New Legislation Neglects Small Exporters’ Biggest Need

A Cosco Pacific container ship enters the Port of Long Beach in California

Photograph by Tim Rue/Bloomberg

A Cosco Pacific container ship enters the Port of Long Beach in California

Less than 1 percent of U.S. companies export goods and services, according to the Department of Commerce, and President Obama has pushed to double exports by 2015. To help small firms tap foreign markets, Representative Sam Graves, a Missouri Republican who chairs the House Small Business Committee, introduced three bills last week that seek to improve federal programs that promote U.S. businesses abroad. “Although 95 percent of the world’s market for products exists outside the U.S., many small firms do not have the resources and personnel to take advantage of these opportunities,” Graves says in a press release.

To that end, Graves’s legislation focuses on “improving the coordination of the federal trade promotion agencies.” That means doing a better job of publishing up-to-date listings of foreign trade missions, tariff laws, and changes in foreign regulations, and integrating state-level efforts to promote foreign trade into federal programs.

A blog post last week about Nevada’s exporter of the year suggested those efforts will help entrepreneurs like Sarah Brown, the owner of Carson City (Nev.)-based Critical Tattoo, which does about 70 percent of its business abroad and earned the honor from the Small Business Administration. Brown said she had “zero experience” in international sales when she began exporting and relied on help from the Department of Commerce and a Score adviser when she was getting started.

Still, it’s going to be difficult to turbocharge exports without addressing an important need small business owners face when selling abroad: working capital.

Last month, the Small Business Administration’s Office of Advocacy published (PDF) a survey of U.S. export data to determine the effects of the credit crunch that accompanied the financial crisis on small businesses’ foreign sales. Among the findings: Exporters were especially reliant on working-capital loans because of the longer transportation times required when shipping goods abroad and the riskier nature of foreign sales. And exporters with fewer than 100 employees were hit especially hard by tighter credit from 2008 to 2009, when the value of all U.S. exports fell 14 percent.

The small business lending environment has gotten better by some measures but leaves plenty of room for improvement. Sixty-three percent of small businesses in New York, New Jersey, and Connecticut that applied for loans in 2012 were approved, according to a survey released today by the Federal Reserve Bank of New York, and approval rates were worse for businesses seeking loans of less than $100,000.

The federal government already has an initiative in place to increase export financing to small businesses through the Export-Import Bank. While improving coordination among federal trade promotion agencies can’t hurt, it seems clear better access to working-capital loans would make a significant difference, just as tighter credit constricted exports during the Great Recession.

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