What Is the International Trade Loan?

The International Trade Loan is for the United States small businesses with a global presence. The goal is to help them bring production and jobs back to the United States from other countries. In this article, we will take a close look at trade loans and how they can benefit your business.

What are Trade Loans Used For?

If you take out an International Trade Loan, you must produce goods or services for international trade. You cannot limit your sales to the U.S. market unless you’re being severely affected by imports.

The SBA asks that you use the loan for equipment within the U.S or its territories. You may allocate the funds toward constructing, improving, or expanding both your facilities and equipment.

In addition, the proceeds may be put toward debt refinancing that isn’t structured under reasonable terms and conditions. This includes debt that’s eligible for refinancing under a Standard SBA 7(a) Loan.

International Trade Loan

The International Trade Loan offers up to $5 million in funding. The SBA can guarantee up to 90% up to a maximum of $4.5 million. If you’re using your loan for working capital, the guarantee caps out at $4 million.

SBA-approved lenders who offer trade loans may charge an interest rate of up to 2.25% and 2.75% points above the prime rate, depending on the loan’s maturity.

When it comes to collateral, the SBA accepts collateral located in the U.S. It also requires a first lien on property or equipment financing. Depending on your situation, you may have to back your loan with additional collateral.

Eligibility for an International Trade Loan

You need to meet the requirements for standard 7(a) loan if you want to take out an international trade loan. You will need to prove that the loan will help you expand or develop an export market. If your business has been significantly affected by imports, you’re required to show that the loan will help you regain your competitive spot.

Financing Alternatives to the International Trade Loan

Explore these alternatives if an international trade loan is not right for you.

SBA Loans

In addition to the standard International Trade Loan, the SBA offers two other international trade loan options that can help your business. Working Capital Loans come with loan amounts of up to $5 million and are also backed by an SBA guarantee of 90%.

Traditional Business Loans

You can opt for a traditional business loan from a bank, credit union, or online lender. Since rates and terms vary by business lender you will want to shop around to find the ideal financing option for your business’s particular situation.

Business Lines of Credit

A business line of credit is another form of financing that may make sense if you’re unsure of how much you need to borrow. You will be able to withdraw as much or as little as you want.

Merchant Cash Advances

Business cash advances offer immediate approvals and fast funding. Sometimes you get approved on the same day.

The Bottom Line

If you’re involved in international trade, the international trade loan can help you have enough cash flow to operate. You can get up to $5 million in funding for fixed assets and working capital, as long as you start, continue, or expand your international export efforts.