Export Express, Export Working Capital, and International Trade Loan Programs, 48807-48809 [2019-20048]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Proposed Rules]
[Pages 48807-48809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20048]



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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

RIN 3245-AG95


Export Express, Export Working Capital, and International Trade 
Loan Programs

AGENCY: U.S. Small Business Administration.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The U.S. Small Business Administration (SBA or Agency) is 
seeking comments on potential changes to the regulations governing its 
Export Loan Programs (the Export Express, Export Working Capital, and 
International Trade Loan Programs). SBA is soliciting comments on how 
the Agency can improve the products, procedures, forms, and reporting 
requirements of the Export Loan Programs. Feedback will be used to 
modernize the Export Loan Programs, increase lender participation and 
usage, ensure that U.S. small businesses can finance their 
international sales, and increase U.S. small business exports.

DATES: Comments must be received on or before November 18, 2019.

ADDRESSES: You may submit comments, identified by RIN 3245-AG95 by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail/Hand Delivery/Courier: David Vidal, Director, Office 
of International Trade, U.S. Small Business Administration, 409 Third 
Street SW, 2nd Floor, Washington, DC 20416.
    All comments will be posted on https://www.regulations.gov. If you 
wish to submit Confidential Business Information (CBI) as defined in 
the User Notice at https://www.regulations.gov, you must submit such 
information either by mail to David Vidal, Director, Office of 
International Trade, U.S. Small Business Administration, 409 Third 
Street SW, 2nd Floor, Washington, DC 20416, or by email to 
[email protected]. Highlight the information that you consider to be 
CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review your information and determine whether it 
will make the information public.

FOR FURTHER INFORMATION CONTACT: David Vidal, Director, Office of 
International Trade, U.S. Small Business Administration, 409 Third 
Street SW, 2nd Floor, Washington, DC 20416; (202) 205-7119 or 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    The SBA 7(a) Loan Program includes three financing options for U.S. 
small business exporters, or businesses adversely affected by import 
competition: The Export Express Program, the Export Working Capital 
Program, and the International Trade Loan Program. The purpose of these 
programs is to provide access to capital for U.S. small business 
concerns to support expansion into international markets and the growth 
of U.S. small business exports. Details on the features and 
requirements of each program are described below.

A. Export Express Program

    Established as a pilot program in 1998, the Export Express Program 
(Export Express) was made permanent by the Small Business Jobs Act of 
2010 (Pub. L. 111-240). The statutory provisions for Export Express are 
in Section 7(a)(34) of the Small Business Act, as amended (15 U.S.C. 
636(a)(34)). SBA's Standard Operating Procedures 50 10 5(K), Lender and 
Development Company Loan Programs, and 50 57 2, 7(a) Loan Servicing and 
Liquidation (SOPs), as amended, describe in detail the policies and 
procedures governing Export Express. On September 28, 2018, SBA 
published a Proposed Rule regarding, in part, Export Express (83 FR 
49001). The original comment period for the Proposed Rule was scheduled 
to end on November 27, 2018 but was extended to December 18, 2018 (83 
FR 57693). A Final Rule is under development.
    The maximum loan amount for an Export Express loan is $500,000. The 
maximum SBA guaranty on an Export Express loan of $350,000 or less is 
90 percent, and for an Export Express loan over $350,000 and up to 
$500,000, the maximum guaranty is 75 percent. Under Export Express, 
designated lenders (Export Express Lenders) are permitted to use, to 
the maximum extent practicable, their own analyses, procedures, and 
documentation in making, closing, servicing, and liquidating Export 
Express loans. They also have reduced requirements for submitting 
documentation to SBA and obtaining the SBA's prior approval. These loan 
analyses, procedures, and documentation must meet prudent lending 
standards; be consistent with those the Export Express Lender uses for 
its similarly sized, non-SBA guaranteed commercial loans; and conform 
to all requirements imposed upon 7(a) Lenders generally and Export 
Express Lenders in particular by Loan Program Requirements (as defined 
in 13 CFR 120.10), as such requirements are issued and revised by SBA 
from time to time. As with all 7(a) loans, the Export Express Lender 
must demonstrate that credit is not available elsewhere to the 
applicant on reasonable terms from non-federal, non-state, or non-local 
government sources, including the lender. In addition to the 
eligibility criteria applicable to all 7(a) loans, an Export Express 
borrower must have been in operation, although not necessarily in 
exporting, for at least 12 full months, unless certain additional 
requirements are met.
    Export Express loan proceeds must be used for an export development 
activity, which includes the following:
    a. Obtaining a standby letter of credit when required as a bid 
bond, performance bond, or advance payment guarantee;
    b. Participating in a trade show that takes place outside of the 
U.S.;
    c. Translation of product brochures or catalogues for use in 
markets outside of the United States;
    d. Obtaining a general line of credit for export purposes;
    e. Performing a service contract for buyers located outside the 
U.S.;
    f. Obtaining transaction-specific financing associated with 
completing export orders;
    g. Purchasing real estate or equipment to be used in the production 
of goods or services for export;
    h. Providing term loans or other financing to enable a small 
business concern, including an export trading company and an export 
management company, to develop a market outside the U.S.; and
    i. Acquiring, constructing, renovating, modernizing, improving, or 
expanding a production facility or equipment to be used in the U.S. in 
the production of goods or services for export.
    Export Express Lenders must follow the same collateral policies and 
procedures that they have established and implemented for their 
similarly sized, non-SBA guaranteed commercial loans, including those 
concerning identification of collateral. Such policies and procedures 
must be commercially reasonable and prudent. Additionally, Export 
Express lines of credit over $25,000 used to support the issuance of a 
standby letter of credit must have collateral (cash, cash equivalent or 
project) that will provide coverage for at least 25 percent of the 
issued standby letter of credit amount.

