For a tiny company, Trusty-Step International has a surprisingly global reach, selling its slip-resistant flooring compounds to distributors in Asia, Africa, and South America. In the past two years, the Lynn company’s sales have jumped nearly 30 percent, with nearly all that growth coming from abroad.
So how does a company with just four employees manage to compete on four continents? Simple, said owner Stan Handman: the Export-Import Bank.
The Export-Import Bank — Ex-Im, for short — is a federal agency that for the past 80 years has been the primary means of government support for US companies trying to expand into overseas markets. Providing credit, insurance, and other services, the bank in 2013 alone helped over 3,000 US businesses export $46 billion in goods and services.
But the future of the Export-Import Bank is now at the center of another battle in Congress as Republicans, who control the House of Representatives, threaten to dismantle the program after the bank’s operating authority expires at the end of next month. Once again, the debate focuses on government’s role in the economy as Republicans argue that the Ex-Im bank’s activities amount to corporate welfare and are best left to private financial firms.
The outcome will affect scores of Massachusetts companies that use the Export-Import Bank to gain and expand overseas sales. Since 2007, the bank says, it has helped 160 Massachusetts companies export $4 billion worth of products. Most are small businesses like Parlee Cycles, a maker of high performance bicycles.
International business at the Beverly company, founded in 2000, was minimal during its first decade, in part because it couldn’t insure its sales at rates it could afford. One of the biggest risks to companies exporting products — particularly when breaking into new markets — is they won’t get paid by foreign customers or partners, so they need to insure against that possibility.
In 2011, Parlee Cycles found affordable insurance through the Export-Import Bank. Today, the company does business in 29 countries and six of its 24 employees owe their jobs to international sales, said Isabel Parlee, the company’s chief executive.
Parlee said she hopes to expand international sales further, estimating that the company can increase sales 25 percent and add four employees a year. But she worries the shutdown of the Ex-Im Bank would derail those plans.
“If we want to push to the next level, this is a really important tool to have in our toolbox,” said Parlee. “If it goes away, it’s an opportunity that we lose.”
The Export-Import Bank was created by President Franklin D. Roosevelt in 1934 as a way to create jobs when the nation, mired in the Great Depression, desperately needed them. Banks, worried about their survival, were reluctant to extend the credit that companies needed to sell overseas, since the complex international trading system of the time could tie up even the simplest deals for months.
To expedite the process, the Ex-Im Bank would essentially front payments to US sellers on behalf of foreign buyers, then collect — with interest — when the money came through. The system not only accelerated trade and put more Americans to work, but also supported itself.
Today, the Ex-Im Bank offers more services, like insurance for transactions and multiyear loan terms. It usually ends the year with a surplus from the fees and interest it charges, which it turns over to the Treasury. Last year, the Ex-Im Bank returned $1 billion.
But some congressional Republicans and libertarian analysts say the Ex-Im Bank isn’t worth it. They’ve accused it of “crony capitalism” for helping well-connected corporations like Boeing, which was involved in more than a third of long-term financing deals the bank made in its last fiscal year. While Ex-Im says nearly 90 percent of its clients are small businesses, the bank’s critics point out that most of the money — 80 percent — goes to large corporations, such as Boeing Co., the Chicago aerospace company.
In a television appearance, House majority leader Kevin McCarthy said he sided with critics who have accused the bank of “crony capitalism” for helping giant businesses more than small ones. “I think Ex-Im Bank is one that government does not have to be involved in,” said McCarthy, a California Republican. “The private sector can do it.”
McCarthy, through a spokesman, declined to comment further.
Other top Republicans, including House Financial Services Committee chairman Jeb Hensarling of Texas, also have called for an end to the bank. They say the bank’s surplus is more a product of accounting gimmicks than business activity, and the risks of big losses remain.
Opponents add that support from the Ex-Im Bank does not always lead to success. NMT Medical, Inc., a Boston maker of cardiac implants, received $4 million line of credit, guaranteed by the Ex-Im Bank, to support $13 million in exports. But ultimately, NMT, which employed about 100 people, couldn’t raise enough capital to continue operations, and shut down in 2011, before it could tap the credit line.
Despite company failures and other problems that can derail repayment of loans, the Export-Import Bank has a delinquency rate, 0.24 percent, that is less than third of the rate for private lenders. Business groups, including traditional allies of Republican politicians, have come out in support of the Export-Import Bank.
An executive from the US Chamber of Commerce called the bank “indispensable” in an opinion piece published in Roll Call, a Washington publication that focuses on Congress. The US Chamber was one of 865 trade organizations to sign a letter in June calling on Congress to reauthorize the Ex-Im Bank.
Brian Gilmore, an executive vice president of the Associated Industries of Massachusetts, said exporters he had spoken to were befuddled by Republican opposition to the bank. He added that many Massachusetts companies may not receive direct funding from the Ex-Im Bank, but they benefit by supplying products and services to larger companies that do get support and increase sales overseas.
Exports play an important role in the Massachusetts economy. The more than $25 billion a year in goods that local companies sell in foreign markets each year supports 70,000, or about one in four manufacturing jobs in Massachusetts, according to Alan Clayton-Matthews, an economics professor at Northeastern University.
In an interview, Export-Import Bank Chairman Fred Hochberg said creating jobs was the bank’s top priority. Ex-Im’s financing packages, he said, put American companies on equal footing with some 60 other countries, like China, Germany, and Japan,which use similar agencies.
For Decas Cranberry Products, a cranberry growing and processing operation in Carver, the end of the Ex-Im Bank would mean losing a partner that has opened doors for the company in foreign markets, said Norman Beauregard, the chief financial officer. Decas has insured its international shipments with Ex-Im for 15 years, during which time its exports — mostly dried cranberries — grew from virtually nothing to between $8 and $10 million per year.
“They’re so highly regarded by the banking institutions, and they’re easy to work with,” he said. “It would be sad to see them go.”Jack Newsham can be reached at firstname.lastname@example.org. Follow him on Twitter @TheNewsHam.