Ex-Im Bank Reauth Begins, Small Biz Lending Up

June 1, 2011

With just a few months remaining for Congress to reauthorize the Export-Import Bank of the U.S. (Ex-Im Bank), lawmakers are now in the process of holding oversight hearings and crafting draft legislation. The U.S. Senate Committee on Banking, Housing, and Urban Affairs recently held a hearing on Ex-Im Bank’s activities and challenges in the coming years. On the other side of the Capitol, House Financial Services Subcommittee on International Monetary Policy and Trade Chairman Gary Miller (R-Calif.) has begun circulating a discussion draft of his reauthorizing legislation. Meanwhile, Ex-Im Bank recently announced growth in financing for small- and mid-sized exporters as a direct result of their Global Access for Small Business Program.

Senate Hearing

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held an oversight hearing last week. Led by Chairman Tim Johnson (D-S.D.) and Ranking Member Richard C. Shelby (R-Ala.), the committee’s hearing was the Senate’s first step toward crafting and enacting reauthorizing legislation for Ex-Im Bank which is set to expire at the end of FY 2011.

The key witness was Ex-Im Chairman and President Fred P. Hochberg who focused a great deal on small- and mid-sized exporters throughout his testimony.

Hochberg reported that Ex-Im is meeting its statutory goal of providing at least 20 percent of its financing to small businesses. In FY 2008, Ex-Im Bank’s total small-business transactions  were $3.2 billion, for FY 2010, that jumped to $5.1 billion—a 58 percent increase. In that same period, total Ex-Im Bank transactions grew from $14.4 billion in FY 2008 to $24.5 billion in FY 2010.

Given their rapid growth, Hochberg warned that maintaining the 20 percent goal could be difficult given Ex-Im Bank’s limited administrative budget and the fact that the 20 percent of funding that goes toward small businesses constitutes 85 percent of the overall transactions and therefore requires a good deal of staff time and resources.

 

House Legislation

House Financial Services Subcommittee on International Monetary Policy and Trade Chairman Gary Miller (R-Calif.) is working on a discussion draft of the Ex-Im Bank reauthorization bill, provisionally entitled: “Securing American Jobs Through Exports Act of 2011.”  That draft has been circulated to a handful of stakeholders to provide input, including SBEA.

While still a work in progress, the draft bill will:

  • Reauthorize Ex-Im Bank for five years, from 2011 to 2015;
  • Increase Ex-Im Bank’s limits on outstanding loans, guarantees, and insurance to $160 billion over three years, up from the current limit of $100 billion;
  • Require Ex-Im Bank to establish guidelines on the goods and services allowable for Ex-Im Bank financing;
  • Allow Ex-Im Bank to use up to five percent of the surplus each fiscal year (not to exceed $20 million total) for the acquisition, installation, operation, and maintenance of  IT systems of the Bank;
  • Require Ex-Im Bank to calculate default rates every 60 days and provide a report to Congress within 45 days if such default rate exceeds 2 percent; and
  •  Allow for the financing of non-lethal defense articles or services where the primary use will be for civillian purposes.

There are a number of challenges Ex-Im faces in coming years, many of which ought to be dealt with during the reauthorization process. For example, the 85 percent domestic content requirement, the MARAD cargo preference, and Tied Aid, and other policies that hamstring the competitiveness of the Bank.

SBEA is urging Congress to ensure small businesses are not left behind in reauthorization talks and legislation, and is urging that the 20 percent goal for small-business financing be maintained as-is, and not watered down by allowing indirect financing to be counted toward the total. Furthermore, SBEA supports continued integrity and autonomy of Ex-Im Bank’s small-business operations that are led by a senior vice president who reports directly to the President. Finally, SBEA believes that further decentralization of Ex-Im Bank’s operations will improve transparency and make the process more accessible.

Increased Ex-Im Bank Financing

Ex-Im Bank recently announced growth in financing for small- and mid-sized exporters. Launched Jan. 2010 by Ex-Im Chairman & President Fred P. Hochberg, the Global Access for Small Business Program http://www.exim.gov/smallbusiness/  has played a critical role in the growth of Ex-Im’s small-business lending portfolio.

According to Ex-Im Bank’s announcement, they have provided financial backing to more than 1,700 small businesses thus far in FY 2011 totaling more than $2.4 billion have been completed.  More than 900 American small businesses have worked with Ex-Im Bank for the first time since FY 2010. In total, Ex-Im Bank, for the first half of FY 2011, has completed $13.4 billion in total authorizations, supporting $15.9 billion in U.S. exports and more than 115,000 American jobs.

In order to reach President Barack Obama’s established goal of doubling U.S. exports by 2014, Ex-Im Bank plans to reach $9 billion in annual small-business export financing, add a total of 5,000 small businesses to its portfolio, and approve at least $30 billion in transactions. To reach these benchmarks, the Bank also is offering new financing and insurance products as well as streamlining product delivery.

Chairman Hochberg stated that he is “optimistic that we can reach the President’s goal of doubling U.S. exports by 2014.”

The two Ex-Im Bank products most used by U.S. small business exporters are export-credit insurance andworking capital loan guarantees. Export-Credit insurance protects exporters and lenders from the risk of buyer nonpayment for commercial or political reasons, and it enables exporters to extend credit to international customers. Working capital guarantees cover 90 percent of the outstanding balance of working capital loans to exporters supported by export-related inventory and accounts receivable.

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