International Loan Program

April 13, 2006

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The International Trade Loan Program helps small businesses that are engaged or preparing to engage in international trade, as well as small businesses adversely affected by competition from imports. This program has not been used by small businesses as much as the Export Working Capital Loan Program. The Section 7(a) loan guarantee program is probably being used in lieu of this program for capital needs under $1 million.

In addition to the general eligibility criteria for a SBA loan guarantee, a small business applicant for the International Trade Loan Program must establish either of the following:

The loan proceeds will significantly expand existing export markets or develop new export markets. The applicant must submit a business plan, including sufficient information to reasonably support the likelihood of expanded export sales. The plan must include both a profit and loss projection and a narrative rationale.
The applicant is adversely affected by import competition. Injury attributable to increased competition with foreign firms must be demonstrated. A narrative explanation and financial statements must show that directly competitive imported products have made an important contribution to a decline in the firm's competitive position. This can be demonstrated by factors such as a decline in sales or production or underutilization of capacity, decreased profitability, or the threat of (or actual) loss of production employees.

The SBA can guarantee up to $1.25 million, less the amount of SBA's guaranteed portion of other loans outstanding to the borrower under the SBA's regular lending program. Only $750,000 can be for working capital needs; consequently the maximum guarantee amount is available only if used for a combination of working capital and facilities/equipment. The working capital portion of the loan may be made according to the provisions of the SBA's Export Working Capital Program (EWCP).

The loan proceeds may be used for:

working capital
purchasing, building, renovating, expanding or improving facilities or equipment (including purchasing land and buildings)
making other improvements that will be used within the United States for producing goods or services

Proceeds may not be used for repayment of debt.

Only collateral located in the United States (including its territories and possessions) is acceptable for a loan made under this program. The lender must take a first lien position (or first mortgage) on the items financed under this section. Additional supportive collateral may be required as appropriate, including personal guaranties, subordinate liens or items which are not financed by loan proceeds.

Maturities of loans for facilities or equipment may extend to the 25-year maximum applicable to most SBA loan programs. The working capital portion of loans, under EWCP provisions, have a three-year maturity.

Lenders may charge 2.25 or 2.75 percentage points above the prime rate, depending on the maturity of the loan. The interest rate on EWCP loans is not regulated.

More detailed information on the International Loan Program can be found on the SBA site at this page.