Export loan business booming for bankers: lenders competing fiercely amid global trade surge.

When Premier Business Bank opened its doors in downtown Los Angeles last summer, one of the first things the bank's founders did was to seek special lender status from the Export-Import Bank of the United States so that it could offer government-guaranteed loans to its business customers hoping to cash in on the Asian trade boom.

Normally, a bank would be in operation for several years before getting this lender status. But, in a sign of the fierce competition developing for export loan customers, Premier hired executives with substantial international trade experience, pushed for a fast-track approval from the Export-Import Bank and was able to start making guaranteed export loans less than two months after it opened.

"The export loan business is reaching a critical mass now; there's a real feeling of 'Let's get in on this,'" said Mike Stoddard, Premier's executive vice president brought in specifically to set up the fledgling bank's export loan programs.

Indeed, Premier is just one of several banks that have set up or stepped up operations to assist its business customers.

Last October, Beverly Hills-based City National Corp. rolled out two loan programs for its business clients with guarantees from the Export-Import Bank.

"City National sees the long-term benefits of helping small and medium-sized export companies because a large percentage of future growth in U.S. exports will come from companies that haven't previously exported," said Tom Burr, senior vice president and manager of the bank's export finance group.

Other local banks are increasing their focus on export loans, including Los Angeles-based East West Bank, which just received approval from the Export-Import Bank to make larger loans, and Los Angeles-based Guaranty Bank, which is working with the Export-Import Bank to enter the China market.

Several factors are behind this push by community-based banks into the export business. Foremost is the increasing desire of small and mid-sized businesses to enter the export markets.

"We're moving into this area because it's what our customers are demanding," said City National Bank chief executive Russell Goldsmith.

In part because of this recent push, the value of export loans guaranteed by the Export-Import Bank in California has rebounded after spiking in 2004. In the fiscal year that ended Sept. 30, $1.85 billion in export loans were backed by the Export-Import Bank, up from $1.58 billion a year earlier.

This is in contrast to the situation 10 or 20 years ago, when big companies dominated the export markets. These multibillion-dollar companies turned to their major bankers--Bank of America, Wells Fargo & Co., J.P. Morgan Chase & Co.--to handle their transactions.

Then came the global financial crises of the late 1990s, first in Asia, then in Russia, Brazil and other countries. The big banks pulled back from their international operations to reduce their exposure.

In the last few years, smaller businesses have stepped in to the export markets. But with few financial resources of their own to sustain their export efforts, they need help.

Take Monrovia-based Mee Industries, which makes fogging equipment to cool gas turbines and industrial equipment and for special effects. Several years ago, the 100-employee company made a push into overseas markets, with a line of credit guaranteed by the Export-Import Bank for small projects. Then, last year, the company had a chance to bid on a bigger power project in Mexico.

"In the power industry, payment comes at the end of the project and there's no down payment. So we needed to come up with $2.5 million in up-front financing for this project," said D'Arcy Sloane, president of Mee Industries. "Without a loan guarantee from the Export-Import Bank, few, if any, banks would loan a small company that kind of money for a foreign project with no payback until completion."

Mee Industries received the loan guarantee and is now working on the project.

D'Arcy said the company is now bidding on a power plant project in Iraq. "Without the Export-Import Bank, we probably wouldn't even be looking at this project," she said.

Internationally minded

But there have been other forces at work, too. One factor has been the emergence over the last decade of a generation of marketing managers and small business executives more open to doing business internationally.

"You take sales managers educated in our colleges and universities prior to the mid-1970s and they were pretty much focused on domestic sales," said Wayne Gardella, vice president of business development for the Export Import Bank. "Now this generation of leaders is retiring and the next generation has been steeped in the importance of global markets. It's much easier to convince these managers to sign on to our programs."

Also boosting interest in exporting has been the falling dollar, which makes U.S.-made goods cheaper abroad.

There's also been an increased emphasis on small business from the Export-Import Bank itself. This agency was founded in the 1930s and has become the federal government's official export credit agency, offering financing for U.S. businesses seeking to export products. The agency operates similarly to the U.S. Small Business Administration, guaranteeing major portions of loans made by banks to businesses exporting products. The banks then feel more comfortable making otherwise riskier loans.

The Export-Import Bank has focused on helping large companies break into international markets. But starting in the 1990s, Congress pushed the Export-Import Bank to focus more on helping small businesses access foreign markets. The bank expanded its working capital program, essentially a line of credit with a federal loan guarantee of up to 90 percent to help exporters finance their overseas marketing efforts. It also refocused towards small business its other major loan guarantee program, for foreign purchasers of U.S. products, through loans by U.S. banks.

But the agency's progress was not rapid enough for some members of Congress, particularly the last chairman of the House Small Business Committee, Don Manzullo, R-Ill. As part of the agency's reauthorization last year, Manzullo authored legislation to enhance the small business division within the Export-Import Bank, including adding staff to process loan guarantees.

But getting the word out to small business about the guaranteed loans remains a challenge. "There's somewhere in the neighborhood of 65,000 companies across the nation that we believe can use our guaranteed loan products and we only have a marketing staff of 20," Gardella said.

HOWARD FINE 

Staff Reporter