B. Export Working Capital Program

    The statutory provisions for the Export Working Capital Program 
(EWCP) are in Sections 7(a)(14) and

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7(a)(2)(D) of the Small Business Act, as amended (15 U.S.C. 636(a)(14) 
and 636(a)(2)(D)). Agency regulations at 13 CFR 120.340 to 13 CFR 
120.344 govern EWCP. SBA's SOPs 50 10 5(K) and 50 57 2, as amended, 
describe in detail the policies and procedures governing EWCP. Under 
EWCP, SBA guarantees short-term export working capital loans made by 
participating lenders to eligible U.S. small business exporters. The 
maximum loan amount for an EWCP loan is $5,000,000. The guaranty for 
EWCP loans is 90 percent, not to exceed $4,500,000.
    EWCP loan maturities may be for up to 3 years with annual renewals. 
EWCP loan facilities can be structured for single export transactions, 
multiple export transactions or as asset-based lines of credit. EWCP 
loan proceeds can be used only to finance export transactions. An 
export transaction is the production and payment associated with a sale 
of goods or services to a foreign buyer. In addition to the eligibility 
criteria applicable to all 7(a) loans, an EWCP borrower must be in 
business for one full year at the time of application, but not 
necessarily in the exporting business, unless waived by SBA. 
Additionally, as with all 7(a) loans, the EWCP lender must demonstrate 
that credit is not available elsewhere on reasonable terms to the 
borrower.
    Eligible uses of EWCP loan proceeds are as follows:
    a. To acquire inventory;
    b. To pay the manufacturing costs of goods for export;
    c. To purchase goods or services for export;
    d. To support standby letters of credit;
    e. For pre-shipment working capital; and
    f. For post-shipment foreign accounts receivable financing.
    SBA requires a first security interest sufficient to cover 100 
percent of the EWCP loan amount (such as insured accounts receivable or 
letters of credit). Collateral must be located in the U.S., its 
territories or possessions. EWCP applicants are required to submit cash 
flow projections to support the need for the loan and demonstrate the 
ability to repay. After the EWCP loan is made, the EWCP borrower must 
submit continual progress reports.

C. International Trade Loan Program

    The statutory provisions for the International Trade Loan Program 
(ITL) are in Section 7(a)(16) and 7(a)(2)(E) of the Small Business Act, 
as amended (15 U.S.C. 636(a)(16) and 636(a)(2)(E)). Agency regulations 
at 13 CFR 120.345 to 120.349 govern the ITL program. SBA's SOPs 50 10 
5(K) and 50 57 2, as amended, describe in detail the policies and 
procedures governing the ITL program. Under the ITL program, SBA 
guarantees term loans made by participating lenders to U.S. small 
businesses that are engaged in or preparing to engage in international 
trade or are adversely affected by import competition. The maximum loan 
amount for an ITL loan is $5,000,000. The ITL loans may receive a 
maximum guaranty of 90 percent or $4,500,000, except that the maximum 
guaranty amount for any working capital component of an ITL loan is 
limited to $4,000,000.
    An applicant must demonstrate that the ITL loan proceeds will allow 
it to significantly expand an existing export market or develop new 
export markets, or that the applicant has been adversely affected by 
import competition and the loan will improve its competitive position. 
As with all 7(a) loans, the ITL lender must demonstrate that credit is 
not available elsewhere on reasonable terms to the borrower.
    Eligible uses of ITL loan proceeds are as follows:
    a. Acquire, construct, renovate, modernize, improve, or expand 
facilities and equipment to be used in the U.S. to produce goods or 
services involved in international trade, and to develop and penetrate 
foreign markets;
    b. Refinance existing indebtedness that is not structured with 
reasonable terms and conditions, including any debt that qualifies for 
refinancing under 7(a) Loan Program Requirements; and
    c. Provide working capital.
    Each ITL loan must be secured either by a first lien position or 
first mortgage on the property or equipment financed by the ITL loan or 
on other assets of the borrower. An ITL loan may be secured by a second 
lien position on the property or equipment financed by the ITL loan or 
on other assets of the borrower, if SBA determines the second lien 
position provides adequate assurance of the payment of the ITL loan.

