Blog/News

Handling SBA Loan Lags

Sadie Keljikian, Express Trade Capital

The current government shutdown is the subject of nation-wide distress for myriad reasons. Sources are reporting that the shutdown, which is officially the longest in US history, has delayed public services like tax refunds, food, beverage and aviation product safety inspections, and millions of dollars in Small Business Association loans.

Generally, the SBA handles approximately $200 million in loans daily, but since the shutdown began, they’ve been unable to provide any financing aside from disaster assistance. As a result, hundreds of small businesses nationwide have waited a month for vital funds to help them grow and operate.

While many of the delayed loans are relatively small amounts, nearly 40% of them are known as 504 loans. These are meant to help business owners purchase real estate or costly equipment and can amount to $20 million or more. Regardless of quantity, many small business owners who rely on these loans are wondering how to bridge the gap until SBA loans are readily available again. The answer depends on where each business falls in the wide variety of industries the SBA serves.

Substituting these loans directly is tricky. If you or your business have very good credit, you may be able to replace your SBA loan with a regular bank loan, but it will likely take at least 60 days to reach you, which is decidedly unhelpful when speed is a priority.

We’ve discussed creative financing methods before, but not in terms of which methods are fastest. Depending on your budget, there are a few options that will give you access to quick funding for your business:

  • Factoring your receivables.

If you’re selling goods to creditworthy retailers, you can receive financing against your unpaid invoices. Provided you have all necessary materials and enough volume to qualify, you may receive funds within a day or two with this method.

  • Finance your purchase orders.

Purchase order financing (or PO financing) is a method designed precisely for wholesalers who need help covering production and shipping costs while they wait for their customers to pay. So, if you have purchase orders from creditworthy customers and need to bolster your business’s funds, PO financing is a great option.

  • Borrow against your unsold inventory.

If you have a stockpile of unsold inventory and a solid track record of consistent sales, you can borrow against your unsold inventory. This can take slightly longer than financing against your receivables or purchase orders since it requires a field examination (as do any lending arrangements involving goods, equipment, or real estate), but can be a highly useful tool if you find yourself in a slow season.

  • Enter a merchant cash advance agreement.

If your customers pay you with credit or debit cards regularly, you may want to consider merchant cash advance options. Merchant cash advance arrangements, or MCAs, aren’t technically considered loans, but operate in a very similar way. At the onset, you receive a lump sum in exchange for a percentage of your future credit/debit card sales. With an MCA, you will receive funds very quickly, but it is important to note that this is by far the most expensive option, as interest tends to run extremely high among MCAs and compounds over time.

There are numerous ways to handle an unexpected lag in your business’s operational funds, but be careful not to let an urgent situation lead you to poor lending choices that could hurt you down the road.

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Changes to GSP Eligibility

Results of a GSP review have just been published as Presidential Proclamation 9813. This announcement lists changes to select products and countries. The GSP status of these identified articles is effective for goods entering on/after November 1, 2018.

If you would like more information or analysis as to how this impacts your company, please contact our logistics department at logistics@expresstradecapital.com.


AMS Plans Cotton Fee Increase

The Agricultural Marketing Service has released a statement announcing that it plans to raise the “cotton fee” applied to imported cotton goods from $0.011510 to $0.011905 per kilogram. Adjustments to the fee occur regularly to ensure that assessments collected on imported cotton match those paid on domestically produced cotton.

The announcement stipulates that the new rule will take effect October 16th, 2018, barring significant adverse feedback between now and September 17th.


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New Tariffs Imposed on Turkish Steel

Sadie Keljikian, Express Trade Capital

The president has released yet another tariff-imposing proclamation. The latest in a series of recently implemented “trade remedy tariffs”, the new proclamation will impose a 50% tariff on steel mill products from Turkey and will take effect immediately. The new tariffs have been incorporated into Section 232 of the Trade Expansion Act of 1962 and take aim at countries said to be engaged in “unfair” trade practices.

The president has also hinted that he may double tariffs on Turkish aluminum from the current 10% to 20%, but no formal announcement has been made as of now.


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Trade War Begins

Sadie Keljikian, Express Trade Capital

President Trump’s promised trade war has begun and it doesn’t look like there will be any winners.

Earlier this year, Trump imposed a series of new import tariffs on goods made outside the US, particularly those made in China. The move has been controversial, largely because each affected country’s respective economy relies heavily on exports. As many economists predicted, however, China, India, the EU and Russia have all fired back.

The president signed the so-called “Trump Tariffs” in March in an attempt to combat “unfair trade practices“ in China and other manufacturing hubs. The newly established tariffs targeted $34 billion in Chinese-produced goods, as well as numerous steel and aluminum goods manufactured abroad.

Shortly after news of the proclamations broke, the EU pledged to place new tariffs on American-made goods in retaliation. Soon after, China announced plans to impose a 25% tariff on US exports, including motor vehicles, soy beans and lobster, which also total at $34 billion in value. Russia followed suit last week and began introducing its own tariffs on US goods, including mining and road building equipment as well as oil/gas industry products. India joined in last week as well, notifying the World Trade Organization that it would raise tariffs on 30 US products including almonds, seafood and chocolate.

Experts continue to debate the precise effects that the trade war will have, but many agree that US traders will struggle to maintain financial stability and accessibility to everyday consumer goods. Although the US is economically stronger than any of the other involved countries, we lack the infrastructure and workforce to supplement the manufacturing resources on which we’ve become dependent in recent decades.

