If there was a bright spot for small businesses during the downturn, it was that Uncle Sam continued to help buoy their exports.
While banks pulled the plug on other types of small-business financing, government-backed funding for selling goods abroad stayed stable.
“We would have survived, but it would have been a lot more difficult from a cash flow perspective” without export financing, said Jim Zullo, chief financial officer at Irvine’s Medennium Inc., a maker of eye devices for treating dryness and cataracts. “As a small company, you are looking to hang on to every penny you can.”
Medennium tapped the Newport Beach office of the Washington, D.C.-based Export-Import Bank, a government agency that guarantees loans to small businesses and provides other services to minimize risk for lenders to exporters.
Amid the credit crunch, the government guarantees helped small businesses get loans when banks might otherwise have turned them down.
Ex-Im Bank helped Medennium secure
a $950,000 loan and also insures its re-ceivables in case a customer doesn’t pay.
“During the downturn, we didn’t have any problems,” Zullo said. “We were able to keep our line of credit even though our sales dropped.”
Insurance
Medennium, which has 28 workers here, filed three claims under its insurance policy after some of its distributors didn’t pay for its goods.
“The U.S. government has the clout to go and collect the money,” Zullo said. “They have so far collected on two of the three claims.”
Fullerton’s Pacific Miniatures Inc., a maker of model airplanes that are used for promotions and marketing, gets about 40% of its $7 million in yearly sales from abroad, mostly from airlines in Europe and the Middle East.
The Ex-Im loan guarantees provide “a little more sense of security so that if worse came to worse, they would pay if we couldn’t,” Chief Executive Fred Ouweleen said.
Ex-Im also insures Pacific Miniatures’ exports, which meant it didn’t have to get deposits or letters of credit from buyers abroad, Ouweleen said.
“It gave us a competitive advantage,” he said. “It gave us a sense of security that if a transaction really went south some of the risks could be taken care of.”
Ouweleen estimates that Pacific Miniatures’ export sales slumped about 20% during the downturn.
“In a financial crisis like we saw, certain customers we thought were OK turned out to have significant financial problems,” he said. “If anything, it made the export programs more appealing to us.”
Rising Exports
Anecdotal evidence shows local exports are on the rise, according to David Josephson, Western regional director of Ex-Im Bank.
“We are getting more local companies who want to sell abroad, and the ones who are already selling abroad are more frequently calling us,” he said.
Ex-Im Bank has space at the Newport Beach office of the Commerce Department, which works with local companies to boost business abroad. The office’s trade promotion efforts are seeing more interest too, according to Josephson.
“We are getting 20 to 30 calls a month in the OC offices,” he said. “Maybe two or three years ago, that was how many we got in a year.”
For the six months through March, Ex-Im Bank had some $13 billion worth of export underwriting authorized by Congress, up 125% from a year earlier, he said.
The government agency works with around 75 banks but doesn’t do any lending itself. It makes money from insurance premiums and fees.
Boosting exports is an Obama administration push. In the president’s most recent State of the Union speech, he called for doubling U.S. exports within five years.
“The idea is that exports can create or sustain some 2 million jobs,” said Ro Khanna, deputy assistant secretary for domestic operations for the Commerce Department. “It’s the first time there has been a coordinated government effort to increase exports and link it to creating jobs at home.”
Khanna visited Orange County a few weeks ago.
“This area has extraordinary emerging technologies in clean tech, advanced manufacturing, technology and biotech,” he said. “These are the industries in which we see the largest potential for growing exports. My visit here is to highlight the critical role that the companies in OC are going to play in achieving the president’s national export initiative.”