II. Comments Requested

    This Advance Notice of Proposed Rulemaking (ANPRM) reflects a 
revision to the title submitted for this action in SBA's Spring 2019 
Semiannual Regulatory Agenda. In order to facilitate feedback from the 
public, the rule title for this action is revised from ``Amendments to 
International Trade Loan Programs (RIN 3245-AG95)'' to ``Export 
Express, Export Working Capital, and International Trade Loan Programs 
(RIN 3245-AG95)''. SBA will include this revised rule title in its Fall 
2019 Semiannual Regulatory Agenda and Regulatory Plan.
    SBA requests comments from the public on the questions listed 
below. The list of questions is meant to assist in the formulation of 
public comments and is not intended to restrict the issues that may be 
addressed. Responders are invited to comment on any or all portions of 
this ANPRM.

A. Questions About the Export Express Program

    1. Currently, the maximum loan amount for Export Express is 
$500,000, and loans up to $350,000 receive a 90 percent guaranty, while 
loans over $350,000 receive a 75 percent guaranty. Is there a need for 
an SBA guaranty for U.S. small business exporters at this loan level to 
address a market gap? Are the current maximum loan amount and guaranty 
amounts affecting usage of the program?
    2. What requirements, including underwriting and types of 
documentation, do lenders use for export loans made under their 
conventional policies to ensure that loan proceeds are used for their 
intended purpose?
    3. The Export Express program allows participating lenders to 
monitor lines of credit using their own internal policies for similarly 
sized non-SBA guaranteed commercial loans, provided that such policies 
are commercially reasonable and prudent. How do SBA requirements differ 
from lenders policies for conventional export loans regarding use of 
proceeds for unauthorized purposes?
    4. Although the SBA Express and Export Express programs share many 
similarities, they are separate programs with separate maximum loan and 
guaranty amounts and different eligible uses of proceeds. Do lenders 
combine loans for both export and domestic uses for conventional 
commercial loans? If so, how does the monitoring, reporting and 
underwriting account for the different uses of proceeds?
    5. The Export Express program allows participating lenders to 
refinance an existing Export Express loan under Export Express only if 
the original Export Express Lender is unable or unwilling to increase 
or make a second Export Express loan. Since all Export Express loans 
must have a stated maturity, do lenders support permitting the use of a 
term Export Express loan to refinance an Export Express revolving line 
of credit under other conditions?
    6. Would the ability to submit Export Express loans using SBA One 
increase usage of the program? Do lending partners encounter any 
challenges in

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inputting Export Express loans into SBA's E-Tran system?
    7. How can SBA revise the Export Express Loan Program Requirements 
to increase the number of lenders using the Export Express program and 
increase the number of eligible U.S. small businesses receiving loans 
under the program?
    8. How can SBA revise the Export Express Loan Program Requirements 
to more closely align with how lenders finance export transactions 
conventionally?

