Due to trouble getting a small business loan and other financial difficulties, some small businesses have had a tough time expanding operations overseas. Small businesses currently account for one-third of exported goods from the United States, making them a huge contributor to the GDP and overall economic recovery, but government officials and economists alike have stressed the importance of increasing these numbers.
In President Barack Obama’s 2010 State of the Union address, he vowed to double exports by 2015, a goal that has not been achieved. Near the end of 2012, exports were up more than 43 percent from the same period in 2009, but slowdowns in Asian and European markets have stalled the progress.
What’s more important to the export business is access to the market. According to a report released last month by the National Small Business Association, too many entrepreneurs find the exporting process to be overly complicated and require some assistance in understanding the complexities of entering the market.
The report found that 46 percent of business owners said they didn’t know where to begin when attempting to expand their companies across international borders, while 49 percent responded that the federal government should make more training available to entrepreneurs.
In the House of Representatives, members of the House Small Business Committee have proposed efforts that would simplify overseas programs for businesses that are trying to target foreign buyers. Introduced last month, the Export Coordination Act aims to increase congressional oversight on federal agencies that promote overseas trade.
Rep. Sam Graves (R-MO), a sponsor of the bill, said increased exports would lead to more job creation and that currently, U.S. business owners were largely missing out on a huge international market. According to Graves, 95 percent of the world market exists outside the U.S., but only 1 percent of small businesses actually export their goods.
Graves has also called for an increase in free trade agreements (FTAs), which he argues would greatly benefit small businesses across the country. Many supporters of free trade agreements agree, including Gary Hufbauer, a fellow at the Peterson Institute, who vocalized his support in front of the Small Business Committee.
“FTAs make a significant positive impact on small business exports by lowering the fixed and variable costs of doing business abroad,” Hufbauer said. “They do this by eliminating tariffs, cutting red tape at the border, simplifying international payments, and allowing multiple entries on a single business visa.”
There are many opponents to sweeping changes in free trade agreements, however. Some argue that widely opening foreign channels for trade can lead to complications in payments and other legal problems.
Trouble with financing
Compounding the issue of the complex trade processes is the difficulty in raising funding. Many small business owners still have trouble getting loans from financial institutions and traditional credit unions. After the financial crash of 2008, export financing standards tightened, leading to a drop in small business export rates.
Small business owners who are hoping to branch out into international markets should contact National Funding for advice on everything from credit card processing for small businesses to heavy equipment financing.