Fate of Small Businesses Rests in the Hands of Congress

On June 30th, the US Congress will vote on whether or not to extend the charter for the US Export Import Bank. Also known as the ‘Trade Bank,” this organization acts as a secondary bank, supporting international trade deals through financing only after private sector options have been exhausted. In 2014, the bank extended nearly $16.6 billion in support of US manufactured exports, making up less than 2% of all exports.

Screen Shot 2015-06-09 at 11.33.12 AM

After more than 80 years of existence, the fate of the bank is in jeopardy. Critics label it as “Boeing’s Bank,” citing the staggering amount of loans and guarantees that directly benefit Boeing, Co. According to the 2014 EXIM annual report, $8.4 billion of the $20.5 billion the bank lended in 2014, or 41%, supported the aircraft and avionics industry. Opponents also point to the corruption within the organization as a reason to let the charter expire.


Regardless of your political or economical stance, it is hard to debate the fate of small businesses in the short-term if the bank were forced to halt its lending. Two groups of small businesses in particular could be hard hit.


The first, and more obvious, are the thousands of businesses that will lose business to competitors due to a lack of sufficient financing. EX-IM reported support of $5 billion to small businesses in 2014. Some of this could feasibly be taken on by private banks, but jobs and revenue would be sure to take a hit at small businesses nationwide that rely on international trade. As reported on in more detail in this Washington Post article, small business owners who operate oversees will face a new obstacle, and potentially have to cease operations altogether.


“We have a bunch of European competitors that have comparable or better financing options,” said Bowe, president of Baltimore-based Ellicott Dredges, which manufactures dredging equipment used in mines, harbors and canals and sells to clients in more than a dozen countries.

“If Ex-Im isn’t reauthorized, those competitors will be able to go to our customers and offer affordable five-year financing,” Bowe said. “Those customers are going to turn to us and say, ‘What can you offer us?’ Our answer would be ‘Nothing.’ ”

Consequently, without Ex-Im’s financing programs, Bowe expects his company would be in jeopardy of losing between 10 percent and 20 percent of its sales to foreign competitors.

Source: 2014 EXIM Annual Report
Source: 2014 EXIM Annual Report


The second group of small businesses to take a hit are the companies who act as suppliers for the likes of Boeing, Co. According to the Wall Street Journal, 15% of Boeing deliveries in 2015 were expected to be covered by deals backed by the Ex-IM Bank.


Boeing Chief Executive Jim McNerney has said he expects Ex-Im Bank to be reauthorized, though in lobbying for it also has warned that the company may look to shift some production overseas to countries with export credit agencies if Ex-Im is dissolved.


If Boeing were to move some operations oversees, it would make business sense for them to look for new suppliers as well.




Dan B.


4 Ways to Finance your Business

Finding enough money to cover the initial costs of your business can have significant long-term impacts. In addition, poor financial planning can result in unforeseen events hampering the business in a major way. For example, imagine a retail store receives their order from the supplier three weeks later than expected. Coupled with poor inventory management, this could lead to lower sales for the month. Having a sizable cash cushion to deal with unexpected events will prove helpful in the long run. We’ll break down the options for financing your business, along with some of the challenges of each source.

Modern business concept


High risk = high reward. Using your own personal funds will give you autonomy to run the business any way you seem fit. It will also leave you with no interest payments to be made in years to come.  However, this may mean cashing out your 401(k) and savings, as well as living a more restricted life-style while the business is in its early stages. Be sure to keep your estimates cautious, and don’t underestimate how long the business may go on without any profits.

Small Business Loans:

The SBA Loan program is one of the most popular funding methods for people without sufficient capital of their own. The Basic 7(a) Loan Program is eligible to borrowers for starting, acquiring and expanding businesses. While repayment terms vary depending on a number of factors, the average amount borrowed in 2012 (last year of information) was $337,730. Their is also the microloan program which offers up to $50,000 to cover the costs of working capital, inventory, supplies and the like. Other options are available for specific needs, such as loans for property or disaster relief.

Keep in mind, taking out a loan in excess of what is needed will create a larger liability for the company and servicing the debt will cut into the bottom line.

Selling Equity:

Selling ownership in your business, whether it’s to a venture capitalist or other investor, can be a way to raise significant capital while also acquiring additional expertise. However, this might also mean giving up partial control and compromising on some of your visions for the business. Ensuring that the investors vision for the company aligns with your own should be the foremost important factor when faced with the decision to sell a piece of your company. Discussions about the companies future should include the investors time horizon, or how long they can wait before they want to cash out and sell the business. Ultimately, an investor with industry connections and expertise can help catapult your business to the next level if visions are aligned.


Crowd Funding:

One of the more recent innovations in fundraising has been the boom of the crowd funding platforms. Websites like Kickstarter and Indiegogo offer platforms to pitch your business idea, along with the amount you wish to raise. For example, Indiegogo offers an ‘all-or-nothing’ funding plan, in which you only receive the money if the funding goal is met, at which point you will pay a 7% fee. On the other hand, the ‘flexible’ funding plan allows you to keep any money raised, even if you do not hit your goal, but the cost be anywhere between 7% – 12% of funds raised.

The success stories have been well-documented, like this 3D printer, but a successful campaign requires a network of people in the right places.