L.A. Businesses to Get Help on Foreign Trade

Mayor Tom Bradley is putting Los Angeles City Hall in the international banking business by opening an office that will help small and medium-size companies obtain the financing needed to sell their goods overseas.

In what Bradley administration officials describe as a unique program, four city foreign-trade experts and an official of the Export-Import Bank of the United States will staff a City Hall office that will help the businesses obtain financing from the Ex-Im Bank for their trade deals.

The federal bank makes or guarantees loans to foreign buyers of American-made goods on terms that are designed to come close to the financing offered by companies in other countries.

How Process Works

If a local computer-parts manufacturer wants to sell goods to a firm in Thailand, for example, the Ex-Im Bank would either lend money to the foreign buyer or guarantee credit given the Thai company by the local firm. The Ex-Im Bank could also guarantee a private loan made to the Thai firm for the purchase.

Four city trade employees and the Ex-Im Bank official working in City Hall will put together the paper work needed for the bank transactions, just as commercial banks do. In addition, they will guide the often unsophisticated businesses through the intricacies of foreign trade and will help them find overseas markets for their goods.

The city will finance the program by charging the businesses a fee, just as the banks did. The first year’s operations will be financed by $200,000 from city harbor funds and $200,000 from the airport. Thereafter, the service by the city is expected to pay for itself.

An Ex-Im Bank spokesman said all loans and loan guarantees would be approved by the bank in Washington after the proposed transaction is investigated by bank officials. That, he said, should protect the federal government against loans being made to shaky businesses that happen to have political clout at City Hall.

By making financing services available to firms that now have difficulty obtaining Ex-Im Bank assistance, city officials said they hope to stimulate $100 million in business in Los Angeles, Orange, Ventura, San Bernardino and Riverside counties, which would directly create 3,000 new jobs and indirectly generate about 4,500 more.

1-Year Pilot Program

The plan, a one-year pilot program, will be announced by the mayor and John A. Bohn Jr., Export-Import Bank president, at a City Hall press conference today.

Bradley administration officials said the mayor decided to propose the plan, conceived by his office of economic development, because commercial banks, which usually arrange the Ex-Im Bank financing, are tending to avoid lower profit deals for small and medium-size businesses.

Such businesses are generally considered to be those with a net worth of up to $6 million, and a net profit of up to $2 million a year, and include computer, food, garment, electronics, scientific instruments and biomedical technology firms.

They said that in today’s competitive business climate, banks are concentrating on big, high-profit deals, rather than smaller ones.

Trade Activity Limited

“This has created a void in the financial marketplace, severely limiting the export trade activity of small and medium-sized businesses,” according to a background paper accompanying the mayor’s proposal. “The resultant loss of potential export sales represents a significant adverse impact on every level of the economy.

“Los Angeles is directly affected since much of the city’s economy is composed of growing small and medium-sized businesses for export but little experience in international trade.”

The withdrawal of commercial banks from the small and medium- size business field presented problems to the Ex-Im Bank. It has been under pressure from Congress to increase its loans to such businesses and has been criticized for concentrating on big items, such as helping finance the sale of American-made aircraft to foreign airlines.

“Ex-Im Bank recognized the need to establish an alternative delivery system for financing smaller firms,” the administration background paper said, and began looking for ways to do it.

If the program works, officials said, it will be duplicated in other cities.