The SBA International Trade Loan (ITL) from the Small Business Administration offers loans up to $5 million for fixed assets and working capital for businesses that plan to start or continue exporting.
The ITL offers a combination of fixed asset, working capital financing and debt refinancing with the SBA’s maximum guaranty of 90 percent on the total loan amount.
To be qualified for this loan your business must meet the 7(a) loan program standards, are entering or expanding into international markets, or have been negatively impacted due to competition from importers.
How It Works
The SBA International Trade Loan may be used to refinance, acquire, construct, renovate, modernize, improve, or expand facilities and equipment to be used in the United States to produce goods or service involved in international trade and to develop and sell in foreign markets.
The international trade loan term is 10 years and for real estate, it can up to 25 years. Working capital and equipment can go up to 10 years. of fixed assets and working capital financing, the maturity of the loan is averaged.
SBA does not establish or subsidize interest rates on ITL loans. Interest rates are negotiated between the borrower and the lender, subject to SBA caps and rate range between 2.25 and 2.75 percent for loans over $50,000 and slightly higher for loans under $50,000.
The SBA International Trade Loan guaranty fee is normally between 2 percent and 3.75 percent, depending on the size of the loan and can be added to the loan.
Collateral in the form of a first lien position is required for an International Trade Loan and must be located in the United States.
A company that made indoor rock climbing holds had received significant publicity due to their unique design. What started out as a hobby had grown to distributing to five countries and after the publicity had distributors eager to start selling their product to an additional twelve countries.
The owner’s did not have the cash flow to handle the new orders so we targeted the SBA International Trade Loan program through their current bank. Why did we use the ITL instead of the 7(a)? During the recession, there were special provisions reducing the fees, plus international trade was becoming a strategy to grow the SBA and thus they were very eager to make these loans.
In a fast turnaround of 10 days, the owner’s had financing to expand their business
Why Get a SBA International Trade Loan?
While the thought of qualifying as a business engaging in international trade the fact that thus far it has been very easy to qualify. There is still a big charge through the government to grow U.S. companies and the economy through international sales which means the SBA is aggressively trying to make these loans.
The big plus with the ITL is that the interest rate is negotiable between the lender and borrower which can be typically lower than a 7(a), especially with the lender getting a 90% guarantee and the speed which these have been approved.
If you have a business that would be approved for a 7(a) and you have even slight exposure to international sales or the expectation to grow international sales, this is a good program to look into. Many banks by default go to the 7(a) program so you many need to educate them on the merits.
Where To Find a SBA International Trade Loan
While being considered as engaged an international trade is very broad, you may want to first contact the U.S. Export Assistance Center to find out if your business qualifies for an International Trade Loan.
Any lender that can offer SBA 7(a) loans can also make SBA international trade loans.