THE Pacific : L.A. Mayor’s Office Lends a Hand to Smaller Export Firms : Program Run With Export-Import Bank Helps Firms That Might Have Trouble Getting Loans

When Nantucket Corp. set up a joint venture with a Japanese company to begin selling its computer software to Japan, chief financial officer Ken Keegan did not ask his banker for financing.

Instead, he turned to a novel export financing program established last year by Mayor Tom Bradley’s office and the U.S. Export-Import Bank. So far, the L.A. XPORT program has approved 14 loans totaling $10.3 million.

Since Imperial Bank agreed to provide a $15-million credit line for the program in July, 31 small and medium-sized Southern California companies have applied for funds to boost exports to the Pacific Rim and beyond, according to Marian Zorn, assistant director of the city’s Economic Development Office.

The loans, which are guaranteed up to 90% by the federal government, fill a gap created when commercial banks are reluctant to take the risk to provide export financing, officials said.

The program is managed by the Los Angeles Loan Development Corp. or LALDC, as it is called. Initial funding of $400,000 was provided by the Department of Airports and the Port of Los Angeles.

“We do not see this program competing with commercial banks,” said Arthur J. Obester, liaison officer for the U.S. Export-Import Bank in Washington, D.C. Obester, who is based in Los Angeles for a year, said the city’s program is designed to supplement a company’s commercial banking services.

Finding a source for the money to lend was not easy. City economic development officials said they approached 19 banks before Imperial Bank pledged a $15-million line of credit.

“Our bank is very involved in trade finance in general,” said Perry Ritenour, senior vice president and manager of international banking at Imperial Bank. “This program provides us with a vehicle to service the small and medium-sized businesses.”

Based on the success of the Los Angeles export program, Ritenour said several other California cities have approached him to talk about setting up similar programs.

“We are very optimistic about the program expanding in 1989,” Ritenour said.

The companies participating in the XPORT program are representative of a growing number of small businesses looking abroad for increased sales. In 1987, 3,000 mostly small companies participated in overseas trade missions that generated more than $200 million in sales, according to the U.S. Department of Commerce.

And, new working capital loan guarantees provided by the Export-Import Bank are expected to double this year to $160 million, according to bank officials.

To qualify for the XPORT loans, which are currently pegged at 1 3/4 points over the prime rate, a company must have a viable product to export and be based within 60 miles of downtown Los Angeles. Most companies applying for funds have annual sales of $10 million or less.

Executives at several companies that have received funding said they were impressed by the simplicity and speed of the XPORT program.

“Here was a program that was tailor-made and designed for exactly what we wanted,” said Ruslan Moore, president of the Moore Group, a 5-year-old Torrance company that sells used Digital Equipment Corp. computers and peripherals. “Furthermore, the rates were better than we could have gotten commercially.”

Moore’s firm recently received approval for a $500,000 line of credit. Currently, exports make up about 10% of the company’s $10 million in annual sales.

“We can see exports significantly increasing as a result of this program,” said Moore, adding that he was “amazed at the competence and expediency of the Mayor’s Office.”

Moore said many commercial lenders are reluctant to advance money to small companies waiting to collect from foreign accounts because “it is a lot easier to collect money from companies inside the United States than from those in Taiwan, Australia or Lichtenstein.”

A few miles away, at Nantucket’s offices, employees are busy translating their “Clipper” data base development software into Japanese and Portuguese. The software program, which was used to schedule events at the Democratic National Convention in Atlanta, has already been translated into French and Spanish for export.

“In recent months, the need for exports has really caught on,” said Keegan, Nantucket’s chief financial officer and former director of finance for Texaco in Europe. “It is highly commendable that a city government would take this program on.”

Keegan said Nantucket, which has been approved to receive several hundred thousand dollars through the XPORT program, already sells its software to the United Kingdom, Europe, Australia, Hong Kong and Singapore. The company plans to use the loan to boost sales to the Pacific Rim countries, he said.

Another busy export company intends to use its $500,000 loan to weather an expected slowdown in recycled paper exports around the first of the year, according to David Kim, general manager of Bestway Recycling Inc. in Los Angeles.

Each month, Kim said Bestway exports about 11 million pounds of recycled paper products to the Far East, mainly to Korea.

“We had exhausted our line of credit at the bank, so instead of going through an arduous process to try to increase it, this program offered a better way for us,” Kim said. “The process was very simple. They even sent someone over here to help us with the paper work.”