994 to
190 loans totaling $69 million in fiscal year 1995. The number of export
working capital loans guaranteed by Eximbank increased from 116 loans
valued at about $152 million to 179 loans valued at almost $302 million, a
54-percent increase.
Our analysis of agency data showed that the two programs helped an
increased number of new exporters during the period of harmonization
and key program improvements. SBA’s Export Working Capital Program
assisted 69 exporters in fiscal year 1994 and 160 new exporters in fiscal
year 1995. Eximbank’s Working Capital Guarantee Program assisted
110 exporters in fiscal year 1994 and 133 new exporters in fiscal
year 1995.
Lender participation in both of these programs also increased from 1994 to
1995. In fiscal year 1994, 56 lenders provided financing under SBA’s Export
Working Capital Program. In fiscal year 1995, 107 new lenders participated
in the program. For Eximbank, 79 lenders provided financing under its
Working Capital Guarantee Program in fiscal year 1994; 50 new lenders
participated in the program in fiscal year 1995.
Programs Not Fully Although harmonization and other program improvements have produced
Harmonized some positive results, Eximbank’s and SBA’s programs are still not fully
harmonized, as recommended by TPCC.13 TPCC suggested standardizing the
underwriting standards; however, there is a difference in the two agencies’
12
For example, lenders who had successfully originated four working capital loans were provided with
a limit of $2 million per exporter annually and an aggregate limit of up to $25 million in loans annually.
13
Some remaining differences are statutory in nature, such as those related to Eximbank’s U.S. content
requirements and restrictions on supporting the sale of military or defense-related items.
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credit qualification requirements. Eximbank requires borrowers to have a
positive net worth; SBA does not. An Eximbank official stated that the
agency has the flexibility to waive this requirement for otherwise
creditworthy borrowers but could recall only a few instances in which this
was done.
ProAction Agency, the consultant commissioned by Eximbank and SBA to
evaluate harmonization efforts, identified another key difference between
Eximbank’s and SBA’s programs; Eximbank and SBA fees for processing
guarantees are not standardized. For loans with a term of greater than 6
but not more than 12 months, Eximbank charged 1.5 percent of the loan
amount, and for loans of 6 months or less, it charged 0.75 percent of the
loan amount.14 SBA charged a fee of 0.25 percent of the guaranteed amount
for loans with a term of 12 months or less. ProAction Agency also
identified some remaining differences in Eximbank’s and SBA’s efforts to
harmonize program documentation and operational procedures.
ProAction Agency concluded that because of the vast differences between
the two agencies’ programs, harmonization could not have been
reasonably completed within the recommended 12-month time frame.15 It
further noted, however, that the lack of program standardization created a
larger burden on lenders and exporters in the form of increased
paperwork, high turnaround time, and general confusion regarding
expectations. During fiscal year 1996, no other features of the two export
working capital programs were standardized. SBA commented that, during
fiscal year 1997, it and Eximbank have been working together to identify
ways to further harmonize the closing documents for their export working
capital loans.
Furthermore, progress toward harmonization of the two agencies’
programs was interrupted during fiscal year 1996 when the guarantee
coverage of SBA’s 7(a) program was reduced in accordance with the Small
Business Lending Enhancement Act of 1995 (P.L. 104-36, Sec. 2, Oct. 12,
1995). While Eximbank’s guarantee coverage remained at 90 percent, SBA’s
coverage was reduced to 75 percent for loans above $100,000 and to
80 percent for loans below that level. In a report to Congress, SBA
characterized this change as a severe setback to harmonization that
caused confusion among the lending and small business exporting
14
Under Eximbank’s Delegated Authority Program, the agency allows lenders to retain all or part of the
loan fee, depending on the loan amount and term.
15
Since TPCC recommended that the harmonization plan be evaluated 1 year after its effective date,
the scope of ProAction Agency’s review was limited to the end of fiscal year 1995.
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communities.16 SBA officials believe that this setback caused the agency to
lose the momentum that allowed it to almost triple (from 71 to 190) the
number of loans it guaranteed in fiscal year 1995. An Eximbank official
emphasized that a common guarantee rate was an important element of
harmonization and predicted that SBA’s reduced rate would negatively
affect small business exporters who need the localized support and
assistance of SBA and its lenders.
Notwithstanding the reduction in SBA’s guarantee rate, SBA increased the
number of export working capital loans guaranteed by 38 percent for fiscal
year 1996. Eximbank increased the number of loans guaranteed by
56 percent. The value of loans guaranteed under each of the agencies’
programs likewise increased by almost 38 percent. Figure 1 shows the
number of loans guaranteed by both agencies between fiscal years 1991
and 1996.
16
Report to the Congress on the Impact of the Reduced Maximum Guarantee Percentage for the U.S.
Small Business Administration’s Export Working Capital Program, SBA, February 1996.
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Figure 1: Export Working Capital Loans Guaranteed by Eximbank and SBA (fiscal years 1991-96)
Number of loans guaranteed
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
1991 1992 1993 1994 1995 1996
Fiscal year
Eximbank SBA
Source: GAO.
In addition to increasing the number and value of loans guaranteed during
fiscal year 1996, Eximbank and SBA have continued to enlist new exporters
at generally the same rate as in the prior year. The number of new lenders
funding loans through the export working capital programs, however,
declined for both agencies in 1996, as shown in table 2. Effective
October 1, 1996, SBA was provided authority to restore its guarantee
coverage to 90 percent for its Export Working Capital Program, pursuant
to the Omnibus Consolidated Appropriations Bill for fiscal year 1997
(P.L. 104-208, Sept. 30, 1996).17
17
See H.R. Conf. Rep. No. 104-863, Division D, Title I, sec. 111.
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Table 2: Number of New Lenders
Funding Loans and New Exporters Fiscal year Fiscal year
Receiving Loans 1995 1996a
SBA
New lenders funding loans 107 73
New exporters receiving loans 160 133
Eximbank
New lenders funding loans 50 30
New exporters receiving loans 133 120
Total new lenders funding loans 157 103
Total new exporters receiving loans 293 253
a
Data for fiscal year 1996 cover October 1995 through July 1996.
