SBA Site to Aid Small Banks Fearful of Trade Finance
Kline, Alan, American Banker
The U.S. Small Business Administration is counting on the Internet to change community bankers' views about international trade.
Recognizing that most small banks consider trade financing to be more trouble than it is worth, the agency has developed an on-line rating service that, in a few keystrokes, can help a bank determine the creditworthiness of foreign companies that trade with its small-business customers. SBA officials hope the quick-response system -- to be launched today in New England -- will ease bankers' fears and encourage them to finance more imports and exports.
"The beauty of this is that a bank is not going to have to create an international lending division just to do loans for these folks," said Jean Smith, deputy assistant administrator at the SBA's Office of International Trade.
Dubbed EXR Online, for Export Risk Analysis, the program is free and available to all small-business lenders through a password issued by the SBA. If it catches on in New England, it will be offered to West Coast lenders by early next year. Plans for further expansion have not been set.
Trade finance is not a new business for the SBA; it has offered loan guarantees on overseas transactions for about five years. But the program, which handles just a few hundred transactions each year, has not come close to meeting expectations, partly due to a lack of interest among small banks, Ms. Smith said.
"A lot of banks don't get into this business because it takes time and effort," she said.
The community banks doing well in this market have hired specialists in international lending. Most others either refer loan requests to their larger correspondent banks -- which typically have sophisticated international divisions -- or have chosen to stay out of the game entirely
"You can't really justify ramping up for it for the few occasions that business customers ask for this type of thing," said Robert Daigle, president of $582 million-asset Camden (Maine) National Bank. …