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The new small business administration (SBA) fee structure change is a big win for manufacturers and exporters

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By Daniel Pische, Senior Vice President

Why We Advocate 

At First American Bank, we think of ourselves as more than just a banking institution. We see ourselves as personal wealth management and financial advisors who empower our clients to make more of themselves, their businesses, and their legacies. Banking for us is not a short-term transaction. It’s a long-term partnership based on an essential promise to always prioritize our clients’ success and never shy away from being outspoken in defense of their financial interests and wellbeing. 

This is why we advocate.  

This is why every month now we will bring you news, updates, and information on what we’re doing every day on the frontlines of policy and the community that can help you and your company make smarter decisions to better manage and protect your wealth. 

SBA Announces New Export Working Capital Program Fee Structure Effective October 1, 2020  

On September 21, 2020, the Small Business Administration (SBA) announced an important change to its fee structure for loans issued through its Export Working Capital Program (EWCP) effective October 1. This important fee structure change has big implications for manufacturers and exporters that need to access longer term working capital.  

“Not being able to access working capital is one of the most significant challenges exporting companies face,” says Dan Pische, First American Bank Senior Vice President and an expert on trade finance. “Many banks don’t lend against foreign accounts receivable. Yet, obtaining working capital is key to supporting growth by allowing companies to fund current orders as well as negotiate future opportunities. This fee structure change allows companies to access working capital with more flexibility, fewer administrative burdens, and at a lower cost.”  

The problem with the existing EWCP fee structure was that it organized loans into two categories with two different fees: for loans of 12 months and less, the guaranty fee paid by the borrower to the SBA was 0.25%. For loans over 12 months that fee increased to over 3.0%. 

“The EWCP structure up until now was problematic because for loans over 12 months the increase in the guaranty fee would kill a lot of deals,” says Pische. “Rates of 0.25% for an SBA approval for 12 months increased to 3.0-3.75% for an approval over 12 months. The loan costs were just too expensive.” 

Under the new fee structure, manufacturers using the Export Working Capital Program pay a graduated fee for each 12-month increment of their loan term. This allows for a more flexible loan structure, reduces administrative costs, and makes manufacturers more competitive on larger orders. 

Working on behalf of its exporting customers, First American Bank’s Congressional advocacy and testimony helped to get the EWCP fee structure changed. 

In April 2019, Pische flew from Miami to Washington, D.C. to testify in front of the U.S. Senate Small Business and Entrepreneurship Committee. He along with several other trade finance and banking experts helped push through the fee change along with advocating for other improvements to the EWCP loan structure. For exporting companies, the fee change specifically couldn’t have come at a better time. 

“One of our core strengths has always been working with exporters and manufacturers,” says Pische. “But it’s never been more important than it is right now to advocate on behalf of our exporting and manufacturing customers and leverage our experience to help them use every tool possible to weather the current economic climate and take advantage of opportunities abroad.” 

More information on First American Bank’s SBA and export loan programs and building a relationship with one of our trade advisory experts can here found here

Daniel Pische is a Senior Vice President of Asset-Based Lending and Trade Finance at First American Bank.