Source: GAO.
To facilitate small business export finance, Eximbank and SBA have
Issues Associated established more cooperative agreements with both the private and public
With Expanding the sectors. Delegating authority to private sector lenders and devolving
Use of Cooperative certain program responsibilities to state export finance organizations are
examples of cooperative agreements. Expanding the use of these
Agreements approaches could further leverage federal resources and expand federal
outreach to SMEs, but it would also shift more responsibility for the
guarantee of funds from the federal government to the private sector and
the states. Nevertheless, Eximbank and SBA remain responsible for
ensuring that the programs are well managed, funds are properly spent,
and program objectives are met.
Delegating Authority to Eximbank’s Delegated Authority Program exemplifies one cooperative
Lenders approach to increasing SME access to export financing. Under the program,
exporters can have working capital guarantees processed and approved by
a network of 69 delegated authority lenders located in 25 states plus the
District of Columbia, rather than having to go through Eximbank’s
Washington, D.C., office. This program has also allowed Eximbank to
leverage its resources and increase lender participation.
The Delegated Authority Program enabled the U.S. Division’s staff to
handle an increasing number of working capital guarantees while
maintaining the same level of staffing. For example, in 1994, no loans were
processed under the Delegated Authority Program, but in fiscal year 1995,
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Eximbank’s delegated authority lenders processed 99 loans valued at
$115 million, without an increase in the U.S. Division’s staff. This activity
represented 55 percent of Eximbank’s working capital guarantee program.
During fiscal year 1996, the delegated authority lenders processed
69 percent of the agency’s working capital guarantees. This activity
represented 192 loans valued at about $227 million. U.S. Division officials
estimated that, even though the Delegated Authority Program allowed
them to leverage their resources, about 20 to 30 percent of staff time was
spent administering and monitoring the program.
The Delegated Authority Program also appears to have increased the level
of lender participation. In fiscal year 1995, 29 active delegated authority
lenders funded, on average, over twice as many loans using delegated
authority than they did the prior year, when the program was dormant.
According to Eximbank officials, lenders’ ability to provide guarantees
without obtaining prior approval coupled with fiscal year 1995 program
enhancements contributed to the increased level of lender participation in
the program. These enhancements included, for example, lenders’ ability
to retain all or part of a loan fee. Over 74 percent of the 56 respondents to
our Delegated Authority Program survey18 confirmed that quicker
processing time attributable to the lenders’ ability to approve loan
guarantees, fee incentives, and the 90-percent guarantee coverage were
the most important factors for remaining enrolled in the program.
Because more than two-thirds of Eximbank’s export working capital loans
are handled through the Delegated Authority Program, monitoring lenders’
compliance with program requirements and managing the associated level
of risks of these loan guarantees have become increasingly important.
Eximbank developed a new monitoring system that requires inspections of
all delegated authority lenders that have made at least one transaction
under the program. According to Eximbank officials, these inspections
assess lenders’ compliance with various program requirements, including
repayment terms, reviews of creditworthiness, and maintenance of loan
transaction documentation. If Eximbank identifies compliance problems,
it can place the lender on probation or retract the lender’s delegated
authority status. Eximbank officials said that possible loss of eligibility is
one of the most effective measures for ensuring a lender’s compliance.
Another measure is the 10-percent risk assumed by the bank in the event
of loan defaults. As of June 1996, the default rate for exporters whose
loans were guaranteed through the Delegated Authority Program in fiscal
18
We surveyed all 67 lenders that were enrolled in Eximbank’s Delegated Authority Program as of
February 1996.
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year 1995 was 1 default out of 99 loans, and the default rate for loans
guaranteed through Eximbank headquarters was 3 defaults out of 80 loans.
Devolving Greater In 1993, TPCC recognized the merits of expanding the use of cooperative
Program Responsibility to arrangements with states when it endorsed cofinancing agreements as part
the State Level of an overall government strategy to facilitate export promotion and
financing. Under these agreements, federal programs can expand their
outreach to SMEs by taking advantage of the states’ proximity to target
firms and their knowledge of local businesses. Also, all 17 states and the
1 U.S. territory with export finance programs that were surveyed indicated
their programs were designed to serve smaller companies. Likewise, states
benefit from cooperative agreements by gaining access to federal
guarantee funds that complement their own funds.
However, key limitations to expanding such agreements are (1) legal
prohibitions at the state level and (2) varying levels of state commitment
to export finance assistance. Moreover, these types of arrangements
require provisions or mechanisms to ensure that federal guarantee funds
are appropriately committed. Legal prohibitions sometimes prevent states
from offering state-backed guarantees. Constitutions for six states prohibit
them from providing export finance assistance, according to a report by
the National Association of State Development Agencies.19 States may also
vary in their level of commitment to export financing, depending on the
policy priorities of the states’ current administration. A state program
administrator said maintaining a consistent level of commitment to a
particular program can be difficult because states have limited funds and a
large number of competing demands. In some states, the level of funding
available to support export financing has changed from year to year. In
Maryland, for example, the leveraged guarantee funding was reduced from
$60 million in fiscal year 1995 to $50 million in fiscal year 1996 because of
a shift in the state’s program priorities. In Texas, the leveraged funding
was reduced from $2 million in fiscal year 1995 to no funding in fiscal
year 1996.20
Eximbank established partnerships with state and local government
offices and private organizations to help market its small business
financial products. In September 1996, it implemented a pilot program
19
State Export Program Data Base Analysis, National Association of State Development Agencies,
1994.
20
A state program administrator explained that the state’s legislation did not authorize the program to
use any funds and thus no guarantees were made during fiscal year 1996.
Page 15 GAO/NSIAD-97-20 Export Finance
B-275002
delegating authority for approving working capital guarantees to six of the
agency’s state partners. Eximbank requires participating states to have an
active export guarantee program with an average loan-loss track record of
5 percent or less, an independent credit approval process, and at least one
person within the office or organization who has completed Eximbank’s
City/State Program training requirements.
