Export Finance:

Federal Efforts to Support Working Capital Needs of Small Business

NSIAD-97-20: Published: Feb 13, 1997. Publicly Released: Feb 13, 1997.

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Pursuant to a congressional request, GAO reviewed the current government programs that provide export working capital for small- and medium-sized enterprises (SME), focusing on: (1) federal and state approaches for providing export working capital; (2) federal efforts to harmonize the export working capital programs of the U.S. Export-Import Bank (Eximbank) and the Small Business Administration (SBA); (3) 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) the potential implications of transferring SBA's export working capital program to Eximbank.

GAO found that: (1) Eximbank and SBA have programs that provide guarantees to facilitate export working capital loans for SMEs, however, the agencies emphasize different delivery approaches; (2) 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; (3) SBA relies primarily on specialists with lending authority that it has assigned to the U.S. Export Assistance Centers network and on the agency's 69 district offices to implement its working capital program; (4) both Eximbank and SBA have established other arrangements with state and local offices to help administer their working capital programs; (5) eight states have export guarantee programs specifically geared to assisting small businesses which provide a wide range of funds, staff, and activity levels involving export financing for SMEs; (6) Eximbank and SBA have harmonized certain aspects of their export working capital guarantee programs; (7) while harmonization was underway, Eximbank and SBA made other changes aimed at improving their own export finance assistance programs for small businesses; (8) 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; (9) 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; (10) Eximbank also has a pilot program underway that delegates lending authority to six state export finance organizations; (11) the potential to further expand cooperative agreements would be affected by various factors; (12) the Trade Promotion Coordinating Committee proposed transferring SBA's Export Working Capital Program to Eximbank if harmonization efforts were unsatisfactory; (13) GAO 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; and (14) these factors are: (a) some exporters currently served by SBA may not be served by Eximbank; (b) the Eximbank and its network of delegated authority lenders may not be accessible to some SMEs currently assisted by SBA; and (c) the consolidation of the programs may lead to only minimal cost savings.

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