United States General Accounting Office

GAO Report to Congressional Requesters

February 1997 EXPORT FINANCE

Federal Efforts to

Support Working

Capital Needs of Small

Business

GAO/NSIAD-97-20

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-275002 

February 13, 1997

The Honorable Christopher S. Bond

Chairman, Committee on Small Business

United States Senate

The Honorable Donald A. Manzullo

Chairman, Subcommittee on Procurement, Exports, 

 and Business Opportunities

Committee on Small Business

House of Representatives

As you requested, we reviewed the current government programs that

provide export working capital for small- and medium-sized enterprises

(SME). This report (1) describes federal and state approaches for providing

export working capital, (2) assesses federal efforts to harmonize the

export working capital programs of the U.S. Export-Import Bank

(Eximbank) and the Small Business Administration (SBA), (3) discusses

issues associated with increasing the number of cooperative agreements

with lenders and devolving greater responsibility for export working

capital programs to the states, and (4) examines the potential implications

of transferring SBA’s export working capital program to Eximbank.

Background According to the Trade Promotion Coordinating Committee (TPCC),1

 one of

the greatest obstacles to increased U.S. exports faced by SMEs is the lack

of sufficient working capital. Working capital is used to finance the

manufacture or purchase of goods and services. Eximbank and SBA have

programs designed to increase the availability of export working capital to

SMEs from the private sector by encouraging greater lender participation in

export financing. These programs provide loan repayment guarantees that

reduce the risk associated with such loans. Some states also have

programs to assist SMEs in obtaining working capital.

Eximbank facilitates export financing through its Working Capital

Guarantee Program, which is authorized by the Export Trading Company

Act of 1982 (P.L. 97-290, Sec. 206, Oct. 8, 1982). During fiscal year 1995,

Eximbank guaranteed almost $302 million in export working capital loans,

which represented about 3 percent of Eximbank’s total dollar

authorizations for the year. Over 97 percent of the exporters assisted by

1

TPCC is an interagency group responsible for developing and coordinating U.S. export promotion

programs.

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Eximbank through the program during fiscal year 1995 were self-certified

as small businesses, as defined by SBA regulations (13 C.F.R. Part 121).

SBA developed its Export Working Capital Program (formerly known as the

Export Revolving Line of Credit) in response to a requirement in the Small

Business Export Expansion Act of 1980 (P.L. 96-481, Sec. 112, Oct. 21,

1980). SBA’s program falls within the statutory authority of the agency’s

regular business loan guarantee program, known as the 7(a) program.2

Under the 7(a) program, SBA guarantees private lender loans to small

businesses that have been unable to obtain financing. During fiscal 

year 1995, SBA guaranteed about $69 million in export working capital

loans, which represented less than 1 percent of SBA’s total 7(a) program.

All exporters assisted through SBA must qualify under the agency’s

definition of a small business. During fiscal year 1995, over 90 percent of

the businesses assisted through SBA’s working capital program had less

than 50 employees.

In its 1993 report to Congress, TPCC made a series of recommendations to

increase the effectiveness of U.S. export financing programs.3

 One

recommendation called for the establishment of one-stop shops, that is,

the U.S. Export Assistance Centers (USEAC), as a single point of contact for

all federal export promotion and finance programs.4

 Another

recommendation called for federal agencies to encourage qualified state or

local export finance entities to enter into cofinancing arrangements in

which risk is shared. A third recommendation called for streamlining and

harmonizing key features of Eximbank and SBA’s working capital

guarantee programs to make them more customer-focused and take

advantage of the agencies’ comparative strengths. According to TPCC,

harmonization was to give SMEs access to working capital through a

broader nationwide network of lenders on a more consistent, efficient,

and effective basis. Key features to be harmonized included developing

uniform applications, accompanying documentation, and underwriting

standards. Harmonization was also to include a market segmentation plan.

2

This program is named after section 7(a) of the Small Business Act (15 U.S.C. 636).

3

Toward a National Export Strategy, Trade Promotion Coordinating Committee, September 1993.

4

The Department of Commerce, Eximbank, and SBA have assumed primary responsibility for

establishing and operating these centers. For more information on the implementation of USEACs, see

U.S. Export Assistance Centers: Customer Service Enhanced, But Potential to Improve Operations

Exists (GAO/T-NSIAD-96-213, July 25, 1996).

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Results in Brief Eximbank and SBA have programs that provide guarantees to facilitate

export working capital loans for small- and medium-sized enterprises;

however, the agencies emphasize different delivery approaches. Eximbank

implements its program primarily through a specific division within the

agency and a network of lending institutions that have been delegated with

authority for approving the agency’s working capital guarantees. SBA, on

the other hand, relies primarily on specialists with lending authority that it

has assigned to the USEAC network and on the agency’s 69 district offices to

implement its working capital program. Also, both Eximbank and SBA have

established other arrangements with state and local offices to help

administer their working capital programs. In addition, eight states have

export guarantee programs specifically geared to assisting small

businesses.5

 The state programs provide a wide range of funds, staff, and

activity levels involving export financing for SMEs. For example, in fiscal

year 1996, the value of loans guaranteed ranged from $55,000 in Georgia to

$39.5 million in California.

Eximbank and SBA have harmonized certain aspects of their export

working capital guarantee programs, including the guarantee coverage,

application form, and initial application fee. While harmonization was

underway, Eximbank and SBA made other changes aimed at improving

their own export finance assistance programs for small businesses. These

efforts to harmonize and improve their programs appear to have helped

simplify the lending process, increase the number and value of loans

guaranteed, and expand the number of exporters and lenders who

participate in the programs. However, some program differences remain.

For example, there are differences in Eximbank’s and SBA’s credit

qualification requirements and fees for processing guarantees.

To leverage federal funds and provide SMEs with more export financing,

Eximbank and SBA have set up cooperative arrangements with both the

private and public sectors. Eximbank also has a pilot program underway

that delegates lending authority to six state export finance organizations.6

However, the potential to further expand the use of such cooperative

agreements would be affected by various factors, such as the need for

oversight and monitoring obligations at the federal level, legal prohibitions

that may prevent states from offering state-backed guarantees, and varying

amounts of state commitment to the area of export financing.

5

States that provide export working capital guarantees are California, Florida, Georgia, Kansas,

Maryland, Massachusetts, Minnesota, and South Carolina.

6

The six states in Eximbank’s pilot program are California, Florida, Georgia, Maryland, Massachusetts,

and Minnesota.

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TPCC proposed transferring SBA’s Export Working Capital Program to

Eximbank if harmonization efforts were unsatisfactory. We found that

Eximbank and SBA have made progress in harmonizing their programs. We

identified a number of factors that would need to be considered before

any transfer of program responsibility from SBA to Eximbank were to take

place. These factors are (1) some exporters currently served by SBA may

not be served by the Eximbank, (2) the Eximbank and its network of

delegated authority lenders may not be accessible to some SMEs currently

assisted by SBA, and (3) the consolidation of the programs may lead to only

minimal cost savings.

Eximbank, SBA, and

States Use Various

Delivery Approaches

Eximbank and SBA emphasize different delivery approaches for facilitating

their programs. Eximbank relies on its U.S. Division and network of

delegated authority lenders, whereas SBA relies primarily on staff with

lending authority it has assigned to the USEACs and on its network of

district offices. Eight states also have export finance programs that

provide working capital guarantees. Levels of financing and contractual

arrangements for these guarantees vary considerably among the states.

Eximbank Relies Heavily

on Delegating Authority to

Lenders

Eximbank’s U.S. Division, staffed with six loan officers and one vice

president, has primary responsibility for administering the Working

Capital Guarantee Program as well as some marketing responsibility. This

division processed all the agency’s export working capital guarantees until

the beginning of fiscal year 1995. Over the past couple of years, the

division has expanded its outreach to SMEs through its Delegated Authority

Program. Under this program, a private lender and Eximbank enter into an

agreement that allows the lender to approve Eximbank guaranteed loans

to exporters without first having to submit individual applications to

Eximbank for approval. During fiscal year 1996, delegated authority

lenders approved 192 loans, 69 percent of the agency’s export working

capital guarantee transactions. These transactions represented 55 percent

of the $413 million in loans guaranteed under Eximbank’s program. (See

app. I for a map showing the locations of Eximbank’s U.S. Division and

delegated authority lenders.)