Under pilot program guidelines, the maximum Eximbank guarantee will
not exceed the legislative limit of the respective state partner, and
Eximbank’s maximum aggregate liability on principal will be $10 million
per state partner. The state, Eximbank, and the lender will be partners in
each guarantee, sharing all risks or losses or recovered amounts on a
proportional basis.21 Matching fund requirements and risk-sharing
provisions are intended to promote accountability, and Eximbank officials
believe they encourage state partners to ensure that federal funds are
appropriately committed. Transactions under this program are also
expected to conform with Delegated Authority Program guidelines and
documentation requirements. As with delegated authority lenders, state
partners are to be subject to periodic field inspections by Eximbank staff.
SBA has developed separate coguarantee arrangements with three states,
as discussed earlier. It relies on risk-sharing program features,
documentation requirements, and its final approval authority to ensure
that states exercise due diligence and comply with coguarantee
arrangements. Although SBA does not have formal eligibility requirements
for developing coguarantee arrangements with states, agency officials
emphasized that they tailor the agreements to the individual state
programs. For example, SBA’s agreement with California provides for a
50/50 matching guarantee for 90 percent of the principal of working capital
loans. Guarantees under this agreement are not to exceed $1.5 million, or
up to $750,000 per agency per guarantee, the maximum amount that
California can guarantee. According to the director of the California
program, the state conducts its loan analysis and completes its forms as
usual and then sends the loan guarantee package to SBA trade finance
specialists located at the USEAC in Long Beach for approval. SBA officials
explained that they have not developed a separate monitoring system for
overseeing its coguarantee agreements with the states because the agency
still retains final review and approval authority for SBA’s portion of the loan
guarantee.
21
Specifically, the risk is to be shared as follows: 45 percent for the city/state partner, 45 percent for
Eximbank, and 10 percent for the commercial lender.
Page 16 GAO/NSIAD-97-20 Export Finance
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In 1993, TPCC recommended that SBA’s Export Working Capital Program
Potential Implications should be merged into Eximbank’s program if the agency’s harmonization
of Transferring SBA’s efforts were unsatisfactory. Although Eximbank and SBA have made
Export Working progress in harmonizing their programs, a number of factors would need
to be considered before any such transfer occurred. For example,
Capital Program to Eximbank’s program may not serve some exporters currently served by
Eximbank SBA since its delegated authority lenders may not handle the smaller export
transactions SBA does. Other exporters may not have easy access to
Eximbank’s U.S. Division and its network of delegated authority lenders,
which are located in only 25 states plus the District of Columbia and tend
to be clustered around large metropolitan areas. Likewise, some SBA
lenders currently served by SBA may lose the benefit of being introduced to
the program and becoming involved in export financing, since Eximbank
and SBA tend to encourage greater lender participation in differing ways
and reach out to different types of lenders. Finally, consolidating the
programs may result in minimal cost savings, according to SBA’s cost
estimates for administering its Export Working Capital Program.
Delegated Authority We sought to determine whether Eximbank’s lenders would be willing to
Lenders May Not Serve the provide the same level of support for smaller export transactions that SBA
Needs of Exporters Served lenders provide. In accordance with the market segmentation plan under
harmonization, SBA was to handle applications for loans that were less
by SBA than or equal to $833,333 and Eximbank was responsible for handling
working capital loans over $833,333. However, Eximbank’s delegated
authority lenders were not covered by the market segmentation plan and
were allowed to handle smaller export working capital loans.22 Therefore,
we focused our analysis on the delegated authority lenders. During fiscal
years 1995 and 1996, only 24 percent of the loans guaranteed through
Eximbank’s Delegated Authority Program were valued at less than
$500,00023 and about 70 percent of the export working capital loans
guaranteed by SBA were valued at less than $500,000, as shown in figure 2.
22
Before the market segmentation plan, Eximbank’s Working Capital Guarantee Program had been
available for loans of any size. In fiscal year 1995, when the market segmentation plan became
effective, Eximbank was to handle working capital guarantee applications for loans over $833,333.
When SBA’s guarantee rate was lowered in fiscal year 1996, Eximbank returned to its practice of
guaranteeing loans of any size. As of October 1, 1996, SBA’s guarantee rate was restored. According to
an Eximbank official, the agency has resumed guaranteeing loans that are consistent with the market
segmentation plan.
23
According to Eximbank data, 10 percent of the loans guaranteed under Eximbank’s U.S. Division in
fiscal year 1995 were valued at less than $500,000 (13 percent in 1996).
Page 17 GAO/NSIAD-97-20 Export Finance
B-275002
Figure 2: Export Working Capital Loans Guaranteed by Dollar Value (fiscal years 1995 and 1996)
Number of loans
200
57%
150 30.8%
22.8%
100
16.6% 16.6%
50 13.7% 14.4%
10% 7.5%
5.5%
4.5%
0.3%
0
< $100 $100 to $249 $250 to $499 $500 to $749 $750 to $833 > $833
Dollar value (in thousands)
Eximbank SBA
Delegated Authority Program
Source: GAO.
In our survey of delegated authority lenders, over 80 percent (46 of 56) of
the respondents indicated that they would be willing to provide export
working capital loans for less than $833,333 to existing customers, and
62 percent (35 of 56) indicated they would be willing to provide such loans
for new customers. However, 66 percent of the respondents indicated that
they would probably not provide a working capital loan under a certain
threshold, which for these lenders was a median threshold of $250,000.24
During fiscal years 1995 and 1996, 14 percent of the export working capital
loans guaranteed through delegated authority lenders were less than
$250,000 compared with about 40 percent of the loans guaranteed by SBA.
24
In its October 1996 report to Congress, TPCC recognized the reluctance of banks to handle the
smaller loans, particularly for export financing. It reported that a major problem facing small exporters
was limited access to export finance due to the small number of banks (75 out of 9,000) that provide
this type of financing. Moreover, most of these 75 banks are larger institutions that typically do not
provide banking services to SMEs.
Page 18 GAO/NSIAD-97-20 Export Finance
B-275002
More than half of the delegated authority lenders indicating they had a
threshold stated that processing loans below that amount was too costly
and time-consuming for them to make a profit. In response to follow-up
contacts, six of seven delegated authority lenders who were generally
willing to provide smaller working capital loans agreed such loans were
largely unprofitable for their institutions.25 They were willing to provide
small working capital loans chiefly to develop new business opportunities
with exporters or maintain their existing customer base.