B. Questions About the Export Working Capital Program

    1. Although EWCP provides guarantees for short-term loans with 
maturities of up to 3 years, EWCP loans with a maturity of 12 months or 
less are charged a guaranty fee of one quarter of one (.25) percent, 
while EWCP loans with a maturity over 12 months and up to 3 years are 
charged a guaranty fee of between 2 percent and 3 and 3 quarters (3.75) 
percent depending on the amount of the loan. What fee structure do 
lenders use for similarly sized working capital loans, including asset-
based loans? Would an alternative fee structure increase participation 
in EWCP?
    2. Currently, the maximum loan amount for EWCP is $5,000,000, and 
all loans receive a 90 percent guaranty. Per 7(a) loan program 
parameters, these loan guarantees must only be provided to eligible 
small businesses. Are these loan limits and credit facility types 
sufficient to serve the needs of U.S. small business exporters, 
particularly in light of the availability of a similar program with 
higher loan amounts at the Export-Import Bank of the United States 
(EXIM) which are not restricted to eligible small business?
    3. Which, if any existing EWCP collateral requirements set forth in 
13 CFR 120.343 differ from conventional lending standards for similarly 
sized commercial loans for collateral on asset-based lending export 
credit facilities?
    4. Should SBA consider allowing lenders to advance loan proceeds 
under an EWCP line with sufficient collateral to ensure there is a 1:1 
collateral ratio or better, rather than using a Borrowing Base 
Certificate, as is currently available in the 7(a) Working Capital 
CAPLine program? Would such a change increase usage of EWCP?
    5. SBA understands that lenders and EXIM allow overseas accounts 
receivable and inventory owned by an affiliated entity of a borrower, 
located in overseas markets, to be included in a borrowing base on 
conventional export loans. What additional risks are associated with 
such a policy and what experience do lenders have recovering funds from 
the liquidation of such collateral for their non-SBA guaranteed loans 
of similar size?
    6. What cash flow analysis (including projections) and 
documentation do lenders require on their conventional asset-based 
export loans similarly sized to SBA guaranteed loans?
    7. What fees do lenders currently charge on conventional export 
loans similar in size to SBA guaranteed loans? What interest rates do 
lenders currently charge on conventional export loans similar in size 
to SBA guaranteed loans?
    8. Non-bank lenders are allowed to participate in the EWCP program 
provided they are Small Business Lending Companies (SBLCs) or Non-
Federally Regulated Lenders (NFRLs). Historically, Non-bank lender 
participation in the EWCP has been low. What outreach efforts and EWCP 
program changes would increase Non-bank lender utilization?
    9. Would the inclusion of SBA One for electronic submission of EWCP 
loan applications increase usage of the program?
    10. How can SBA revise the EWCP Loan Program Requirements to 
increase the number of lenders using the EWCP program and increase the 
number of eligible U.S. small businesses receiving loans under the 
program?
    11. How can SBA revise the EWCP Loan Program Requirements to more 
closely align with how lenders finance export transactions 
conventionally?

C. Questions About the International Trade Loan Program

    1. Currently, an ITL loan must be secured by a first lien position 
on the property or equipment financed by the loan or on other assets of 
the borrower, except that an ITL loan may be secured by a second lien 
position on the property or equipment or other assets of the borrower 
if SBA determines that the second lien position provides adequate 
assurance of payment of the ITL loan. Do the existing ITL collateral 
requirements align with commercial lending standards for 
collateralization of term facilities for capital assets? What other 
options for collateral are used in the extension of conventional 
commercial export loans of similar size?
    2. ITL applicants must have a business plan reasonably supporting 
their projected export sales. Is there a need for additional policy 
guidance regarding this requirement?
    3. Although ITL loans can be processed under a lender's delegated 
authority, is there a need for a streamlined delivery method for ITL 
loans with a maximum limit of $350,000 or less? Would such a delivery 
method increase lender usage of the ITL loan program?
    4. Would the inclusion of the ITL programs in SBA One increase 
usage of the program? Do lending partners encounter any challenges in 
inputting ITL loans into SBA's E-Tran system?
    5. How can SBA revise the ITL Loan Program Requirements to increase 
the number of lenders using the ITL program and increase the number of 
eligible U.S. small businesses receiving loans under the program?
    6. How can SBA revise the ITL Loan Program Requirements to more 
closely align with how lenders finance export transactions 
conventionally?

D. Export Financing General Comments

    SBA is seeking comments and recommendations on additional 7(a) Loan 
Program changes in order to increase the number of U.S. small business 
exporters and the volume of U.S. small business exports. Comments and 
recommendations are not limited to specific financial products. SBA 
would be interested in hearing from commenters on the need for loan 
guarantees for financial products specifically tailored for standby 
letters of credit, lease financing, purchase order financing, 
receivable factoring platforms, or supply chain finance.
    Interested parties are invited to provide any other comments that 
they may have relating to the concerns described in this ANPRM. We ask 
that you provide a brief justification for any suggested changes.

Christopher Pilkerton,
Acting Administrator.
[FR Doc. 2019-20048 Filed 9-16-19; 8:45 am]
 BILLING CODE 8025-01-P