Although the U.S. Division and delegated authority lenders are central to

Eximbank’s Working Capital Guarantee Program, the agency has other

resources and arrangements for marketing and supporting the program.

These include the following:

Page 4 GAO/NSIAD-97-20 Export Finance
B-275002 

• Eximbank’s Business Development Division promotes and markets the

agency’s small business programs, including the Working Capital

Guarantee Program. This group includes Washington-based staff and five

regional offices,7

 four of which are collocated within USEACs. According to

the Eximbank official responsible for regional office operations, the

agency’s limited regional staff of 21 employees is expected to focus

primarily on increasing the participation of banks, brokers, and other

intermediaries in these programs.

• Eximbank has established partnerships with state and local government

offices and private sector organizations under its City/State Program.

These partners are to act as liaisons with their export communities,

market Eximbank programs, and submit applications on behalf of small

businesses. During fiscal year 1995, however, only 8 of Eximbank’s 

31 partners reported working capital activity under the program. Effective

in April 1996, Eximbank initiated a pilot program to strengthen its program

by paying its local partners a packaging fee for applications submitted

directly to the agency and a finder’s fee for referrals to delegated authority

lenders that result in working capital loans. In September 1996, Eximbank

initiated another pilot program to delegate authority for approving

guarantees to six state partners.

• Eximbank has an agreement with the Private Export Funding Corporation,

a private consortium of commercial banks and other users of Eximbank,

in which the company (1) acts as the lender of last resort for exporters

that obtain a preliminary working capital commitment from Eximbank but

are unable to obtain financing from commercial sources and (2) purchases

Working Capital Guarantee Program loans made by small and regional

banks that require help in supporting small business exporters.

Under the Working Capital Guarantee Program, Eximbank guaranteed 

179 loans valued at almost $302 million during fiscal year 1995. As of

June 1996, the default rate for exporters whose loans were guaranteed

during fiscal year 1995 was 2.2 percent (4 defaults out of 179). The agency

estimated that the cost associated with administering the program during

fiscal year 1995 was about $912,000. This estimate included the costs for

compensation, benefits, and overhead attributable to the U.S. Division.

SBA Relies on USEACs

and District Offices

Although SBA’s Office of International Trade is responsible for overseeing

its Export Working Capital Program, the agency relies primarily on USEACs

and their district office network to implement the program. SBA has staffed

the 15 USEACs with 20 international trade and finance specialists. These

7

Eximbank’s regional offices are located in Chicago, Houston, Long Beach, Miami, and New York.

Page 5 GAO/NSIAD-97-20 Export Finance
B-275002 

specialists help SBA’s 69 district offices reach their Export Working Capital

Program goals by marketing and promoting the program and working

directly with the exporting and lender communities to structure loans and

package applications for loan guarantees. Applications are sent to 1 of 

25 district offices designated as export working capital processing centers,

where they are reviewed and approved or rejected. An SBA official

estimated that the specialists’ spend about 85 percent of their time on the

program and the remaining 15 percent on other trade-related activities.

(See app. I for a map showing the locations of the USEACs and SBA district

offices.)

Even though SBA works primarily through USEACs and district offices, it has

other resources and arrangements that help market and support the

program. These include the following:

• SBA has coguarantee agreements with California, Kansas, and Florida.

Under these agreements, SBA and the states guarantee a portion of the

export working capital loan and share, on a proportional basis, any

resulting losses and recoveries. California has been by far the most active

state, with 25 export working capital loans valued at $8.8 million.

• SBA has agreements with at least 26 local private sector entities to

encourage them to act as packaging intermediaries for its Export Working

Capital Program.8

• SBA uses staff from its small business development centers, about 30 of

which have established separate international trade centers, to help

market its financial products, including export working capital guarantees.

• SBA’s Preferred Lender Program, which is part of its Export Working

Capital Program,9

 is similar to Eximbank’s Delegated Authority Program.

However, according to an SBA official, only 1 of about 12 preferred lenders

had provided export financing under the program, as of August 1996.10

Under the Export Working Capital Program, SBA guaranteed 190 loans

valued at about $69 million during fiscal year 1995. As of August 1996, the

default rate for exporters whose loans were guaranteed during fiscal 

year 1995 was 1.6 percent (3 defaults out of 190). The agency estimated

8

These agreements are separate from SBA’s packaging intermediaries for its domestic programs.

9

This program is separate from SBA’s Preferred Lender Program for its domestic programs.

10Although the guarantee rate for Eximbank’s program has been 90 percent, the guarantee rate for

SBA’s Preferred Lender Program was 70 percent during fiscal year 1995 and legislatively mandated at

75 percent during fiscal year 1996. According to SBA, its lower guarantee rate was not as attractive to

lenders that could obtain a 90-percent rate from Eximbank. As of fiscal year 1997, SBA’s guarantee rate

has been legislatively restored to 90 percent for its entire Export Working Capital Program.

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that costs associated with administering its program during fiscal year

1995 totaled $461,667. This estimate includes an allocated portion of SBA’s

costs related to staffing and supporting USEACs.

Eight State Programs

Identified as Providing

Working Capital

Guarantees

We surveyed 24 states and 1 U.S. territory initially identified as having

export finance programs and found 8 states that provide export working

capital guarantees for SMEs.11 The eight state programs were designed

specifically to service small businesses. As shown in table 1, these state

programs varied greatly in their level of staff resources, available funding

for guarantees, and program activity.

Table 1: Staff Resources, Available

Funding, and Loans Guaranteed for

States Identified With Export Working

Capital Guarantee Funds for Fiscal

Year 1996

Dollars in thousands

State

Number of

staff

resourcesa

Leveraged

funding

levelb

Number of

loans

guaranteed

Value of

loans

guaranteed

California 12 $38,908 91 $39,498

Maryland 3 50,000c 15 15,900

Massachusetts 1 30,000 2 1,000

Florida 4 20,000 25 3,588d

Minnesota 3 3,674 10 1,550

Kansas 1 2,300 6 2,542

Georgia 2 2,000 1 55

South Carolina 1 850 0 0

aThe number of staff resources does not necessarily represent full-time equivalents.

bThe leveraged funding level is calculated by multiplying the allocated funding level by the

number of times the fund may be leveraged. This amount represents the maximum amount of

guarantees that may be outstanding at any one time.

cThis fund is available for domestic loans as well as export loan guarantees.

dThis amount represents the state’s total liability associated with the 25 loans guaranteed during

fiscal year 1996.

In addition, our survey identified programs in nine states and the one U.S.

territory that provided export finance assistance to small companies but

did not offer export-related working capital guarantees. Services provided

by these programs included export finance counseling; loan packaging for

Eximbank; and referrals to Eximbank, SBA, or lenders. The remaining

11We used the National Association of State Development Agencies’ state export program data as well

as information from Eximbank and SBA to identify states with export finance programs.

Page 7 GAO/NSIAD-97-20 Export Finance
B-275002 

seven states surveyed did not have export finance programs. (See app. II

for additional information on state-level export finance programs.)

Harmonization Efforts

Are Incomplete but

Appear Beneficial

Eximbank and SBA have made progress harmonizing their export working

capital programs. The agencies’ efforts to harmonize and, in other ways,

improve their programs appear to have increased the level of loans

guaranteed and the extent of exporter and lender participation. However,

the programs continue to have some differences. Furthermore, progress

toward harmonization was affected by a reduction in SBA’s guarantee rate

effective during fiscal year 1996. Despite remaining program differences

and the temporary reduction in SBA’s guarantee rate, both SBA and

Eximbank have been able to continue bringing new exporters and, to a

lesser degree, new lenders into their programs.

Efforts to Harmonize In response to TPCC’s recommendations, Eximbank and SBA began

harmonizing their export working capital programs in October 1994 to

simplify the loan process and make the programs more consistent for

exporters and lenders. They standardized such key features as the

application forms used by lenders or exporters, application fees, and

guarantee coverage. To standardize the guarantee coverage, Eximbank

reduced its coverage from 100 percent of principal and interest to

90 percent, and SBA raised its 85-percent guarantee to 90 percent. Both

agencies also streamlined their procedures for processing loan guarantees.

Additionally, they agreed to a market segmentation plan that (1) assigned

SBA primary responsibility for assisting small businesses whose export

working capital needs do not exceed SBA’s $750,000 exposure limit and

(2) made Eximbank responsible for assisting exporters who do not fall

within SBA’s small business standards or whose transactions exceed SBA’s

limit.