Over 60 percent of the respondents indicated that certain incentives would
be effective in encouraging them to provide working capital loans under
$833,333. These incentives included changes to Eximbank’s program, such
as allowing lenders to retain a greater portion of the facility fee and further
relaxing collateral requirements. Other changes were outside the scope of
the Delegated Authority Program, including allowing lenders to receive
credit for promoting small business export finance through the
Community Reinvestment Act and relaxing loan loss reserve requirements.
About 32 percent of the respondents suggested simplifying the paperwork
and loan processing requirements of Eximbank’s program or increasing
the guarantee to 100 percent for smaller loans.
Eximbank’s Program May If SBA’s Export Working Capital Program were transferred to Eximbank,
Not Be Accessible to Some SMEs in some states might not have convenient access to the current
Exporters lenders who participate in Eximbank’s Delegated Authority Program.
Eximbank’s U.S. Division is located in Washington, D.C., and its 69
delegated authority lenders located in 25 states plus the District of
Columbia tend to be concentrated in large metropolitan areas. In contrast,
USEACs and SBA’s district offices cover all 50 states and Puerto Rico.
Although Eximbank’s delegated authority lenders are in fewer states than
USEACs and SBA’s district offices, Eximbank may be able to reach these
businesses in other ways, such as its City/State Program. Eximbank’s pilot
programs, which began in September 1996, are intended to increase the
activity level of these local partners.
Some SMEs currently served by SBA may not have access to Eximbank’s
Working Capital Guarantee Program because of statutory restrictions on
the types of loans Eximbank can guarantee and a difference in Eximbank’s
and SBA’s credit qualification requirements. For example, Eximbank is
prohibited from financing defense articles and services and is restricted in
25
We selected seven of the survey respondents because they had issued guarantees for and funded at
least three export working capital loans under $833,333 as of February 28, 1996.
Page 19 GAO/NSIAD-97-20 Export Finance
B-275002
the amount it can guarantee for products that have less than 50 percent
U.S. content. Eximbank’s seemingly stricter credit standards may also
affect small exporters served by SBA.
Transferring Program Eximbank and SBA use different methods to increase lender participation
Responsibility May Affect and focus on different types of lenders. If SBA’s Export Working Capital
Outreach to Some Lenders Program were transferred to Eximbank, outreach to some lenders that are
currently part of SBA’s network of 7(a) lenders may be adversely affected
as a result of these differences.
SBA focuses on attracting new banks to its export program from its pool of
domestic 7(a) program lenders, whereas Eximbank focuses more on
increasing the level of loans funded by its existing lenders. Eximbank also
focuses on attracting new lenders to its program but not to the same
extent as SBA. During fiscal year 1995 and the first 10 months of fiscal year
1996, SBA attracted 180 new lenders to its Export Working Capital
Program, whereas Eximbank attracted 80 new lenders. Although
Eximbank had fewer new lenders, it increased the number of loans
guaranteed by increasing participation in its Delegated Authority Program.
The lenders in SBA’s program tend to have different profiles than those in
Eximbank’s program. SBA officials said they generally work with small
community banks without international divisions and provide one-on-one
assistance with processing export working capital loans. They also
explained that the agency works with larger banks’ small business or
credit departments, which typically lack experience in export financing.
Although some of these larger banks may have international divisions,
these divisions are generally not inclined to handle the less profitable
smaller transactions. Eximbank tends to work with large banks, many
with international departments that can assume delegated authority.
In addition, Eximbank and SBA tend to work with banks of different asset
sizes. For example, over 70 percent of the banks Eximbank works with
have assets greater than $1 billion.26 On the other hand, almost 53 percent
of SBA’s Export Working Capital Program lenders have less than $1 billion
in assets, with 16 percent having assets less than $100 million. (See app. III
for summary data on the assets of SBA’s Export Working Capital Program
lenders and Eximbank’s delegated authority lenders.)
26
Asset size data is as of March 30, 1996, except for banks that merged before this date. For merged
banks, we used the most recent asset size data available before merger.
Page 20 GAO/NSIAD-97-20 Export Finance
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Some SBA lenders were aware of Eximbank’s Working Capital Guarantee
Program but did not use the program for a variety of reasons. In our
survey of the more active SBA lenders,27 25 of 28 respondents were aware
of Eximbank’s program, but less than half used it. Five respondents did
not use Eximbank’s program because they were satisfied with SBA’s
program, three respondents believed Eximbank’s program was intended
for larger export transactions, and two said the program was too
bureaucratic.
Cost Savings Associated The potential savings associated with transferring the program from SBA to
With Transferring SBA’s Eximbank may be modest, given the relatively low estimated costs of
Program May Not Be administering SBA’s Export Working Capital Program. Furthermore,
Eximbank might incur increased costs from hiring additional loan officers
Significant to handle the new workload. On the other hand, some of these costs could
be mitigated by approving more working capital loan guarantees through
the Delegated Authority Program or devolving authority to approve
guarantees to more states. SBA estimated it cost $460,000 to administer its
Export Working Capital Program in fiscal year 1995. Under the program,
SBA guaranteed 190 export working capital loans, which resulted in a
potential liability of about $57 million. SBA’s estimates for administering
the Export Working Capital Program include costs related to staffing and
supporting USEACs. Although these estimates do not include the time or
costs of the agency’s district office staff involved in handling export
working capital guarantees, they represent the bulk of the agency’s
administrative costs for the program, according to an SBA official.
SBA and Eximbank provided us with written comments on a draft of this
Agency Comments report. (See apps. V and VI.) SBA did not offer any overall comments on the
and Our Evaluation draft but provided specific technical suggestions and observations to
improve the clarity and accuracy of the draft. We have incorporated these
changes in the report where appropriate.
