Finkenauer Convenes Small Business Owners, Experts to Talk Improving Trade Program
Washington, June 11, 2019
Washington, D.C.— Today, the House Small Business Subcommittee on Rural Development, Agriculture, Trade, and Entrepreneurship under Chairwoman Abby Finkenauer (D-IA) held a hearing focused on the current state of the Small Business Administration’s (SBA) State Trade Expansion Program (STEP). Members had the opportunity to hear from small business owners and economic development professionals regarding their experience with STEP and its effectiveness in expanding the ability of small businesses to export.
“Many small businesses operate with razor thin margins and only a few employees,” said Chairwoman Finkenauer. “They don’t always have the resources to attend a trade show, design an international marketing campaign, or navigate a foreign countries’ complex rules and regulations. With STEP, small businesses and entrepreneurs can focus on building relationships with customers abroad and not worry about the red tape.”
As advances in technology have opened global markets, small businesses have the opportunity to export their products on a worldwide scale. However, only one percent of the nation’s 30 million small businesses sell their products abroad. This lack of trade is caused by the unique challenges that small businesses face including difficulty obtaining the working capital to fill foreign purchase orders, not knowing how to connect with international buyers, and lacking the expertise to understand other countries’ rules and regulations.
With 95% of consumers living outside the U.S. Congress created the STEP program in 2010 as a three-year pilot. In 2015 Congress gave the STEP program a $30 million authorization through fiscal year 2020. Since the program began, SBA has awarded about $139 million in grants to state trade offices, with a reported average federal taxpayer return on investment (ROI) of 31:1.
However, government oversight entities including the SBA Inspector General and the Government Accountability Office have uncovered issues with the program including compressed program timelines, sizeable administrative burden, poor communication within the SBA and lack of oversight of the program.
During the hearing, Chairwoman Finkenauer and other committee members heard from witnesses about how STEP has benefited their business and the challenges that come with utilizing the program.
“As we prepare for the eighth year of STEP, we encourage SBA to collaborate with states and the Committee to identify and define the most important data points and performance indicators needed to evaluate the effectiveness of the STEP program, and optimize the reports to capture and compile that data more efficiently,” said Jennifer Black, Executive Director of Export Development PA Department of Community & Economic Development Office of International Business Development. “Reducing the administrative burden – on clients, on states and on SBA staff – will also enhance our ability to leverage additional STEP funds in support of more small business exporters.”
“It is critical that international markets be an integral part of small businesses’ growth strategy, and it is critical that those small businesses have the support, whether financial, technical, or even emotional – that they need to play offense and be successful,” said Wade Merritt, President of Maine International Trade Center. “For many states and the businesses we serve, the STEP program is an important part of that equation.”
“Programs such as STEP help prime the pump to develop export markets and export sales,” said Clifton Broumand Founder and CEO of Man & Machine, Inc. Landover, MD. “STEP helps my company in 2 ways: First it helps with Export Grants that provide matching funds to allow small businesses to attend trade shows overseas to develop export sales. Secondly, the STEP allows states to provide a framework in respect to State Pavilions at trade shows all over the world.”
“Deep relationships are extremely important to our export partners and STEP funds allow us to create direct relationships with retailers in countries vs relying on a distributor to do all the work and take a hefty margin,” said Jennifer Bacon, Co-Founder of Flapjacked in Westminster, CO. “These are relationships that now belong to us, which is invaluable.”
“By connecting small businesses with customers overseas, STEP can help entrepreneurs grow their businesses at home and abroad,” said Chairwoman Finkenauer. “More so, when small businesses succeed, their communities thrive. Increased economic activity from exports helps support Main Street businesses and gives other local companies the chance to grow.”