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 North Carolina's small businesses need the trade
 agreement with Colombia

 

 

Q&A WITH STEVE PRESTON

Leader helps small firms think Globally

CHRISTINA REXRODE  Posted on Sun, Mar. 30, 2008

crexrode@charlotteobserver.com

If there's one myth that Steve Preston is intent on dispelling, it's this: Only big companies can do business globally.

Preston, head of the U.S. Small Business Administration since 2006, is enthusiastically encouraging small companies to get on the exporting bandwagon. What's more, he believes exports can be the saving grace for many companies stung by foreign competition or the current downturn in the economy.

Preston, who came to the SBA from the private sector, spoke to the Observer during a brief visit to Charlotte this week. He has been promoting trade agreements with Colombia, Panama and South Korea, which have already been brokered but are awaiting congressional approval. Preston said he expects all three agreements to be presented to Congress by the summer.

Questions and answers have been edited for clarity and brevity.

Q. Tell me about the trade agreement with Colombia. (Preston says it should be in front of Congress within weeks.) What would it do for North Carolina?

Almost all that Colombia sends to (the U.S.) -- well over 90 percent -- comes in duty free. But our exports (to Colombia) have tariffs, as high as 35 percent depending on the goods category. For North Carolina, what's important (what it exports to Colombia) is chemical manufactures, plastic and rubber products, fabric mill products, and all kinds of machinery products. Last year, North Carolina exported over $180 million in goods to Colombia, so it's an important market.

A lot of people are concerned that this will take away (U.S.) jobs. Well, those goods are already coming into our country. It's not going to get any better for them; it's only going to get better for us.

Q. What else does the trade agreement do for small businesses?

It's important that small businesses can understand what happens at the border, that they can know that when the goods get into the other country they'll be protected. And these agreements help with those transparency issues. Large companies often have staffs that can handle this stuff; small businesses generally don't.

Q. Why are you so big on getting small businesses to be exporters?

Forty percent of GDP growth last year came from exports, so it is a very, very important bright spot in the economy right now. We've seen some businesses, challenged by foreign competition here, turn around and export to foreign markets, and they're doing really well.

Q. Don't you need to be a huge company to be global?

A lot of people think it's the Fortune 500 companies that ship all the goods overseas, but a lot of companies with five or six employees are exporters. Thirty-five percent of exports to Colombia are already small- and medium-sized businesses.

There are a lot of reasons why it's easier (than before) for small businesses to export. Shipping is easier than it's ever been with all these international shipping companies. Any business can look like a big business on a Web site, so it's easy for them to market themselves. Communication is totally simplified -- you can just press a button with e-mail. What we're trying to do is simplify the regulatory side as well.

Q. Are more small businesses telling you that they're interested in exporting?

We're absolutely seeing them come to the table. Now, one thing we do find with small businesses is, if they're exporters, they typically export to one country. The more these trade agreements open up, the more we hope they'll become multi-country exporters.

Q. Kind of like diversifying your portfolio?

Exactly.

Q. In an economic downturn, do you see more people wanting to start their own businesses because they're concerned about getting laid off?

The good news of what's happening right now is we still have a low unemployment rate. (North Carolina's jobless rate was 5 percent in February, which is still considered full employment by most economists.) But it is not unusual, in times of higher unemployment, for people to look at starting their own businesses. Often those are home-based businesses so they don't employ a lot of people -- for example, you see people leave the workforce and go into consulting.

What we do see in this downturn is the following: Small businesses are less likely to hire more people and less likely to invest in their business for expansion. So there are incentives in the economic stimulus plan for small businesses to invest in capital goods. It's important for us to keep our eyes on the stimulus package: In May, most Americans will get their stimulus checks. The impact of those checks will be largely absorbed in the third and fourth quarter.

Q. In a downturn, which small businesses are the first to hurt?

It really depends on what's driving the downturn. Right now, I'd say small businesses for whom energy costs are very significant: a greenhouse that has a lot of its costs in heating, small businesses with a large vehicle fleet. It's people who cut your lawn, people who have an extermination business, it's maid services, it's any kind of delivery.

Q. Bank of America's chief financial officer noted in a January earnings call that more small-business loans were in danger of defaulting. Does that mean it's going to get harder for a small business to get a loan?

I think it's getting somewhat harder. Some banks are telling us, `We stretched too far,' but many banks have said they're not changing their credit criteria one bit. There's capital out there for smaller businesses; however, in some cases, very small businesses that relied on their home value for collateral, they don't have that backstop to the same degree they did before.

The other thing is, there is less demand (from small businesses) for credit right now; people are not looking for credit if they're not looking to expand. Banks are reporting that fewer small businesses are walking in the door and asking for loans, and that is absolutely across the board. If there's anything we're hearing consistently, it's that.

Help for your small business

 If you're interested in exporting, the SBA has a U.S. Export Assistance Center in Charlotte. Visit www.sba.gov/oit and click on "Contact your Local SBA U.S. Export Assistance Center."

 If you need a small-business loan but don't meet your bank's credit standards, ask your bank if it accepts SBA loans. The SBA can guarantee up to about 80 percent of a qualifying small-business loan, which can sometimes persuade a bank to fund a loan. The SBA has a district office in Charlotte: www.sba.gov/localresources/district/nc/index.html.

 The SBA also recommends SCORE, or the Service Corps of Retired Executives, for free business counseling, and the N.C. Small Business and Technology Development Center, for counseling and other services, most of them free. On the Web: www.charlottescore.org and www.sbtdc.org.

Christina Rexrode: 704-358-5170
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