Eximbank generally agreed with the report. However, it disagreed with
our observation that small businesses may have less access to export
working capital if SBA’s program were transferred to Eximbank. Eximbank
stated that its delegated authority lenders had greatly expanded the
availability of its program to small businesses. Although the Delegated
Authority Program has enabled Eximbank to greatly expand its program
27
We surveyed all 35 lenders that had funded at least 2 export working capital loans guaranteed by SBA
during fiscal year 1995.
Page 21 GAO/NSIAD-97-20 Export Finance
B-275002
without increasing its staff, our review also identified a significant
limitation that exporters may face if they must seek smaller working
capital loans from delegated authority lenders. Our analysis of Eximbank
data showed that, for fiscal years 1995 and 1996, only about 24 percent of
the loans guaranteed through Eximbank’s delegated authority lenders
were under $500,000. On the other hand, about 70 percent of the export
working capital loans guaranteed by SBA were valued at less than $500,000.
To understand federal and state approaches to facilitating export working
Scope and capital to SMEs, we interviewed Eximbank and SBA officials and reviewed
Methodology pertinent agency documents, such as working capital program
instructions, summary activity reports, and related press releases. We also
reviewed Eximbank and SBA documents on various arrangements aimed at
facilitating export working capital guarantees, such as the Eximbank
Delegated Authority Program, the Eximbank City/State Program, SBA
coguarantee arrangements with states, and SBA agreements with
intermediaries to package export working capital loans. To determine
state efforts to facilitate export working capital for SMEs, we reviewed the
National Association of State Development Agencies’ 1994 State Export
Program Data (the latest comprehensive information on state’s programs
available at the time of our review) as well as information from Eximbank
and SBA. We identified 21 states and 1 U.S. territory using the National
Association of State Development Agencies’ data and identified an
additional 3 states as having export finance programs. We then surveyed
and received responses from representatives at each of the 24 states and
the 1 U.S. territory.
To assess efforts to harmonize Eximbank and SBA’s export working capital
programs, we interviewed officials responsible for administering each
agency’s program and reviewed available program documents, such as
operating guidelines and sample guarantee agreements. We also reviewed
a consultant report, cosponsored by both agencies, aimed at evaluating the
success of harmonization efforts.28 To identify whether harmonization
efforts may have affected the level of program activity, we analyzed
Eximbank and SBA data on the number and dollar value of loans
guaranteed during fiscal years 1994 through 1996 as well as data on the
number of lenders and exporters participating in the working capital
guarantee programs. Data presented in the report on the number and value
of loans guaranteed exclude those cases in which a guarantee was
28
Harmonization of Ex-Im Bank Working Capital Guarantee Program and SBA Export Working Capital
Program, Evaluation Study, ProAction Agency, May 20, 1996.
Page 22 GAO/NSIAD-97-20 Export Finance
B-275002
approved but was subsequently withdrawn or canceled. To identify the
number of new lenders and new exporters, we compared agency data for
fiscal years 1994 through 1996. New lenders or exporters for fiscal year
1995 were those that did not participate in the programs in fiscal year 1994
(before harmonization). New lenders or exporters for fiscal year 1996
were those that did not participate in the programs in the preceding 2
years. We did not independently verify the accuracy of the data provided
by Eximbank or SBA.
To identify the issues associated with expanding the number of
cooperative agreements in the federal working capital guarantee
programs, we focused on delegating authority to lenders and devolving
greater responsibility for export working capital programs to the states.
We evaluated these approaches on the basis of leveraging federal
resources, SME access to export financing, and program oversight. We also
examined the potential implications of transferring SBA’s export working
capital program to Eximbank by focusing on SME access to export
financing and lender participation. We discussed these approaches with
Eximbank, SBA, and Department of Commerce officials as well as with
officials of financial institutions and small business trade associations,
such as the Bankers Association of Foreign Trade, Small Business
Exporters Association, and the National Small Business United.
To obtain lenders’ perspectives on expanding the use of cooperative
agreements with banks, we surveyed the 67 lenders that were enrolled in
Eximbank’s Delegated Authority Program as of February 1996 and had
about an 85-percent response rate. We also surveyed all lenders that had
funded at least 2 export working capital loans guaranteed by SBA during
fiscal year 1995 (35 out of 150 lenders) and had an 80-percent response
rate. (See app. IV for more details on the methodology for and selected
results of the two lender surveys.) We obtained information on the costs
associated with administering the export working capital programs to
determine potential cost savings that may be derived from transferring
SBA’s program to Eximbank. Since agency budget and cost data was not
maintained by specific program areas, we relied on estimates provided by
both Eximbank and SBA.
We did our work from February to October 1996 in accordance with
generally accepted government auditing standards.
Page 23 GAO/NSIAD-97-20 Export Finance
B-275002
We are sending copies of this report to appropriate congressional
committees, the Administrator of the Small Business Administration, the
Chairman of the U.S. Export-Import Bank, and the Chairman of the Trade
Promotion Coordinating Committee. We will also make copies available to
others on request.
This report was prepared under the direction of JayEtta Z. Hecker,
Associate Director, who may be reached on (202)512-8984 if you or your
staff have any questions about this report. Other major contributors to this
report are listed in appendix VII.
