Winderosa In The News
From the January 7, 2000 print edition
Move afoot to bolster export financing for small companies
Kent Hoover
From a converted chicken barn in
the mountains of western Maine, Rachel W.
Carignan exports
gaskets for snowmobiles, dirt bikes and other small
engine vehicles
to more than 40 countries. Exports
account for about 45 percent of the revenue for
Carignan's
company. Peru, Maine-based Winderosa will ring up more than $1.5
million
in sales this year. Financing this international
trade is not a problem for Winderosa,
which employs 14 people.
"We don't do anything fancy," Carignan says. "We just go to
the
bank." Franklin Savings Bank of Farmington, Maine, where Winderosa
has banked
since 1990, is "real comfortable" with us, she adds.
As a result, Winderosa doesn't
need government assistance to find
the money it needs to tap into global markets.
Other small
businesses, however, may get a chillier reception from their banks
when
they bring export deals to the table. Large banks have a
"dismal" record in
small-business export loans, says Jerry W.
Smith, president of Transcon Trading Co.,
an Irmo, S.C.-based
export management company.Small community banks, he
adds,
"generally do not have the export trade financing knowledge
to put them in a comfort
zone of lending, except on an asset
basis." Most banks aren't willing to look at
transactions that
are under $5 million, says Steve Molnar, vice president
of
international business at Webster Bank, a Connecticut-based
bank that has made
export financing an important part of its
commercial banking strategy. Webster looks
at loans starting at
$200,000, working primarily with the Export-Import Bank of
the
United States. "For us it's a good market," Molnar says. But
Webster is one of "only a
handful" of U.S. banks engaged in
export finance "to any significant degree," says
Edmund Rice,
president of the Coalition for Employment Through Exports. As a
result,
"financing is a choke point" for many small businesses
considering international
trade,he says. Trade gap The federal
government tries to encourage small businesses
to export by
offering financing programs through the Ex-Im Bank, the Small
Business
Administration (SBA) and the Overseas Private Investment
Corp. But these programs
"have not been widely utilized," says
Sen. Christopher Bond (R-Mo.) chairman of the
Senate Small
Business Committee, who recently held a forum on export issues.
While
the number of small businesses that export tripled from
1987 to 1997, the 202,200
firms that now export represent only 1
percent of the nation's 24 million small
businesses. "That's
woefully inadequate," says Michael Copps, assistant secretary
for
trade development at the U.S. Department of Commerce's
International Trade
Administration. The U.S. trade deficit jumped
to a record $25.9 billion in October as
imports increased 1.6
percent to $107.9 billion and exports fell 0.1 percent to
$81.9
billion. Small businesses are the key to closing this trade
gap, says James F. Wilfong,
who heads the SBA's Office of
International Trade. "If we could bring small-business
trade to
parity with the small-business portion of the GDP, that would do
it," Wilfong
says. While 97 percent of the nation's exporters are
small businesses,they account for
only 31 percent of total export
sales. Small businesses account for 47 percent of total
domestic
sales. Targeting small firms Wilfong, who joined the SBA in June
after a
career of his own in international trade, hopes to make
it easier for small businesses to
find export financing. The SBA
will soon roll out EXR-Online, a web-based system that
banks can
use to analyze the risks of exporting deals. The system will be
hooked into
databases that will enable it to assign risk codes
for the country involved, the foreign
buyer and the buyer's bank.
If the codes fall into the acceptable range, a small
business
applying for an SBA export working capital loan could be approved
"right on
the spot --within10 minutesyou'll know," Wilfong says.
This will provide banks with a
much more cost-effective way of
doing due diligence on export loans. "That makes
them more likely
to do it," Wilfong says. The SBA also is working on a
"less
cumbersome" way for banks to make export loans in the
$10,000 to $25,000 range --
the small loans needed for many
export opportunities. The Overseas Private
Investment Corp.,
which reduced its minimum loan size from $2 million to
$250,000,
more than doubled its number of small-business projects
this year. One of those
projects involved political risk
insurance for Aquarius Systems of North Prairie, Wis.
Aquarius
won a $1.75 million World Bank contract to use its aquatic plant
harvesters
to chop up water hyacinths choking Kenya's Lake
Victoria, but its bank, Milwaukee
Western Bank, "was not exactly
excited about the idea" of lending money foraprojectin
a
potentially unstable country, says Aquarius' Jane Dauffenbach. The
bank financed
the deal only after Aquarius obtained OPIC's
insurance. "They're terrific people,"
Dauffenbach says of her
bankers, "but they're limited in their experience on
export
stuff." Kent Hoover is Washington bureau chief of American
City Business Journals. He
can be reached at (703) 816-0330 or by
fax at (703) 875-2231. E-mail:(khoover@amcity.com).
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