Government Pushes Exports for Small Business

Fred Hochberg, chairman and president of the Export-Import Bank of the United States wants to get small business to think globally. Ex-Im, along with the Small Business Administration, Commerce Department and other government agencies, will be part of an eight city tour kicking off in New York City on Oct. 5th that aims to help small firms tap into the export market. (For details visit http://www.export.gov) I chatted with Ex-Im’s Hochberg about why small business needs to look beyond the U.S. market and how Ex-Im can help.

BW: Why is it critical for you to get more small firms into the export game?

FH: We are really pushing export trade. In this environment where American consumers are unlikely to drive our economy to the extent they have in the past, we are going to have to rely on exports to drive our economy.

BW: Ex-Im is starting this eight city tour. What is your goal?

FH: I think our biggest issue with small firms is the knowledge that we are there for them. The Ex-Im Bank is not as well known as the SBA. I’m hoping what we can do with our small business customer is both encourage them and make exporting easier for them. So if they are exporting to Mexico, to get them to think about exporting to the rest of Latin America. Or if they are exporting to Canada, to get them to think about Mexico.

BW: How has the recession impacted trade?

FH: If we look in total, exports have declined just over 20% [in the first three quarters of] this year over last year. I would imagine the 20% [decline] is a bit higher for small business.

BW: How have the events of the last year affected demand for your services?

FH: Trade finance is a more specialized area. So if two banks consolidated it may not be the same trade finance people in place anymore. There’s been a sharper squeeze on trade finance. For small business, for example, we will insure receivables and [that export credit insurance business] is up about 50% over the last year.

BW: How does that insurance work?

FH: The insurance product is vitally important. Once we insure the receivable, frequently a bank will be inclined to make a loan [that is collateralized by those receivables]. And once the receivable is guaranteed, businesses can tap into Ex-Im’s working capital loans more easily. We want to make more banks aware of the products and services we extend.

BW: What has happened in the private market for insuring receivables?

FH: I think what you’ve seen with banks and insurance companies is there’s been a flight to quality, so to higher quality credits and larger firms. As they’ve all contracted, they tend to stay with the bigger firms. I do think insurance companies will likely be back [to playing a bigger role in credit insurance] in a year or two.