The effects of harmonization-related changes are difficult to measure

because many occurred when Eximbank and SBA were making other

changes aimed at improving export finance assistance for small

businesses. For example, in fiscal year 1995, SBA began to set export

working capital goals for each of its 69 district offices, and it developed

new coguarantee agreements with a few states. SBA also provided basic

export finance training to almost 300 of its staff and resource partners

(e.g., small business development centers) and more in-depth training on

transaction lending to its trade finance specialists. Likewise, during the

same period, Eximbank enhanced its Delegated Authority Program by

Page 8 GAO/NSIAD-97-20 Export Finance
B-275002 

increasing the limits on the aggregate amounts participating lenders can

provide to single borrowers annually12 and allowing lenders to retain all or

part of a loan fee, depending on the amount of the loan. Together,

Eximbank and SBA officials also conducted export finance seminars in 13

cities that were attended by about 1,300 bankers. In addition, the agencies

worked with the Department of Commerce to expand the USEAC network.

These program changes, including those related to the agencies’

harmonization efforts, appear to have helped expand the use of the

program, improve SME access to working capital, and increase the number

of lenders participating in export financing. During fiscal year 1995, the

number of export working capital loans guaranteed by SBA increased 

167 percent, from 71 loans totaling $24 million in fiscal year 1994 to 

190 loans totaling $69 million in fiscal year 1995. The number of export

working capital loans guaranteed by Eximbank increased from 116 loans

valued at about $152 million to 179 loans valued at almost $302 million, a

54-percent increase.

Our analysis of agency data showed that the two programs helped an

increased number of new exporters during the period of harmonization

and key program improvements. SBA’s Export Working Capital Program

assisted 69 exporters in fiscal year 1994 and 160 new exporters in fiscal

year 1995. Eximbank’s Working Capital Guarantee Program assisted 

110 exporters in fiscal year 1994 and 133 new exporters in fiscal 

year 1995.

Lender participation in both of these programs also increased from 1994 to

1995. In fiscal year 1994, 56 lenders provided financing under SBA’s Export

Working Capital Program. In fiscal year 1995, 107 new lenders participated

in the program. For Eximbank, 79 lenders provided financing under its

Working Capital Guarantee Program in fiscal year 1994; 50 new lenders

participated in the program in fiscal year 1995.

Programs Not Fully

Harmonized

Although harmonization and other program improvements have produced

some positive results, Eximbank’s and SBA’s programs are still not fully

harmonized, as recommended by TPCC.

13 TPCC suggested standardizing the

underwriting standards; however, there is a difference in the two agencies’

12For example, lenders who had successfully originated four working capital loans were provided with

a limit of $2 million per exporter annually and an aggregate limit of up to $25 million in loans annually.

13Some remaining differences are statutory in nature, such as those related to Eximbank’s U.S. content

requirements and restrictions on supporting the sale of military or defense-related items.

Page 9 GAO/NSIAD-97-20 Export Finance
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credit qualification requirements. Eximbank requires borrowers to have a

positive net worth; SBA does not. An Eximbank official stated that the

agency has the flexibility to waive this requirement for otherwise

creditworthy borrowers but could recall only a few instances in which this

was done.

ProAction Agency, the consultant commissioned by Eximbank and SBA to

evaluate harmonization efforts, identified another key difference between

Eximbank’s and SBA’s programs; Eximbank and SBA fees for processing

guarantees are not standardized. For loans with a term of greater than 6

but not more than 12 months, Eximbank charged 1.5 percent of the loan

amount, and for loans of 6 months or less, it charged 0.75 percent of the

loan amount.14 SBA charged a fee of 0.25 percent of the guaranteed amount

for loans with a term of 12 months or less. ProAction Agency also

identified some remaining differences in Eximbank’s and SBA’s efforts to

harmonize program documentation and operational procedures.

ProAction Agency concluded that because of the vast differences between

the two agencies’ programs, harmonization could not have been

reasonably completed within the recommended 12-month time frame.15 It

further noted, however, that the lack of program standardization created a

larger burden on lenders and exporters in the form of increased

paperwork, high turnaround time, and general confusion regarding

expectations. During fiscal year 1996, no other features of the two export

working capital programs were standardized. SBA commented that, during

fiscal year 1997, it and Eximbank have been working together to identify

ways to further harmonize the closing documents for their export working

capital loans.

Furthermore, progress toward harmonization of the two agencies’

programs was interrupted during fiscal year 1996 when the guarantee

coverage of SBA’s 7(a) program was reduced in accordance with the Small

Business Lending Enhancement Act of 1995 (P.L. 104-36, Sec. 2, Oct. 12,

1995). While Eximbank’s guarantee coverage remained at 90 percent, SBA’s

coverage was reduced to 75 percent for loans above $100,000 and to

80 percent for loans below that level. In a report to Congress, SBA

characterized this change as a severe setback to harmonization that

caused confusion among the lending and small business exporting

14Under Eximbank’s Delegated Authority Program, the agency allows lenders to retain all or part of the

loan fee, depending on the loan amount and term.

15Since TPCC recommended that the harmonization plan be evaluated 1 year after its effective date,

the scope of ProAction Agency’s review was limited to the end of fiscal year 1995.

Page 10 GAO/NSIAD-97-20 Export Finance
B-275002 

communities.16 SBA officials believe that this setback caused the agency to

lose the momentum that allowed it to almost triple (from 71 to 190) the

number of loans it guaranteed in fiscal year 1995. An Eximbank official

emphasized that a common guarantee rate was an important element of

harmonization and predicted that SBA’s reduced rate would negatively

affect small business exporters who need the localized support and

assistance of SBA and its lenders.

Notwithstanding the reduction in SBA’s guarantee rate, SBA increased the

number of export working capital loans guaranteed by 38 percent for fiscal

year 1996. Eximbank increased the number of loans guaranteed by

56 percent. The value of loans guaranteed under each of the agencies’

programs likewise increased by almost 38 percent. Figure 1 shows the

number of loans guaranteed by both agencies between fiscal years 1991

and 1996.

16Report to the Congress on the Impact of the Reduced Maximum Guarantee Percentage for the U.S.

Small Business Administration’s Export Working Capital Program, SBA, February 1996.

Page 11 GAO/NSIAD-97-20 Export Finance
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Figure 1: Export Working Capital Loans Guaranteed by Eximbank and SBA (fiscal years 1991-96)

1991 1992 1993 1994 1995 1996

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

Fiscal year

Number of loans guaranteed

Eximbank SBA

Source: GAO.

In addition to increasing the number and value of loans guaranteed during

fiscal year 1996, Eximbank and SBA have continued to enlist new exporters

at generally the same rate as in the prior year. The number of new lenders

funding loans through the export working capital programs, however,

declined for both agencies in 1996, as shown in table 2. Effective

October 1, 1996, SBA was provided authority to restore its guarantee

coverage to 90 percent for its Export Working Capital Program, pursuant

to the Omnibus Consolidated Appropriations Bill for fiscal year 1997 

(P.L. 104-208, Sept. 30, 1996).17

17See H.R. Conf. Rep. No. 104-863, Division D, Title I, sec. 111.

Page 12 GAO/NSIAD-97-20 Export Finance
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Table 2: Number of New Lenders

Funding Loans and New Exporters

Receiving Loans

Fiscal year

1995

Fiscal year

1996a

SBA

New lenders funding loans 107 73

New exporters receiving loans 160 133

Eximbank

New lenders funding loans 50 30

New exporters receiving loans 133 120

Total new lenders funding loans 157 103

Total new exporters receiving loans 293 253

aData for fiscal year 1996 cover October 1995 through July 1996.

Source: GAO.

Issues Associated

With Expanding the

Use of Cooperative

Agreements

To facilitate small business export finance, Eximbank and SBA have

established more cooperative agreements with both the private and public

sectors. Delegating authority to private sector lenders and devolving

certain program responsibilities to state export finance organizations are

examples of cooperative agreements. Expanding the use of these

approaches could further leverage federal resources and expand federal

outreach to SMEs, but it would also shift more responsibility for the

guarantee of funds from the federal government to the private sector and

the states. Nevertheless, Eximbank and SBA remain responsible for

ensuring that the programs are well managed, funds are properly spent,

and program objectives are met.