Benjamin F. Nelson
Director, International Relations and Trade Issues
Page 24 GAO/NSIAD-97-20 Export Finance
Page 25 GAO/NSIAD-97-20 Export Finance
Contents
Letter 1
Appendix I 28
Main Components for
Delivering Export
Working Capital
Programs to Small-
and Medium-Sized
Enterprises
Appendix II 30
Information on
State-Level Export
Finance Programs
Appendix III 34
Lenders Participating
in Eximbank’s and
SBA’s Export Working
Capital Programs
Appendix IV 35
Survey of Eximbank Delegated Authority Lenders 35
Methodology for and Survey of Lenders Participating in SBA’s Export Working Capital 38
Selected Results of Program
Lender Surveys
Appendix V 41
Comments From the
Small Business
Administration
Page 26 GAO/NSIAD-97-20 Export Finance
Contents
Appendix VI 45
Comments From the
U.S. Export-Import
Bank
Appendix VII 53
Major Contributors to
This Report
Tables Table 1: Staff Resources, Available Funding, and Loans 7
Guaranteed for States Identified With Export Working Capital
Guarantee Funds for Fiscal Year 1996
Table 2: Number of New Lenders Funding Loans and New 13
Exporters Receiving Loans
Table II.1: States Surveyed With an Export Finance Program or 30
Export Working Capital Guarantee Funds
Table II.2: Leveraged Guarantee Fund and Export Working 31
Capital Loans Guaranteed by State
Table II.3: Comparison of Eight State-Level Export Working 32
Capital Guarantee Programs
Figures Figure 1: Export Working Capital Loans Guaranteed by 12
Eximbank and SBA
Figure 2: Export Working Capital Loans Guaranteed by Dollar 18
Value
Figure I.1: Eximbank’s U.S. Division and Delegated Authority 28
Lenders
Figure I.2: USEACs and SBA District Offices 29
Abbreviations
Eximbank U.S. Export-Import Bank
SBA Small Business Administration
SME small- and medium-sized enterprises
TPCC Trade Promotion Coordinating Committee
USEAC U.S. Export Assistance Centers
Page 27 GAO/NSIAD-97-20 Export Finance
Appendix I
Main Components for Delivering Export
Working Capital Programs to Small- and
Medium-Sized Enterprises
The U.S. Export-Import Bank (Eximbank) relies heavily on its U.S.
Division and delegated authority lenders for delivering its Working Capital
Guarantee Program. Figure I.1 shows the locations of the U.S. Division and
delegated authority lenders.
Figure I.1: Eximbank’s U.S. Division and Delegated Authority Lenders
Eximbank U.S. Division
Delegated authority
lenders
Source: U.S. Division, Eximbank.
Page 28 GAO/NSIAD-97-20 Export Finance
Appendix I
Main Components for Delivering Export
Working Capital Programs to Small- and
Medium-Sized Enterprises
The Small Business Administration (SBA) relies on the U.S. Export
Assistance Centers (USEAC) and district offices to deliver its Export
Working Capital Program. Figure I.2 shows the locations of USEACs and SBA
district offices.
Figure I.2: USEACs and SBA District Offices
USEACs
SBA District Offices
Source: SBA.
Page 29 GAO/NSIAD-97-20 Export Finance
Appendix II
Information on State-Level Export Finance
Programs
Table II.1 shows the 17 states and 1 U.S. territory in our survey that have
export financing programs. Table II.2 shows the eight states that offer
working capital guarantees as part of their export financing programs and
the number and amount of guaranteed loans. Table II.3 compares the eight
state-level export working capital guarantee programs.
Table II.1: States Surveyed With an
Export Finance Program or Export States with export finance programs States with export finance programs
Working Capital Guarantee Funds without working capital guaranteesa that offer working capital guarantees
Alaska California
Arkansas Florida
Indiana Georgia
New Hampshire Kansas
New Jersey Maryland
New York Massachusetts
Puerto Rico Minnesota
b
Texas South Carolina
Utah
Washington
a
Oregon has a general credit enhancement fund that is not precluded from providing funding for
export financing.
b
Texas has an export finance program, but funds allocated have not been available for providing
working capital guarantees since March 1995. According to the state program administrator, the
appropriate language needed to allow the Texas program to access the fund had been
inadvertently omitted from the authorizing legislation.
Page 30 GAO/NSIAD-97-20 Export Finance
Appendix II
Information on State-Level Export Finance
Programs
Table II.2: Leveraged Guarantee Fund and Export Working Capital Loans Guaranteed by State (fiscal years 1995 and 1996)
Dollars in thousands
Fiscal year 1995 Fiscal year 1996
Leveraged Leveraged
funding Loans guaranteed funding Loans guaranteed
State levela Number Amount levela Number Amount
California $38,908 165 $65,136 $38,908 91 $39,498
Florida 5,000 N/Ab N/Ab 20,000 25 3,588c
Georgia 1,000 2 330 2,000 1 55
Kansas 2,120 5 1,180 2,300 6 2,542
Maryland 60,000d 22 19,000 50,000d 15 15,900
b b
Massachusetts 30,000 N/A N/A 30,000 2 1,000
Minnesota 3,365 10 1,380 3,674 10 1,550
South Carolina 850 1 100 850 0 0
Note: The states’ fiscal year begins July 1 and ends June 30. Amounts for loan guarantee
represent amount of guarantee liability.
a
The leveraged funding level is calculated by multiplying the allocated funding level by the
number of times the fund may be leveraged. This level represents the maximum amount of
guarantees that may be outstanding at any one time.
b
Not available.
c
This amount represents the state’s total liability associated with the 25 loans guaranteed during
fiscal year 1996.
d
This fund is available for domestic loans as well as export loan guarantees.
Page 31 GAO/NSIAD-97-20 Export Finance
Appendix II
Information on State-Level Export Finance
Programs
Table II.3: Comparison of Eight
State-Level Export Working Capital Program attribute California Florida G
Guarantee Programs Program attribute California Florida G
First year of operation 1985 1994
Cumulative default ratea 1.5 0 0
b
Number of loans guaranteed during fiscal 256 25 3
years 1995 and 1996
Average amount of loans guaranteed during $408,726 $143,520b $
fiscal years 1995 and 1996
State-specific requirementsc Minimum state Shipments from M
content and state port
state-based
operations
Typical size of participating companies 15 to 20 employees 7 employees or 3
or $1 million to $20 $5 million or less in
million in sales sales
Maximum guarantee percentage 90 90 9
Maximum loan guarantee $750,000 $500,000 $
Minimum loan guarantee None None N
Number of lenders in program during fiscal 65 20 4
years 1995 and 1996
Page 32 GAO/NSIAD-97-20 Export Finance
Appendix II
Information on State-Level Export Finance
Programs
Georgia Kansas Maryland Massachusetts Minnesota South Carolina
Georgia Kansas Maryland Massachusetts Minnesota South Carolina
1994 1990 1986 1993 1983 1990
0 0 1.0 0 1.2 0
3 11 37 2 20 1
$128,333 $338,358 $943,243 $500,000 $146,500 $100,000
Minimum state content Minimum state Minimum state Minimum state Minimum state Minimum state content
content content or shipment content content
from state port
3 to 125 employees 500 employees or $1 million to 50 employees or 100 employees or 5 to 50 employees
less $5 million in sales $10 million in sales less
90 90 90 70 90 85
$500,000 $345,000 $1,000,000 $500,000 $250,000 $170,000
None None None $50,000 $25,000 None
4 10 10 4 5 1
a
The cumulative default rate represents the rate of defaults since the fund was first established in
the state.
b
This figure represents fiscal year 1996.
c
For those states with a state content requirement, the required minimum state content was either
50 or 51 percent.