The trade war also drew controversy within the White House and among the Republican party. Several party leaders including House speaker Paul Ryan and former White House economic advisor Gary D. Cohn lobbied against the trade plan. Cohn even resigned shortly after the plan was set in motion, though it is unclear whether he left specifically due to the trade war.

As of now, it is still unclear what the lasting effects of this trade war will be, but sources warn that US consumers and exporters will suffer the most. It may seem counterintuitive, but a combination of the price increases on goods that we continue to import to meet demand and the devastating effect that retaliatory tariffs will likely have on US farmers and manufacturers will probably have a far more detrimental effect than most activity in the ongoing struggle.

Needless to say, it’s difficult to predict precise outcomes this early in the process, but given the buying and manufacturing powers at hand, the international trade industry may change dramatically.


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Trade Protection Financing Announced at ETC!

Express Trade Capital is pleased to announce the latest in our growing selection of innovative financing services with Trade Protection Financing. We will use a combination of specialized credit enhancements, along with preferred pricing structures, to offset any potential tariff cost implications due to new legislation. We are fully equipped to help you purchase goods at a reasonable price worldwide, even during these uncertain times, with our full spectrum of trade finance, supply chain, and logistical solutions.

Contact us to take advantage of this innovative and exciting new financial vehicle!


US Import Tariff Updates

Sadie Keljikian, Express Trade Capital

The following is an update on recent tariff adjustments on steel, aluminum, and Chinese-made products.

Steel and Aluminum Products:

Several Presidential Proclamations signed in March 2018 have collectively implemented Section 232 of the Trade Expansion Act of 1962. The Proclamations primarily serve to adjust imports of aluminum and steel into the United States. The proclamations indicate that covered steel mill and aluminum product imports will be subject to additional tariffs of 25% ad valorem and 10% ad valorem respectively. The following products are covered:

  • Steel mill product HTSUS classifications:
    • 10 through 7216.50 including bars, rods, ingots and angles.
    • 99 through 7301.10 including wire, bars, rods, ingots and sheet piling.
    • 10 rails.
    • 40 through 7302.90 including sleepers and plates.
    • 11 through 7306.90 including pipes, hollow profiles and tubes.
  • Aluminum product HTS classifications:
    • 7601, unwrought aluminum.
    • 7604 including rods, profiles and bars.
    • 7605, aluminum wire.
    • 7606 and 7607 including flat rolled products like foil, sheet, strip and plate.
    • 7608 and 7609 including pipes, tubes, and pipe and tube fittings.
    • 99.51.60 and 7616.99.51.70, forgings and castings.

The newly implemented tariffs will be added to all existing duties and will apply to all countries of origin except for a specific list of exempted countries. Exempted countries include Argentina, Australia, Brazil, Canada, Mexico, South Korea and European Union members, which include Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

As of now, exemptions are limited through April 30th, 2018, but it is unclear whether they will be extended beyond that date. Extension of the exemptions may lead to a change in the rates applied to other countries and/or restraints on quotas for some, or all countries of origin.

Products from China:

On March 22, 2018, President Trump announced his plan of action to combat China’s unfair trade practices as addressed in the USTR Section 301 investigation of China’s Policies, Acts, and Practices pertaining to Intellectual Property, Innovation and Technology Transfer. As the president’s instructions, US Trade Representative Robert Lighthizer began the investigation in August of 2017.

President Trump has indicated that action against China will be taken in three stages:

  • Tariffs. Representative Lighthizer will propose a list of products with corresponding tariff increases within 15 days of the announcement on March 22, 2018. The final list will be published after a brief period for notice and comment.
  • WTO dispute settlement. Representative Lighthizer will attempt to settle the dispute in the World Trade Organization, or WTO to address discriminatory practices in China’s technology licensing.
  • Restricted investments. The Secretary of the Treasury will address concerns about investors in China or investments facilitated in China in US industries or technologies deemed important to the US.

On the bright side, President Trump signed an omnibus budget bill into law which aims to end the ongoing cycle of resolutions and government shutdowns. It also renews the General System of Preferences, or GSP, which seeks to ensure fair trade practices among WTO countries. The bill will extend GSP through December 31st, 2020 and retroactively renew it to the previous expiration on December 31st, 2017. Goods that arrive in between will be eligible for a refund, if indicated properly. The GSP will officially go back into effect on April 22, 2018.


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Retailers Speak Up About Trump’s Tariff Plans

Sadie Keljikian, Express Trade Capital

A collection of the largest global retailers have written an open letter to President Trump following his move to impose tariffs on $60 billion in exports from China.

Since his campaign, Trump has expressed frustration with the trade gap between the US and China, leading many to fear an oncoming trade war. Until today, however, the trade relationship between the US and China was more or less unaffected.

The retailers in question account for more than $1.5 trillion in annual sales and tens of millions of US jobs. They respectfully suggested that they work together with the president to come up with a solution less likely to negatively impact working American families.


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Steel Yourself for Increased Import Duties

Peter Stern, Express Trade Capital

As widely reported in the press, President Trump announced plans to implement raised duties on steel and aluminum using a pre-existing but rather obscure provision. Section 232 permits the President to impose tariffs or quotas to protect national security.

President Trump announced tariffs will be 25% on foreign-made steel and 10% on foreign-made aluminum.

We expect an official document next week which should provide or lead to specifics around scope, effective date, duration, whether any countries are excluded or carved out, and whether there will be quotas with the tariffs. Also there is only speculation at this point as to what retaliation the US or US exports will face.

We will share the facts once known. If you have any questions, please contact us.