Delegating Authority to

Lenders

Eximbank’s Delegated Authority Program exemplifies one cooperative

approach to increasing SME access to export financing. Under the program,

exporters can have working capital guarantees processed and approved by

a network of 69 delegated authority lenders located in 25 states plus the

District of Columbia, rather than having to go through Eximbank’s

Washington, D.C., office. This program has also allowed Eximbank to

leverage its resources and increase lender participation.

The Delegated Authority Program enabled the U.S. Division’s staff to

handle an increasing number of working capital guarantees while

maintaining the same level of staffing. For example, in 1994, no loans were

processed under the Delegated Authority Program, but in fiscal year 1995,

Page 13 GAO/NSIAD-97-20 Export Finance
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Eximbank’s delegated authority lenders processed 99 loans valued at

$115 million, without an increase in the U.S. Division’s staff. This activity

represented 55 percent of Eximbank’s working capital guarantee program.

During fiscal year 1996, the delegated authority lenders processed 

69 percent of the agency’s working capital guarantees. This activity

represented 192 loans valued at about $227 million. U.S. Division officials

estimated that, even though the Delegated Authority Program allowed

them to leverage their resources, about 20 to 30 percent of staff time was

spent administering and monitoring the program.

The Delegated Authority Program also appears to have increased the level

of lender participation. In fiscal year 1995, 29 active delegated authority

lenders funded, on average, over twice as many loans using delegated

authority than they did the prior year, when the program was dormant.

According to Eximbank officials, lenders’ ability to provide guarantees

without obtaining prior approval coupled with fiscal year 1995 program

enhancements contributed to the increased level of lender participation in

the program. These enhancements included, for example, lenders’ ability

to retain all or part of a loan fee. Over 74 percent of the 56 respondents to

our Delegated Authority Program survey18 confirmed that quicker

processing time attributable to the lenders’ ability to approve loan

guarantees, fee incentives, and the 90-percent guarantee coverage were

the most important factors for remaining enrolled in the program.

Because more than two-thirds of Eximbank’s export working capital loans

are handled through the Delegated Authority Program, monitoring lenders’

compliance with program requirements and managing the associated level

of risks of these loan guarantees have become increasingly important.

Eximbank developed a new monitoring system that requires inspections of

all delegated authority lenders that have made at least one transaction

under the program. According to Eximbank officials, these inspections

assess lenders’ compliance with various program requirements, including

repayment terms, reviews of creditworthiness, and maintenance of loan

transaction documentation. If Eximbank identifies compliance problems,

it can place the lender on probation or retract the lender’s delegated

authority status. Eximbank officials said that possible loss of eligibility is

one of the most effective measures for ensuring a lender’s compliance.

Another measure is the 10-percent risk assumed by the bank in the event

of loan defaults. As of June 1996, the default rate for exporters whose

loans were guaranteed through the Delegated Authority Program in fiscal

18We surveyed all 67 lenders that were enrolled in Eximbank’s Delegated Authority Program as of

February 1996.

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year 1995 was 1 default out of 99 loans, and the default rate for loans

guaranteed through Eximbank headquarters was 3 defaults out of 80 loans.

Devolving Greater

Program Responsibility to

the State Level

In 1993, TPCC recognized the merits of expanding the use of cooperative

arrangements with states when it endorsed cofinancing agreements as part

of an overall government strategy to facilitate export promotion and

financing. Under these agreements, federal programs can expand their

outreach to SMEs by taking advantage of the states’ proximity to target

firms and their knowledge of local businesses. Also, all 17 states and the 

1 U.S. territory with export finance programs that were surveyed indicated

their programs were designed to serve smaller companies. Likewise, states

benefit from cooperative agreements by gaining access to federal

guarantee funds that complement their own funds.

However, key limitations to expanding such agreements are (1) legal

prohibitions at the state level and (2) varying levels of state commitment

to export finance assistance. Moreover, these types of arrangements

require provisions or mechanisms to ensure that federal guarantee funds

are appropriately committed. Legal prohibitions sometimes prevent states

from offering state-backed guarantees. Constitutions for six states prohibit

them from providing export finance assistance, according to a report by

the National Association of State Development Agencies.19 States may also

vary in their level of commitment to export financing, depending on the

policy priorities of the states’ current administration. A state program

administrator said maintaining a consistent level of commitment to a

particular program can be difficult because states have limited funds and a

large number of competing demands. In some states, the level of funding

available to support export financing has changed from year to year. In

Maryland, for example, the leveraged guarantee funding was reduced from

$60 million in fiscal year 1995 to $50 million in fiscal year 1996 because of

a shift in the state’s program priorities. In Texas, the leveraged funding

was reduced from $2 million in fiscal year 1995 to no funding in fiscal 

year 1996.20

Eximbank established partnerships with state and local government

offices and private organizations to help market its small business

financial products. In September 1996, it implemented a pilot program

19State Export Program Data Base Analysis, National Association of State Development Agencies,

1994.

20A state program administrator explained that the state’s legislation did not authorize the program to

use any funds and thus no guarantees were made during fiscal year 1996.

Page 15 GAO/NSIAD-97-20 Export Finance
B-275002 

delegating authority for approving working capital guarantees to six of the

agency’s state partners. Eximbank requires participating states to have an

active export guarantee program with an average loan-loss track record of

5 percent or less, an independent credit approval process, and at least one

person within the office or organization who has completed Eximbank’s

City/State Program training requirements.

Under pilot program guidelines, the maximum Eximbank guarantee will

not exceed the legislative limit of the respective state partner, and

Eximbank’s maximum aggregate liability on principal will be $10 million

per state partner. The state, Eximbank, and the lender will be partners in

each guarantee, sharing all risks or losses or recovered amounts on a

proportional basis.21 Matching fund requirements and risk-sharing

provisions are intended to promote accountability, and Eximbank officials

believe they encourage state partners to ensure that federal funds are

appropriately committed. Transactions under this program are also

expected to conform with Delegated Authority Program guidelines and

documentation requirements. As with delegated authority lenders, state

partners are to be subject to periodic field inspections by Eximbank staff.

SBA has developed separate coguarantee arrangements with three states,

as discussed earlier. It relies on risk-sharing program features,

documentation requirements, and its final approval authority to ensure

that states exercise due diligence and comply with coguarantee

arrangements. Although SBA does not have formal eligibility requirements

for developing coguarantee arrangements with states, agency officials

emphasized that they tailor the agreements to the individual state

programs. For example, SBA’s agreement with California provides for a

50/50 matching guarantee for 90 percent of the principal of working capital

loans. Guarantees under this agreement are not to exceed $1.5 million, or

up to $750,000 per agency per guarantee, the maximum amount that

California can guarantee. According to the director of the California

program, the state conducts its loan analysis and completes its forms as

usual and then sends the loan guarantee package to SBA trade finance

specialists located at the USEAC in Long Beach for approval. SBA officials

explained that they have not developed a separate monitoring system for

overseeing its coguarantee agreements with the states because the agency

still retains final review and approval authority for SBA’s portion of the loan

guarantee.

21Specifically, the risk is to be shared as follows: 45 percent for the city/state partner, 45 percent for

Eximbank, and 10 percent for the commercial lender.

Page 16 GAO/NSIAD-97-20 Export Finance
B-275002 

Potential Implications

of Transferring SBA’s

Export Working

Capital Program to

Eximbank

In 1993, TPCC recommended that SBA’s Export Working Capital Program

should be merged into Eximbank’s program if the agency’s harmonization

efforts were unsatisfactory. Although Eximbank and SBA have made

progress in harmonizing their programs, a number of factors would need

to be considered before any such transfer occurred. For example,

Eximbank’s program may not serve some exporters currently served by

SBA since its delegated authority lenders may not handle the smaller export

transactions SBA does. Other exporters may not have easy access to

Eximbank’s U.S. Division and its network of delegated authority lenders,

which are located in only 25 states plus the District of Columbia and tend

to be clustered around large metropolitan areas. Likewise, some SBA

lenders currently served by SBA may lose the benefit of being introduced to

the program and becoming involved in export financing, since Eximbank

and SBA tend to encourage greater lender participation in differing ways

and reach out to different types of lenders. Finally, consolidating the

programs may result in minimal cost savings, according to SBA’s cost

estimates for administering its Export Working Capital Program.

