SBA ready to help Valley businesses take advantage of U.S.-Mexico-Canada trade deal

On Dec. 19, the U.S. House of Representatives passed the United States-Mexico-Canada Agreement (USMCA). A modern trade deal that cuts red tape and increases protections for U.S. companies, USMCA also includes a chapter dedicated to small businesses, a first for trade agreements. Its passage puts San Joaquin Valley business owners — including farmers and manufacturers — in a prime position to participate in cross border trade.

In 2018, California exports to Mexico and Canada totaled $48.5 billion. With the fields, orchards, and vineyards located here and around the state, it’s easy to think that fruits, vegetables, and nuts are what California companies sell most to their Mexican and Canadian customers. But surprisingly, agriculture ranked fourth, behind computer & electronic products, transportation equipment, and machinery as this state’s top export to our northern and southern neighbors.

With help from the Small Business Administration, there is even more that San Joaquin Valley companies can sell — in Mexico, to Canada, and around the globe. The next customer for this region’s small businesses could be in Tijuana, Toronto, or any corner of the world, and SBA’s international trade programs are key to unlocking new exporting opportunities under USMCA.

Expanding access to capital is the SBA’s main role in supporting foreign trade. The SBA’s export financing programs give Valley small businesses a way to provide more competitive payment terms to foreign customers, making local products more attainable to cross border buyers.

This region’s companies use a variety of ways to get paid for their overseas sales. Requiring cash in advance and getting paid upfront are the least risky strategies for our businesses — but they’re the least attractive to foreign customers because this ties up their capital. SBA export programs give local firms broad options when they negotiate export payment terms, helping make Valley products a better deal for Mexican and Canadian customers.

The SBA’s Export Working Capital Program (EWCP) benefits San Joaquin Valley small businesses by allowing them to offer favorable payment terms to overseas buyers. Local companies establish a revolving line of credit — up to $5 million — to fund export transactions. This helps them extend flexible payment options for the life of an international trade deal, from pre-shipment working capital through final payment on invoices.

SBA’s Export Express loan provides up to $500,000 to enhance a company’s exporting ability. Small businesses can attend overseas trade shows, translate product literature into other languages, buy equipment, or expand their facilities. SBA’s International Trade Loan funds up to $5 million for businesses to purchase, build, improve, or expand facilities and buy equipment they need for international trade.

In addition to the SBA’s export loan programs, Valley small businesses can use export credit insurance to cover up to 95% of their invoiced amount on a foreign deal. This further decreases their exposure when selling across the border, which can help them close more and bigger orders.

The SBA also leverages state and local partnerships that provide trade assistance to small businesses. The State Trade and Export Promotion (STEP) grant helps Valley companies break into foreign markets by offsetting the costs of trade shows, trade missions, and development of marketing materials. This helps local companies do their first overseas deal and assists experienced exporters with breaking into new markets. The SBA makes further technical assistance available to small businesses with free export counseling and consulting from trusted local resource partners. All of these services help our region’s companies be local and get the support they need to go global.

USMCA cuts red tape, increases export opportunities, and for the first time, a trade deal recognizes the critical role of small businesses in the North American economy. SBA’s international trade programs help small businesses increase their sales and reduce the risk of doing business across the border — in Matamoros or Montreal — while providing competitive payment terms favorable to their foreign customers.

With expanded cross border trade opportunities under USMCA, SBA programs can be the key for San Joaquin Valley’s small businesses to unlock new deals — in Mexico, to Canada, and around the world.