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Local small businesses need Export-Import Bank to expand abroad

Posted on 7/23/2014 by EDTP Coordinator in Small Business Policy

There’s been political contention lately over the Export-Import Bank of the United States (Ex-Im Bank), and whether or not its charter should be renewed on Sept. 30, when it's set to expire. And while those who oppose it may view the bank as an example of crony capitalism, small businesses in Philadelphia view it as the only way to expand and grow business overseas.

“As a small U.S. business, we do need it,” said Michael Strange, president of Bassetts Ice Cream, “and I would not be exporting the quantity of product I am in China if I wasn’t able to purchase export credit insurance [from the bank].”
As the United States’ official export credit agency, Ex-Im Bank offers opportunities for U.S. companies interested in conducting business with international markets through loans-guarantee and trade-credit-insurance programs. And, in 2013, 90 percent of the bank’s transactions were for small businesses.
Last year, the bank helped 77 small businesses in Pennsylvania export approximately $1 billion in goods and services overseas, which contributed to the $37.4 billion worth of U.S. exports, according to The Wall Street Journal. And, because of the high financial risk that comes with dealing with foreign buyers, small businesses — like the 153-year-old ice cream distributor — are looking for Congress to renew the 80-year-old charter.
"If I didn't have Export-Import Bank, I couldn't put the company at risk shipping the quantity overseas and extending credit to foreign customers," Strange said.
Bassetts exports approximately 3,200 2.5-gallon tubs of ice cream per shipment, and could stand to lose enough money that could run the company out of business, Strange said. But, with the bank’s “export credit insurance” service, Bassetts is guaranteed 90 percent of the receivable (unpaid invoice amount) if the foreign country’s distributor never pays.
Furthermore, along with helping small businesses expand overseas, Ex-Im Bank also contributes money back to the U.S. Treasury with the money it earns from interest and fees. In fiscal 2013, the bank put $1.06 billion back into the U.S. Treasury, according to The Wall Street Journal.
"I scratch my head and say why the government wastes money, and why they would discontinue the one agency that supports small business exports and actually makes profits and kicks it into the treasury," Strange said. "Are you kidding me? This is a no-brainer. There’s a lot of political behind-the-scenes stuff."
On the political contention, The Wall Street Journal has more:
Supporters, including the Obama administration, say the agency allows U.S. companies to better compete with foreign rivals, many of which receive government assistance such as below-market-rate financing. Opponents say the bank inappropriately disrupts the free market. They say it mostly benefits the richest and most politically connected companies, turning the fight over the agency into a proxy for a larger struggle over government's role in helping U.S. businesses.
"I have a lot of faith in [the foreign] customer, but it’s enough money that I can put the entire business at risk over money I may not be able to collect," said Strange on if the charter is not renewed. "I don't even know where to start if I had trouble collecting money."
Bassetts has been using Ex-Im Bank since 2008, when it made its first export shipment. Since then, it has expanded its export services to the Caribbean nations, with early initiations with exporting to Taiwan, New Delhi and Riyadh, Saudi Arabia. Approximately 20 percent of its revenue comes from exporting overseas.