Page 33 GAO/NSIAD-97-20 Export Finance
Appendix III
Lenders Participating in Eximbank’s and
SBA’s Export Working Capital Programs
13.0% 8.0%
14.0%
23.0% 16.0%
7.0%
71.0%
48.0%
SBA (141) Eximbank (107)
< $100 mil. $100 to $250 mil. $250 mil. to $1 bil. > $1 bil.
Note:Data shown represent 141 lenders participating in SBA’s program as of August 31, 1995,
and 107 lenders participating in Eximbank’s program as of April 29, 1996. Asset size data is as of
March 30, 1996, except for banks that merged before this date. For merged banks, we used the
most recent asset size data available before merger.
Page 34 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
During our review, we surveyed lenders participating in Eximbank’s
Delegated Authority Program and lenders participating in SBA’s Export
Working Capital Program. The following is a summary of our methodology
and the responses we received for selected survey questions.
To obtain lenders’ perspectives on the Delegated Authority Program and
Survey of Eximbank their willingness to provide smaller export working capital loans, we
Delegated Authority surveyed all lenders participating in the program at the time of our review.
Lenders Eximbank provided us with a list of all delegated authority lenders as of
February 21, 1996, and a database that contained information on all
working capital loans guaranteed during fiscal year 1995 and fiscal
year 1996, as of February 29, 1996. We surveyed all 67 delegated authority
lenders1 and obtained responses from 57, for a response rate of about
85 percent.2
For nonrespondents, seven had not provided any working capital loans
under delegated authority, and the other three had provided at least one
such loan under delegated authority. We pretested the survey with four
lenders, one each in Arizona, California, Texas, and Washington, obtained
feedback from Eximbank on the draft instrument, and made appropriate
revisions. Two of our interviewers surveyed banks by telephone between
April and June 1996. In some instances, banks responded by facsimile
machine. To ensure data reliability and consistency, we asked appropriate
follow-up questions during our telephone interviews. In some cases, we
followed up with lenders who faxed in responses, obtained information on
some questions not answered, and clarified certain responses. The
following are selected questions as asked, and the responses we received
from Eximbank delegated authority lenders.
Question 1:
The following is a list of factors that may be important to remaining
enrolled in the program. Can you add any other factors to this list? Also,
please identify the top three most important factors by placing a “1” by the
most important factor, a “2” by the second most important factor, and a “3”
by the third most important factor.
1
Eximbank’s list contained 68 lenders; however, 1 lender said that it was affiliated with another lender
and requested that we only administer one survey for both lenders.
2
For our analysis, we used 56 of the responses because 1 of the responses was based on a pretest that
could not be used in the analysis.
Page 35 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
Percentage
Top 3 factors 1 2 3 Total respondents
Fee incentives 9 18 15 42 75.0
Guarantee coverage of 90 percent 32 12 4 48 85.7
Quick processing time to meet customer
needs 11 19 15 45 80.4
Access to Eximbank’s expertise in
international finance 0 2 7 9 16.1
Cap of $75(AA)/$50(A)/$25(B) million in
guarantees per bank 0 0 2 2 3.6
Cap of $5(AA)/$3.5(A)/$2(B) million per
borrower 1 3 7 11 19.7
Question 2:
If there is a demand, how likely would your bank be to provide export
working capital loans for less than $833,333 to small businesses with
whom you have an established banking relationship? (Please check one.)
Somewhat As likely Somewhat No basis
Very unlikely unlikely as unlikely likely Very likely to judge
4 4 2 2 44 0
n = 56
Question 3:
If there is a demand, how likely would your bank be to provide export
working capital loans for less than $833,333 to small businesses with
whom you do not have established banking relationship? (Please check
one.)
Somewhat As likely Somewhat No basis
Very unlikely unlikely as unlikely likely Very likely to judge
9 8 4 8 27 0
n = 56
Page 36 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
Question 4:
Is there some amount under which your bank would generally not provide
export working capital loans?
Yes = 37
No = 18
Loan amount Numbera
$25,000 1
50,000 2
100,000 10
150,000 1
200,000 3
250,000 5
300,000 2
350,000 1
500,000 7
1,000,000 3
a
Two lenders stated that they had a threshold, but did not provide the dollar amount of the
threshold.
Average: $302,143
Median: $250,000
Question 5:
In your opinion, how effectively would the following incentives encourage
banks participating in Eximbank’s Delegated Authority Program to
provide more export working capital to small businesses through the
program? (Please identify any other incentives you feel would be effective
and please check one box in each row.)
n = 56
Page 37 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
Very Moderately Not No basis
effective Effective effective effective to judge
Retaining a greater proportion of the fees 37 11 7 1 0
Having more relaxed collateral requirements 24 15 10 7 0
Other: Simplifying the paperwork and loan processing requirements 9 0 0 0 0
Other: Increasing the guarantee to 100 percent 7 0 0 0 0
Question 6:
In your opinion, how effectively would the following incentives encourage
banks to provide more export working capital to small businesses in
general? (Please identify any other incentives you feel would be effective
and please check one box in each row.)
n = 56
Very Moderately Not No basis
effective Effective effective effective to judge
Receiving credit for adhering to the Community Reinvestment Act 20 15 13 3 0
Relaxing loan loss reserve requirements for government guaranteed
loans 21 16 11 3 0
We asked lenders participating in SBA’s Export Working Capital Program
Survey of Lenders about their banks’ policies and opinions on SBA’s program. SBA provided us
Participating in SBA’s with a list of 150 lenders enrolled in its Export Working Capital Program
Export Working as of August 1995 and a database of all loans guaranteed through the
program during fiscal year 1995. During fiscal year 1995, 17 lenders did not
Capital Program make any loans guaranteed through the program, 98 lenders made only
1 loan, and the remaining 35 made 2 or more such loans.