Delegated Authority

Lenders May Not Serve the

Needs of Exporters Served

by SBA

We sought to determine whether Eximbank’s lenders would be willing to

provide the same level of support for smaller export transactions that SBA

lenders provide. In accordance with the market segmentation plan under

harmonization, SBA was to handle applications for loans that were less

than or equal to $833,333 and Eximbank was responsible for handling

working capital loans over $833,333. However, Eximbank’s delegated

authority lenders were not covered by the market segmentation plan and

were allowed to handle smaller export working capital loans.22 Therefore,

we focused our analysis on the delegated authority lenders. During fiscal

years 1995 and 1996, only 24 percent of the loans guaranteed through

Eximbank’s Delegated Authority Program were valued at less than

$500,00023 and about 70 percent of the export working capital loans

guaranteed by SBA were valued at less than $500,000, as shown in figure 2.

22Before the market segmentation plan, Eximbank’s Working Capital Guarantee Program had been

available for loans of any size. In fiscal year 1995, when the market segmentation plan became

effective, Eximbank was to handle working capital guarantee applications for loans over $833,333.

When SBA’s guarantee rate was lowered in fiscal year 1996, Eximbank returned to its practice of

guaranteeing loans of any size. As of October 1, 1996, SBA’s guarantee rate was restored. According to

an Eximbank official, the agency has resumed guaranteeing loans that are consistent with the market

segmentation plan.

23According to Eximbank data, 10 percent of the loans guaranteed under Eximbank’s U.S. Division in

fiscal year 1995 were valued at less than $500,000 (13 percent in 1996).

Page 17 GAO/NSIAD-97-20 Export Finance
B-275002 

Figure 2: Export Working Capital Loans Guaranteed by Dollar Value (fiscal years 1995 and 1996)

< $100 $100 to $249 $250 to $499 $500 to $749 $750 to $833 > $833

0

50

100

150

200

Dollar value (in thousands)

Number of loans

Eximbank

Delegated Authority Program SBA

5.5%

13.7%

22.8%

30.8%

16.6%

7.5%

16.6%

10%

14.4%

4.5%

57%

0.3%

Source: GAO.

In our survey of delegated authority lenders, over 80 percent (46 of 56) of

the respondents indicated that they would be willing to provide export

working capital loans for less than $833,333 to existing customers, and

62 percent (35 of 56) indicated they would be willing to provide such loans

for new customers. However, 66 percent of the respondents indicated that

they would probably not provide a working capital loan under a certain

threshold, which for these lenders was a median threshold of $250,000.24

During fiscal years 1995 and 1996, 14 percent of the export working capital

loans guaranteed through delegated authority lenders were less than

$250,000 compared with about 40 percent of the loans guaranteed by SBA.

24In its October 1996 report to Congress, TPCC recognized the reluctance of banks to handle the

smaller loans, particularly for export financing. It reported that a major problem facing small exporters

was limited access to export finance due to the small number of banks (75 out of 9,000) that provide

this type of financing. Moreover, most of these 75 banks are larger institutions that typically do not

provide banking services to SMEs.

Page 18 GAO/NSIAD-97-20 Export Finance
B-275002 

More than half of the delegated authority lenders indicating they had a

threshold stated that processing loans below that amount was too costly

and time-consuming for them to make a profit. In response to follow-up

contacts, six of seven delegated authority lenders who were generally

willing to provide smaller working capital loans agreed such loans were

largely unprofitable for their institutions.25 They were willing to provide

small working capital loans chiefly to develop new business opportunities

with exporters or maintain their existing customer base.

Over 60 percent of the respondents indicated that certain incentives would

be effective in encouraging them to provide working capital loans under

$833,333. These incentives included changes to Eximbank’s program, such

as allowing lenders to retain a greater portion of the facility fee and further

relaxing collateral requirements. Other changes were outside the scope of

the Delegated Authority Program, including allowing lenders to receive

credit for promoting small business export finance through the

Community Reinvestment Act and relaxing loan loss reserve requirements.

About 32 percent of the respondents suggested simplifying the paperwork

and loan processing requirements of Eximbank’s program or increasing

the guarantee to 100 percent for smaller loans.

Eximbank’s Program May

Not Be Accessible to Some

Exporters

If SBA’s Export Working Capital Program were transferred to Eximbank,

SMEs in some states might not have convenient access to the current

lenders who participate in Eximbank’s Delegated Authority Program.

Eximbank’s U.S. Division is located in Washington, D.C., and its 69

delegated authority lenders located in 25 states plus the District of

Columbia tend to be concentrated in large metropolitan areas. In contrast,

USEACs and SBA’s district offices cover all 50 states and Puerto Rico.

Although Eximbank’s delegated authority lenders are in fewer states than

USEACs and SBA’s district offices, Eximbank may be able to reach these

businesses in other ways, such as its City/State Program. Eximbank’s pilot

programs, which began in September 1996, are intended to increase the

activity level of these local partners.

Some SMEs currently served by SBA may not have access to Eximbank’s

Working Capital Guarantee Program because of statutory restrictions on

the types of loans Eximbank can guarantee and a difference in Eximbank’s

and SBA’s credit qualification requirements. For example, Eximbank is

prohibited from financing defense articles and services and is restricted in

25We selected seven of the survey respondents because they had issued guarantees for and funded at

least three export working capital loans under $833,333 as of February 28, 1996.

Page 19 GAO/NSIAD-97-20 Export Finance
B-275002 

the amount it can guarantee for products that have less than 50 percent

U.S. content. Eximbank’s seemingly stricter credit standards may also

affect small exporters served by SBA.

Transferring Program

Responsibility May Affect

Outreach to Some Lenders

Eximbank and SBA use different methods to increase lender participation

and focus on different types of lenders. If SBA’s Export Working Capital

Program were transferred to Eximbank, outreach to some lenders that are

currently part of SBA’s network of 7(a) lenders may be adversely affected

as a result of these differences.

SBA focuses on attracting new banks to its export program from its pool of

domestic 7(a) program lenders, whereas Eximbank focuses more on

increasing the level of loans funded by its existing lenders. Eximbank also

focuses on attracting new lenders to its program but not to the same

extent as SBA. During fiscal year 1995 and the first 10 months of fiscal year

1996, SBA attracted 180 new lenders to its Export Working Capital

Program, whereas Eximbank attracted 80 new lenders. Although

Eximbank had fewer new lenders, it increased the number of loans

guaranteed by increasing participation in its Delegated Authority Program.

The lenders in SBA’s program tend to have different profiles than those in

Eximbank’s program. SBA officials said they generally work with small

community banks without international divisions and provide one-on-one

assistance with processing export working capital loans. They also

explained that the agency works with larger banks’ small business or

credit departments, which typically lack experience in export financing.

Although some of these larger banks may have international divisions,

these divisions are generally not inclined to handle the less profitable

smaller transactions. Eximbank tends to work with large banks, many

with international departments that can assume delegated authority.

In addition, Eximbank and SBA tend to work with banks of different asset

sizes. For example, over 70 percent of the banks Eximbank works with

have assets greater than $1 billion.26 On the other hand, almost 53 percent

of SBA’s Export Working Capital Program lenders have less than $1 billion

in assets, with 16 percent having assets less than $100 million. (See app. III

for summary data on the assets of SBA’s Export Working Capital Program

lenders and Eximbank’s delegated authority lenders.)

26Asset size data is as of March 30, 1996, except for banks that merged before this date. For merged

banks, we used the most recent asset size data available before merger.

Page 20 GAO/NSIAD-97-20 Export Finance
B-275002 

Some SBA lenders were aware of Eximbank’s Working Capital Guarantee

Program but did not use the program for a variety of reasons. In our

survey of the more active SBA lenders,27 25 of 28 respondents were aware

of Eximbank’s program, but less than half used it. Five respondents did

not use Eximbank’s program because they were satisfied with SBA’s

program, three respondents believed Eximbank’s program was intended

for larger export transactions, and two said the program was too

bureaucratic.

Cost Savings Associated

With Transferring SBA’s

Program May Not Be

Significant

The potential savings associated with transferring the program from SBA to

Eximbank may be modest, given the relatively low estimated costs of

administering SBA’s Export Working Capital Program. Furthermore,

Eximbank might incur increased costs from hiring additional loan officers

to handle the new workload. On the other hand, some of these costs could

be mitigated by approving more working capital loan guarantees through

the Delegated Authority Program or devolving authority to approve

guarantees to more states. SBA estimated it cost $460,000 to administer its

Export Working Capital Program in fiscal year 1995. Under the program,

SBA guaranteed 190 export working capital loans, which resulted in a

potential liability of about $57 million. SBA’s estimates for administering

the Export Working Capital Program include costs related to staffing and

supporting USEACs. Although these estimates do not include the time or

costs of the agency’s district office staff involved in handling export

working capital guarantees, they represent the bulk of the agency’s

administrative costs for the program, according to an SBA official.

