Small Businesses Miss Out On Big Overseas Sales

Ex-Im Bank pushes effort to help small companies expand exports

AT the request of a Chinese company, Michael Wade, president of the China Trade Development Corporation of Chicago, recently tried to arrange the purchase of $25,000 of state-of-the-art manufacturing instrumentation from a small company in Bedford Park, Ill.

''No sale,'' the company said. The firm feared the overseas buyer wouldn't pay. But even if the firm had swallowed the risk, it would have imposed a 15 percent surcharge on the foreign transaction. Such cases happen ''over and over again,'' Wade says.

''I'm outraged when an American small business won't allow me to sell to a Chinese company that really wants to buy the good because I know the Chinese will pay very promptly,'' he says.

The Bedford Park company is like more than 100,000 small US manufacturers that don't export high-value, high-quality products because of the financial risks and their limited resources. As a result, these companies are passing up opportunities in a market with 1.2 billion people and double-digit economic growth.

''If they got off the dime, they would be creating more employment opportunities, paying more in taxes, and boosting the economy,'' says Martin Duggan, executive director of the Small Business Exporters Association in Annandale, Va. ''We've got players who should be in the game and aren't, and it's costing our economy an awful lot.''

''Small and midsize businesses are the largest untapped source to expand US jobs and overseas markets,'' says Kenneth Brody, chairman of the Export-Import Bank, a federal agency.

The Clinton administration has made the grooming of small companies as exporters a key goal in its National Export Strategy. It has refashioned the Ex-Im Bank as a springboard for small businesses venturing overseas.

After years of serving mostly large exporters, the Ex-Im Bank under Mr. Brody has begun to reach out to small firms. It offers working capital loans to small businesses beginning to export. And it provides the sort of credit insurance that would have protected the Bedford Park company and its banks against default by the would-be foreign buyer.

The Ex-Im Bank since 1993 has streamlined its insurance programs and linked its loan program to one offered by the Small Business Administration. It has also opened a toll-free telephone number for exporters.

Still, ''there's much room for improvement,'' Mr. Duggan says. He notes that the paperwork required for gaining Ex-Im Bank support is still onerous.

''I agree, there is nothing worse than having to deal with paperwork,'' says Maria Haley, an Ex-Im director who oversees the program for small exporters. Still, the bank is trying to reduce required documentation while ensuring it gets enough information to lend with confidence.

Duggan says the level of trade finance by the bank is paltry compared with that of rival nations.

FOR example, the federal government provides export support at just 2.9 percent of the value of total exports. Other countries do far more: Germany, 5.7 percent; France, 23 percent; and Japan, 51 percent, according to a 1993 study.

But Haley notes that the US government has traditionally allowed commercial banks to handle a higher percentage of export finance than do US trade rivals.

Finally, some trade experts criticize the bank for still favoring large exporters.

''At the management level, Ex-Im is making an honest effort [to help small exporters], but it bogs down as you go down through the bureaucracy,'' says Duggan.

Haley says foot-dragging on helping small businesses is isolated and it is too early for the fruits from the effort to appear.

''The changes in the [export credit] insurance program have been tremendous and we are reaching a point where we are having a hard time servicing it mainly because the demand is so great,'' she says. Last year 76 percent of the credit insurance applications came from small businesses, up from 70 percent in 1993.

While the market in China is hot, the pitfalls of investing there -- corruption, political uncertainty, regionalism, cultural differences, and the spadework required for long-term profits -- help explain why China enjoys a $30 billion trade surplus with the United States, the experts say.

Most small companies lack the wherewithal to follow up initial exports with investment and other substantial commitments to overseas markets.

''China is a huge challenge for small companies,'' says Margaret MacLean, export promotion specialist with the Illinois Department of Commerce and Community Affairs.

Still, in recent years many small businesses have made the leap. ''A lot of small companies have emerged on the scene, smelling profits in China as bigger companies renew interest in China after the Tiananmen massacre,'' says Dan Martin at the US-China Business Council in Washington. ''It has given birth to a lot of niches that small companies perform in perfectly,'' Mr. Martin says.