We surveyed all 35 participants that had funded 2 or more loans
guaranteed through SBA’s Export Working Capital Program during fiscal
year 1995 and received responses from 28 lenders, an 80-percent response
rate. These 28 lenders had asset sizes ranging from $33 million to
$44 billion and were located throughout the United States. The seven
nonrespondents surveyed had asset sizes that ranged from approximately
$84 million to $49 billion and were also located throughout the United
States.
Page 38 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
We pretested the questionnaire with four lenders, one each in Oregon,
New Jersey, New York, and Washington, D.C., in early July 1996, and made
appropriate revisions. Two of our interviewers surveyed the lenders by
telephone between July and August 1996 and allowed some lenders to
respond by facsimile machine. To ensure data reliability and consistency,
we reviewed and performed edit checks of the instruments returned by
facsimile machine. The following are selected questions as asked and the
responses we received from SBA lenders.
Question 7:
Similar to SBA’s Export Working Capital Program, the Eximbank
administers a working capital guarantee program. Are you aware of this
program?
Yes = 25
No = 3
Question 8:
Does your department currently use Eximbank’s working capital
guarantee program?
Yes = 13
No = 12
Question 9:
Overall, how would you characterize your department’s experience with
Eximbank’s program?
1 = Very positive
7 = Generally positive
3 = Neutral
0 = Generally negative
0 = Very negative
2 = Not sure
n = 13
Page 39 GAO/NSIAD-97-20 Export Finance
Appendix IV
Methodology for and Selected Results of
Lender Surveys
Question 10:
In your opinion, which of the following reasons best explains why your
department has not used Eximbank’s working capital program? (Please
rank up to 3 reasons by placing “1” by the most important reason, “2” by
the second most important, and “3” by the third most important.)
The number of respondents that ranked the following reasons “1”:
3 = Believe Eximbank’s program was intended for larger export
transactions
1 = Eximbank offices (headquarters and regions) are not accessible
2 = Eximbank’s program viewed as being too bureaucratic
5 = Satisfied with SBA’s program and perceive no need to use Eximbank’s
program
1 = Other: (Please specify) Local representation lacking.
n = 12
Page 40 GAO/NSIAD-97-20 Export Finance
Appendix V
Comments From the Small Business
Administration
Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.
Now on p. 1.
Now on pp. 1-2.
Now on p. 2.
See comment 1.
Now on pp. 3-4.
Page 41 GAO/NSIAD-97-20 Export Finance
Appendix V
Comments From the Small Business
Administration
Now on pp. 4-5.
Now on p. 5
See comment 2.
Now on p. 5.
Now on p. 8.
Now on p. 9.
Now on pp. 14-15.
Now on p. 15
Page 42 GAO/NSIAD-97-20 Export Finance
Appendix V
Comments From the Small Business
Administration
Now on p. 20.
Now on pp. 24-25.
Now on p. 28.
Now on pp. 33-34.
Page 43 GAO/NSIAD-97-20 Export Finance
Appendix V
Comments From the Small Business
Administration
The following are GAO’s comments on SBA’s letter dated November 26,
1996.
1. Data was not readily available for us to make a comparable statement
GAO Comments regarding the average number of employees per company that have
obtained working capital loans guaranteed from Eximbank.
2. Eximbank staff are presently located at 4 of the 19 USEACs currently in
operation. Eximbank has indicated that it believes a combination of its
regional office staff and city/state participants would be able to respond to
regional USEAC needs for Eximbank services.
Page 44 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.
Page 45 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Now on pp. 24-25.
Page 46 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Now on pp. 3, 5, 6,
and 28.
Page 47 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Now on p. 14.
Page 48 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Now on p. 14.
See comment 1.
Page 49 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
Now on pp. 28-29.
See comment 2.
Page 50 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
See comment 3.
Page 51 GAO/NSIAD-97-20 Export Finance
Appendix VI
Comments From the U.S. Export-Import
Bank
The following are GAO’s comments on Eximbank’s letter dated
December 2, 1996.
1. We modified the report to better highlight the difference in SBA’s and
GAO Comments Eximbank’s credit qualification requirements. Eximbank requires
borrowers to have a positive net worth; SBA does not. Eximbank’s
requirement is stipulated in its working capital guarantee program
instructions. Also, ProAction Agency, the consultant commissioned by
Eximbank and SBA to evaluate harmonization efforts, reported in May 1996
that this requirement was a key difference between each agency’s
program. Although Eximbank officials stated that they have the flexibility
to waive this requirement, they acknowledged that, in practice, there were
only a few instances in which this was done.
2. The default information presented in the report is not intended to
demonstrate differences in default rates between the U.S. Division and the
Delegated Authority Lender Program. Further, we did not include in the
report any comparison of claims after a default under Eximbank’s or SBA’s
program. Rather, the report provides information on the number of
defaults.
3. The report recognizes that SBA’s cost estimates for administering its
Export Working Capital Program do not include the time or costs for the
agency’s district office staff involved in handling export working capital
guarantees. It does not attempt to make a direct comparison with
Eximbank’s estimated program costs.
Page 52 GAO/NSIAD-97-20 Export Finance
Appendix VII
Major Contributors to This Report
John P. Hutton, Assistant Director
National Security and Jean-Paul Reveyoso, Evaluator
International Affairs
Division, Washington,
D.C.
Martin H. De Alteriis, Social Science Analyst
General Government
Division
Evelyn E. Aquino, Evaluator-in-Charge
San Francisco Field José R. Peña, Evaluator
Office May M. Lee, Computer Specialist
Gerhard C. Brostrom, Communications Analyst
(711171) Page 53 GAO/NSIAD-97-20 Export Finance
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Address Correction Requested
Export Finance: Federal Efforts to Support Working Capital Needs of Small Business
Published by the Government Accountability Office on 1997-02-13.
Below is a raw (and likely hideous) rendition of the original report. (PDF)