Agency Comments

and Our Evaluation

SBA and Eximbank provided us with written comments on a draft of this

report. (See apps. V and VI.) SBA did not offer any overall comments on the

draft but provided specific technical suggestions and observations to

improve the clarity and accuracy of the draft. We have incorporated these

changes in the report where appropriate.

Eximbank generally agreed with the report. However, it disagreed with

our observation that small businesses may have less access to export

working capital if SBA’s program were transferred to Eximbank. Eximbank

stated that its delegated authority lenders had greatly expanded the

availability of its program to small businesses. Although the Delegated

Authority Program has enabled Eximbank to greatly expand its program

27We surveyed all 35 lenders that had funded at least 2 export working capital loans guaranteed by SBA

during fiscal year 1995.

Page 21 GAO/NSIAD-97-20 Export Finance
B-275002 

without increasing its staff, our review also identified a significant

limitation that exporters may face if they must seek smaller working

capital loans from delegated authority lenders. Our analysis of Eximbank

data showed that, for fiscal years 1995 and 1996, only about 24 percent of

the loans guaranteed through Eximbank’s delegated authority lenders

were under $500,000. On the other hand, about 70 percent of the export

working capital loans guaranteed by SBA were valued at less than $500,000.

Scope and

Methodology

To understand federal and state approaches to facilitating export working

capital to SMEs, we interviewed Eximbank and SBA officials and reviewed

pertinent agency documents, such as working capital program

instructions, summary activity reports, and related press releases. We also

reviewed Eximbank and SBA documents on various arrangements aimed at

facilitating export working capital guarantees, such as the Eximbank

Delegated Authority Program, the Eximbank City/State Program, SBA

coguarantee arrangements with states, and SBA agreements with

intermediaries to package export working capital loans. To determine

state efforts to facilitate export working capital for SMEs, we reviewed the

National Association of State Development Agencies’ 1994 State Export

Program Data (the latest comprehensive information on state’s programs

available at the time of our review) as well as information from Eximbank

and SBA. We identified 21 states and 1 U.S. territory using the National

Association of State Development Agencies’ data and identified an

additional 3 states as having export finance programs. We then surveyed

and received responses from representatives at each of the 24 states and

the 1 U.S. territory.

To assess efforts to harmonize Eximbank and SBA’s export working capital

programs, we interviewed officials responsible for administering each

agency’s program and reviewed available program documents, such as

operating guidelines and sample guarantee agreements. We also reviewed

a consultant report, cosponsored by both agencies, aimed at evaluating the

success of harmonization efforts.28 To identify whether harmonization

efforts may have affected the level of program activity, we analyzed

Eximbank and SBA data on the number and dollar value of loans

guaranteed during fiscal years 1994 through 1996 as well as data on the

number of lenders and exporters participating in the working capital

guarantee programs. Data presented in the report on the number and value

of loans guaranteed exclude those cases in which a guarantee was

28Harmonization of Ex-Im Bank Working Capital Guarantee Program and SBA Export Working Capital

Program, Evaluation Study, ProAction Agency, May 20, 1996.

Page 22 GAO/NSIAD-97-20 Export Finance
B-275002 

approved but was subsequently withdrawn or canceled. To identify the

number of new lenders and new exporters, we compared agency data for

fiscal years 1994 through 1996. New lenders or exporters for fiscal year

1995 were those that did not participate in the programs in fiscal year 1994

(before harmonization). New lenders or exporters for fiscal year 1996

were those that did not participate in the programs in the preceding 2

years. We did not independently verify the accuracy of the data provided

by Eximbank or SBA.

To identify the issues associated with expanding the number of

cooperative agreements in the federal working capital guarantee

programs, we focused on delegating authority to lenders and devolving

greater responsibility for export working capital programs to the states.

We evaluated these approaches on the basis of leveraging federal

resources, SME access to export financing, and program oversight. We also

examined the potential implications of transferring SBA’s export working

capital program to Eximbank by focusing on SME access to export

financing and lender participation. We discussed these approaches with

Eximbank, SBA, and Department of Commerce officials as well as with

officials of financial institutions and small business trade associations,

such as the Bankers Association of Foreign Trade, Small Business

Exporters Association, and the National Small Business United.

To obtain lenders’ perspectives on expanding the use of cooperative

agreements with banks, we surveyed the 67 lenders that were enrolled in

Eximbank’s Delegated Authority Program as of February 1996 and had

about an 85-percent response rate. We also surveyed all lenders that had

funded at least 2 export working capital loans guaranteed by SBA during

fiscal year 1995 (35 out of 150 lenders) and had an 80-percent response

rate. (See app. IV for more details on the methodology for and selected

results of the two lender surveys.) We obtained information on the costs

associated with administering the export working capital programs to

determine potential cost savings that may be derived from transferring

SBA’s program to Eximbank. Since agency budget and cost data was not

maintained by specific program areas, we relied on estimates provided by

both Eximbank and SBA.

We did our work from February to October 1996 in accordance with

generally accepted government auditing standards.

Page 23 GAO/NSIAD-97-20 Export Finance
B-275002 

We are sending copies of this report to appropriate congressional

committees, the Administrator of the Small Business Administration, the

Chairman of the U.S. Export-Import Bank, and the Chairman of the Trade

Promotion Coordinating Committee. We will also make copies available to

others on request.

This report was prepared under the direction of JayEtta Z. Hecker,

Associate Director, who may be reached on (202)512-8984 if you or your

staff have any questions about this report. Other major contributors to this

report are listed in appendix VII.

Benjamin F. Nelson

Director, International Relations and Trade Issues

Page 24 GAO/NSIAD-97-20 Export Finance
Page 25 GAO/NSIAD-97-20 Export Finance
Contents

Letter 1

Appendix I 

Main Components for

Delivering Export

Working Capital

Programs to Smalland Medium-Sized

Enterprises

28

Appendix II 

Information on

State-Level Export

Finance Programs

30

Appendix III 

Lenders Participating

in Eximbank’s and

SBA’s Export Working

Capital Programs

34

Appendix IV 

Methodology for and

Selected Results of

Lender Surveys

35

Survey of Eximbank Delegated Authority Lenders 35

Survey of Lenders Participating in SBA’s Export Working Capital

Program

38

Appendix V 

Comments From the

Small Business

Administration

41

Page 26 GAO/NSIAD-97-20 Export Finance
Contents

Appendix VI 

Comments From the

U.S. Export-Import

Bank

45

Appendix VII 

Major Contributors to

This Report

53

Tables Table 1: Staff Resources, Available Funding, and Loans

Guaranteed for States Identified With Export Working Capital

Guarantee Funds for Fiscal Year 1996

7

Table 2: Number of New Lenders Funding Loans and New

Exporters Receiving Loans

13

Table II.1: States Surveyed With an Export Finance Program or

Export Working Capital Guarantee Funds

30

Table II.2: Leveraged Guarantee Fund and Export Working

Capital Loans Guaranteed by State 

31

Table II.3: Comparison of Eight State-Level Export Working

Capital Guarantee Programs

32

Figures Figure 1: Export Working Capital Loans Guaranteed by

Eximbank and SBA 

12

Figure 2: Export Working Capital Loans Guaranteed by Dollar

Value 

18

Figure I.1: Eximbank’s U.S. Division and Delegated Authority

Lenders

28

Figure I.2: USEACs and SBA District Offices 29

Abbreviations

Eximbank U.S. Export-Import Bank

SBA Small Business Administration

SME small- and medium-sized enterprises

TPCC Trade Promotion Coordinating Committee

USEAC U.S. Export Assistance Centers

Page 27 GAO/NSIAD-97-20 Export Finance
Appendix I 

Main Components for Delivering Export

Working Capital Programs to Small- and

Medium-Sized Enterprises

The U.S. Export-Import Bank (Eximbank) relies heavily on its U.S.

Division and delegated authority lenders for delivering its Working Capital

Guarantee Program. Figure I.1 shows the locations of the U.S. Division and

delegated authority lenders.

