Trade is good for small businesses and the U.S. Small Business Administration has programs to help you grow in international markets.
Recently, President Trump and Prime Minister Shinzo Abe of Japan reached two agreements to rebalance trade between our two great nations. These agreements, which were launched at last year’s meeting of the United Nations General Assembly, achieve concrete outcomes from negotiations. Japan is one of America’s most important trading partners and this agreement will serve to enhance our robust two-way trade. Under a market access agreement, Japan will open its market to approximately $7 billion in American agricultural exports, such as American beef, pork, poultry, wheat, cheese, wine, certain nuts and berries, cherries, ethanol, and more – a major win for our farmers, ranchers and growers.
The Japan agreement builds on Trump’s successes negotiating better trade deals for the American people, promoting American workers and industries, such as replacing the North American Free Trade Agreement with the far superior United States–Mexico–Canada Agreement. In fact, the independent International Trade Commission found that USMCA will spur the creation of 176,000 jobs and add $68.2 billion to the United States' economy.
In reaching these agreements, the president is continuing to deliver on his promise to achieve fair, reciprocal and balanced trade that benefits the United States. Trump has made reducing trade deficits and promoting American-made products a priority for his administration.
Beyond these comprehensive trade agreements, one often overlooked option to make American products more competitive is to offer more competitive payment terms to foreign customers. There are many ways to get paid for export sales. The most conservative is cash in advance, and the most risky is open account terms. While cash in advance terms may have some benefits, they also often result in reduced sales terms for the U.S. small business that has to sell at a reduced price to get these terms in place.
The U.S. Small Business Administration Export Working Capital Program can easily help mitigate these types of financing issues . The EWCP can be used to establish a revolving line of credit of up to $5 million to fund export transactions from pre-shipment working capital needs through final payment, providing the flexibility to offer more competitive terms to international buyers.
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In addition to the SBA’s specialized export loan products, a U.S. small business can also take advantage of export credit insurance which will protect you in the event of a default on foreign accounts receivable, covering up to 95% of the invoiced amount. Thanks to these options, small businesses will be able to secure additional and larger orders than you could by only offering cash-in-advance or letter-of-credit payment options.
One additional resource the SBA offers, in partnership with state governments, is the State Trade and Export Promotion grant. This program aims to increase exporting by offering grant assistance to small businesses to support their participation in foreign trade shows and missions, development of international marketing materials, as well as other support services that help facilitate entry to foreign markets. Since 2011, the STEP program has awarded approximately $157 million in grants to fund export opportunities and increase the footprint of small businesses in countries all over the world.
According to the U.S. International Trade Administration, more than 70% of the world’s purchasing power resides outside the United States. The SBA has counseling and programs that provide access to the capital that’s necessary to introduce your products to foreign markets successfully.
With over 68 district offices around the country, in addition to the 21 U.S. Export Assistance Centers with SBA trade finance experts, the SBA stands ready to support America’s small businesses. For more information on SBA’s export assistance please visit www.sba.gov.
Glaccum serves as the SBA's associate administrator for international trade. Nordberg is the SBA's Region VIII administrator based in Denver.