Figure I.1: Eximbank’s U.S. Division and Delegated Authority Lenders

 

 Eximbank U.S. Division

 Delegated authority

 lenders

Source: U.S. Division, Eximbank.

Page 28 GAO/NSIAD-97-20 Export Finance
Appendix I 

Main Components for Delivering Export

Working Capital Programs to Small- and

Medium-Sized Enterprises

The Small Business Administration (SBA) relies on the U.S. Export

Assistance Centers (USEAC) and district offices to deliver its Export

Working Capital Program. Figure I.2 shows the locations of USEACs and SBA

district offices.

Figure I.2: USEACs and SBA District Offices

USEACs 

SBA District Offices 

Source: SBA.

Page 29 GAO/NSIAD-97-20 Export Finance
Appendix II 

Information on State-Level Export Finance

Programs

Table II.1 shows the 17 states and 1 U.S. territory in our survey that have

export financing programs. Table II.2 shows the eight states that offer

working capital guarantees as part of their export financing programs and

the number and amount of guaranteed loans. Table II.3 compares the eight

state-level export working capital guarantee programs.

Table II.1: States Surveyed With an

Export Finance Program or Export

Working Capital Guarantee Funds

States with export finance programs

without working capital guaranteesa

States with export finance programs

that offer working capital guarantees

Alaska California

Arkansas Florida

Indiana Georgia

New Hampshire Kansas

New Jersey Maryland

New York Massachusetts

Puerto Rico Minnesota

Texasb South Carolina

Utah

Washington

aOregon has a general credit enhancement fund that is not precluded from providing funding for

export financing.

bTexas has an export finance program, but funds allocated have not been available for providing

working capital guarantees since March 1995. According to the state program administrator, the

appropriate language needed to allow the Texas program to access the fund had been

inadvertently omitted from the authorizing legislation.

Page 30 GAO/NSIAD-97-20 Export Finance
Appendix II 

Information on State-Level Export Finance

Programs

Table II.2: Leveraged Guarantee Fund and Export Working Capital Loans Guaranteed by State (fiscal years 1995 and 1996)

Loans guaranteed Loans guaranteed

Fiscal year 1995 Fiscal year 1996

Dollars in thousands

State

Leveraged

funding

levela Number Amount

Leveraged

funding

levela Number Amount

California $38,908 165 $65,136 $38,908 91 $39,498

Florida 5,000 N/Ab N/Ab 20,000 25 3,588c

Georgia 1,000 2 330 2,000 1 55

Kansas 2,120 5 1,180 2,300 6 2,542

Maryland 60,000d 22 19,000 50,000d 15 15,900

Massachusetts 30,000 N/Ab N/Ab 30,000 2 1,000

Minnesota 3,365 10 1,380 3,674 10 1,550

South Carolina 850 1 100 850 0 0

Note: The states’ fiscal year begins July 1 and ends June 30. Amounts for loan guarantee

represent amount of guarantee liability.

aThe leveraged funding level is calculated by multiplying the allocated funding level by the

number of times the fund may be leveraged. This level represents the maximum amount of

guarantees that may be outstanding at any one time.

bNot available.

cThis amount represents the state’s total liability associated with the 25 loans guaranteed during

fiscal year 1996.

dThis fund is available for domestic loans as well as export loan guarantees.

Page 31 GAO/NSIAD-97-20 Export Finance
Appendix II 

Information on State-Level Export Finance

Programs

Table II.3: Comparison of Eight

State-Level Export Working Capital

Guarantee Programs

Program attribute California Florida G

Program attribute California Florida G

First year of operation 1985 1994

Cumulative default ratea 1.5 0 0

Number of loans guaranteed during fiscal

years 1995 and 1996

256 25b 3

Average amount of loans guaranteed during

fiscal years 1995 and 1996

$408,726 $143,520b $

State-specific requirementsc Minimum state

content and

state-based

operations

Shipments from

state port

M

Typical size of participating companies 15 to 20 employees

or $1 million to $20

million in sales

7 employees or 

$5 million or less in

sales

3

Maximum guarantee percentage 90 90 9

Maximum loan guarantee $750,000 $500,000 $

Minimum loan guarantee None None N

Number of lenders in program during fiscal

years 1995 and 1996

65 20 4

Page 32 GAO/NSIAD-97-20 Export Finance
Appendix II 

Information on State-Level Export Finance

Programs

Georgia Kansas Maryland Massachusetts Minnesota South Carolina

Georgia Kansas Maryland Massachusetts Minnesota South Carolina

1994 1990 1986 1993 1983 1990

0 0 1.0 0 1.2 0

3 11 37 2 20 1

$128,333 $338,358 $943,243 $500,000 $146,500 $100,000

Minimum state content Minimum state

content

Minimum state

content or shipment

from state port

Minimum state

content

Minimum state

content

Minimum state content

3 to 125 employees 500 employees or

less

$1 million to 

$5 million in sales

50 employees or

$10 million in sales

100 employees or

less

5 to 50 employees

90 90 90 70 90 85

$500,000 $345,000 $1,000,000 $500,000 $250,000 $170,000

None None None $50,000 $25,000 None

4 10 10 4 5 1

aThe cumulative default rate represents the rate of defaults since the fund was first established in

the state.

bThis figure represents fiscal year 1996.

cFor those states with a state content requirement, the required minimum state content was either

50 or 51 percent.

Page 33 GAO/NSIAD-97-20 Export Finance
Appendix III 

Lenders Participating in Eximbank’s and

SBA’s Export Working Capital Programs

16.0%

13.0%

23.0%

48.0%

SBA (141)

7.0%

14.0%

8.0%

71.0%

Eximbank (107)

< $100 mil. $100 to $250 mil. $250 mil. to $1 bil. > $1 bil.

Note:Data shown represent 141 lenders participating in SBA’s program as of August 31, 1995,

and 107 lenders participating in Eximbank’s program as of April 29, 1996. Asset size data is as of

March 30, 1996, except for banks that merged before this date. For merged banks, we used the

most recent asset size data available before merger.

Page 34 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

During our review, we surveyed lenders participating in Eximbank’s

Delegated Authority Program and lenders participating in SBA’s Export

Working Capital Program. The following is a summary of our methodology

and the responses we received for selected survey questions.

Survey of Eximbank

Delegated Authority

Lenders

To obtain lenders’ perspectives on the Delegated Authority Program and

their willingness to provide smaller export working capital loans, we

surveyed all lenders participating in the program at the time of our review.

Eximbank provided us with a list of all delegated authority lenders as of

February 21, 1996, and a database that contained information on all

working capital loans guaranteed during fiscal year 1995 and fiscal 

year 1996, as of February 29, 1996. We surveyed all 67 delegated authority

lenders1

 and obtained responses from 57, for a response rate of about

85 percent.2

For nonrespondents, seven had not provided any working capital loans

under delegated authority, and the other three had provided at least one

such loan under delegated authority. We pretested the survey with four

lenders, one each in Arizona, California, Texas, and Washington, obtained

feedback from Eximbank on the draft instrument, and made appropriate

revisions. Two of our interviewers surveyed banks by telephone between

April and June 1996. In some instances, banks responded by facsimile

machine. To ensure data reliability and consistency, we asked appropriate

follow-up questions during our telephone interviews. In some cases, we

followed up with lenders who faxed in responses, obtained information on

some questions not answered, and clarified certain responses. The

following are selected questions as asked, and the responses we received

from Eximbank delegated authority lenders.

Question 1:

The following is a list of factors that may be important to remaining

enrolled in the program. Can you add any other factors to this list? Also,

please identify the top three most important factors by placing a “1” by the

most important factor, a “2” by the second most important factor, and a “3”

by the third most important factor.

1

Eximbank’s list contained 68 lenders; however, 1 lender said that it was affiliated with another lender

and requested that we only administer one survey for both lenders.

2

For our analysis, we used 56 of the responses because 1 of the responses was based on a pretest that

could not be used in the analysis.

Page 35 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

Top 3 factors 1 2 3 Total

Percentage

respondents

Fee incentives 9 18 15 42 75.0

Guarantee coverage of 90 percent 32 12 4 48 85.7

Quick processing time to meet customer

needs 11 19 15 45 80.4

Access to Eximbank’s expertise in

international finance 0 2 7 9 16.1

Cap of $75(AA)/$50(A)/$25(B) million in

guarantees per bank 0 0 2 2 3.6

Cap of $5(AA)/$3.5(A)/$2(B) million per

borrower 1 3 7 11 19.7

Question 2:

If there is a demand, how likely would your bank be to provide export

working capital loans for less than $833,333 to small businesses with

whom you have an established banking relationship? (Please check one.)

Very unlikely

Somewhat

unlikely

As likely

as unlikely

Somewhat

likely Very likely

No basis 

to judge

4 4 2 2 44 0

n = 56

Question 3:

If there is a demand, how likely would your bank be to provide export

working capital loans for less than $833,333 to small businesses with

whom you do not have established banking relationship? (Please check

one.)

Very unlikely

Somewhat

unlikely

As likely

as unlikely

Somewhat

likely Very likely

No basis 

to judge

9 8 4 8 27 0

n = 56

Page 36 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

Question 4:

Is there some amount under which your bank would generally not provide

export working capital loans?

Yes = 37

No = 18

Loan amount Numbera

$25,000 1

50,000 2

100,000 10

150,000 1

200,000 3

250,000 5

300,000 2

350,000 1

500,000 7

1,000,000 3

aTwo lenders stated that they had a threshold, but did not provide the dollar amount of the

threshold.

Average: $302,143

Median: $250,000

Question 5:

In your opinion, how effectively would the following incentives encourage

banks participating in Eximbank’s Delegated Authority Program to

provide more export working capital to small businesses through the

program? (Please identify any other incentives you feel would be effective

and please check one box in each row.)

n = 56

Page 37 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

Very

effective Effective

Moderately

effective

Not

effective

No basis

to judge

Retaining a greater proportion of the fees 37 11 7 1 0

Having more relaxed collateral requirements 24 15 10 7 0

Other: Simplifying the paperwork and loan processing requirements 9 0 0 0 0

Other: Increasing the guarantee to 100 percent 7 0 0 0 0

Question 6:

In your opinion, how effectively would the following incentives encourage

banks to provide more export working capital to small businesses in

general? (Please identify any other incentives you feel would be effective

and please check one box in each row.)

n = 56

Very

effective Effective

Moderately

effective

Not

effective

No basis

to judge

Receiving credit for adhering to the Community Reinvestment Act 20 15 13 3 0

Relaxing loan loss reserve requirements for government guaranteed

loans 21 16 11 3 0

Survey of Lenders

Participating in SBA’s

Export Working

Capital Program

We asked lenders participating in SBA’s Export Working Capital Program

about their banks’ policies and opinions on SBA’s program. SBA provided us

with a list of 150 lenders enrolled in its Export Working Capital Program

as of August 1995 and a database of all loans guaranteed through the

program during fiscal year 1995. During fiscal year 1995, 17 lenders did not

make any loans guaranteed through the program, 98 lenders made only 

1 loan, and the remaining 35 made 2 or more such loans.

We surveyed all 35 participants that had funded 2 or more loans

guaranteed through SBA’s Export Working Capital Program during fiscal

year 1995 and received responses from 28 lenders, an 80-percent response

rate. These 28 lenders had asset sizes ranging from $33 million to 

$44 billion and were located throughout the United States. The seven

nonrespondents surveyed had asset sizes that ranged from approximately

$84 million to $49 billion and were also located throughout the United

States.

Page 38 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

We pretested the questionnaire with four lenders, one each in Oregon,

New Jersey, New York, and Washington, D.C., in early July 1996, and made

appropriate revisions. Two of our interviewers surveyed the lenders by

telephone between July and August 1996 and allowed some lenders to

respond by facsimile machine. To ensure data reliability and consistency,

we reviewed and performed edit checks of the instruments returned by

facsimile machine. The following are selected questions as asked and the

responses we received from SBA lenders.

Question 7:

Similar to SBA’s Export Working Capital Program, the Eximbank

administers a working capital guarantee program. Are you aware of this

program?

Yes = 25

No = 3

Question 8:

Does your department currently use Eximbank’s working capital

guarantee program?

Yes = 13

No = 12

Question 9:

Overall, how would you characterize your department’s experience with

Eximbank’s program?

1 = Very positive

7 = Generally positive

3 = Neutral

0 = Generally negative

0 = Very negative

2 = Not sure

n = 13

Page 39 GAO/NSIAD-97-20 Export Finance
Appendix IV 

Methodology for and Selected Results of

Lender Surveys

Question 10:

In your opinion, which of the following reasons best explains why your

department has not used Eximbank’s working capital program? (Please

rank up to 3 reasons by placing “1” by the most important reason, “2” by

the second most important, and “3” by the third most important.)

The number of respondents that ranked the following reasons “1”:

3 = Believe Eximbank’s program was intended for larger export

transactions

1 = Eximbank offices (headquarters and regions) are not accessible

2 = Eximbank’s program viewed as being too bureaucratic

5 = Satisfied with SBA’s program and perceive no need to use Eximbank’s

 program

1 = Other: (Please specify) Local representation lacking.

n = 12

Page 40 GAO/NSIAD-97-20 Export Finance
Appendix V 

Comments From the Small Business

Administration

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Now on p. 1.

Now on pp. 1-2.

Now on p. 2.

See comment 1.

Now on pp. 3-4.

Page 41 GAO/NSIAD-97-20 Export Finance
Appendix V 

Comments From the Small Business

Administration

Now on pp. 4-5.

Now on p. 5

See comment 2.

Now on p. 5.

Now on p. 8.

Now on p. 9.

Now on pp. 14-15.

Now on p. 15

Page 42 GAO/NSIAD-97-20 Export Finance
Appendix V 

Comments From the Small Business

Administration

Now on p. 20.

Now on pp. 24-25.

Now on p. 28.

Now on pp. 33-34.

Page 43 GAO/NSIAD-97-20 Export Finance
Appendix V 

Comments From the Small Business

Administration

The following are GAO’s comments on SBA’s letter dated November 26,

1996.

GAO Comments 1. Data was not readily available for us to make a comparable statement

regarding the average number of employees per company that have

obtained working capital loans guaranteed from Eximbank.

2. Eximbank staff are presently located at 4 of the 19 USEACs currently in

operation. Eximbank has indicated that it believes a combination of its

regional office staff and city/state participants would be able to respond to

regional USEAC needs for Eximbank services.

Page 44 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 45 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Now on pp. 24-25.

Page 46 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Now on pp. 3, 5, 6, 

and 28.

Page 47 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Now on p. 14.

Page 48 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Now on p. 14.

See comment 1.

Page 49 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

Now on pp. 28-29.

See comment 2.

Page 50 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

See comment 3.

Page 51 GAO/NSIAD-97-20 Export Finance
Appendix VI 

Comments From the U.S. Export-Import

Bank

The following are GAO’s comments on Eximbank’s letter dated

December 2, 1996.

GAO Comments 1. We modified the report to better highlight the difference in SBA’s and

Eximbank’s credit qualification requirements. Eximbank requires

borrowers to have a positive net worth; SBA does not. Eximbank’s

requirement is stipulated in its working capital guarantee program

instructions. Also, ProAction Agency, the consultant commissioned by

Eximbank and SBA to evaluate harmonization efforts, reported in May 1996

that this requirement was a key difference between each agency’s

program. Although Eximbank officials stated that they have the flexibility

to waive this requirement, they acknowledged that, in practice, there were

only a few instances in which this was done.

2. The default information presented in the report is not intended to

demonstrate differences in default rates between the U.S. Division and the

Delegated Authority Lender Program. Further, we did not include in the

report any comparison of claims after a default under Eximbank’s or SBA’s

program. Rather, the report provides information on the number of

defaults.

3. The report recognizes that SBA’s cost estimates for administering its

Export Working Capital Program do not include the time or costs for the

agency’s district office staff involved in handling export working capital

guarantees. It does not attempt to make a direct comparison with

Eximbank’s estimated program costs.

Page 52 GAO/NSIAD-97-20 Export Finance
Appendix VII 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

John P. Hutton, Assistant Director

Jean-Paul Reveyoso, Evaluator

General Government

Division

Martin H. De Alteriis, Social Science Analyst

San Francisco Field

Office

Evelyn E. Aquino, Evaluator-in-Charge

José R. Peña, Evaluator

May M. Lee, Computer Specialist

Gerhard C. Brostrom, Communications Analyst

(711171) Page 53 GAO/NSIAD-97-20 Export Finance
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