Helping you finance your export activities
As an Australian business exporting or investing internationally, you’ll know that it takes more than a competitive product or service and a keen buyer to succeed overseas. Turning business prospects into sales or investments often depends on securing finance.
At EFIC, we understand that financial issues are common concerns for fast-growing export businesses. A shortage of working capital, for example, can prevent you not just from filling current orders, but from pursuing new opportunities and expanding your export business.
EFIC can assist in overcoming these financial barriers. Our finance solutions for individual export transactions and broader export activities can help to free up your working capital and to finance your production.
Working capital guarantees
If you’re a fast-growing small to medium sized exporter, ensuring that you have enough working capital to keep up with the demands of your business can be an ongoing challenge. You may find that you’re short of funds to deliver on a large new export contract, expand your export business or simply finance its day to day operations.
However, you may not have the assets – often in the form of real estate – that your bank requires you to provide as security for further working capital finance.
If your bank can’t assist, EFIC may be able to help you obtain working capital finance with a working capital guarantee: a guarantee to your bank which enables it to lend you additional funds. EFIC’s range of working capital guarantees can help to finance particular export contracts or provide access to general working capital for export activities.
EFIC’s guarantees can be tailored to the individual requirements of export businesses. Whatever your working capital needs, our flexible guarantees may help you obtain the extra funds to help your export business grow.
A finance package which enables an overseas buyer to purchase your goods and services with funds from a financial institution can be very appealing for the buyer. Two forms of buyer finance are available with EFIC’s support: a direct loan and an export finance guarantee.
Buyer finance doesn’t just benefit the buyer; it can also help you finance an export contract. In order to start work on the export goods or services, you may need additional working capital. If your contract will be supported by buyer finance arrangements, your regular bank may be willing to provide the extra working capital to you. Your bank knows that you have a buyer for your goods or services and, with EFIC’s involvement as lender to the buyer or guarantor to the lending bank, a structure which gives the bank increased confidence that you will get paid and be able to repay the extra working capital.
A documentary credit guarantee from EFIC can also help raise working capital to finance your export activity.
You may be unable to obtain working capital to finance an export contract because your bank won’t confirm a documentary credit (also known as a documentary letter of credit) issued by your buyer’s bank. Under a documentary credit guarantee from EFIC, EFIC assumes credit risk on your buyer’s bank where your bank is unfamiliar with the buyer’s bank or unable to accept risk on that bank. The documentary credit guarantee secures payment under the documentary credit issued by your buyer’s bank.
If your bank is comfortable with your ability to meet your performance obligations under an export contract, a documentary credit guarantee from EFIC can enable your bank to discount the payments under the documentary credit and make working capital available to you to finance the contract.
In general, the longer the payment period in your export contract, the higher the risk of non-payment by an overseas buyer and the greater the pressure on your working capital.
If your export contract has a payment period of more than two years, export payments insurance from EFIC can provide cover against the risk of non-payment due to defined commercial and political events.
Export payments Insurance doesn’t just help protect your payments, it can also help finance your exports. If you need more working capital to fulfil an export contract, the fact that your export payments stream is insured can give your bank the additional confidence to advance extra working capital funds to you.
When competing for overseas contracts or entering international tenders, a potential buyer will often require that you provide a bond (also known as a guarantee). A bond can give your buyer assurance that if you don’t meet your obligations under the contract, upfront funds they have paid will be returned or that there are funds they can call on to reduce their losses. The ability to provide bonds to a potential buyer means you can compete more effectively in the global marketplace.
However, a bond may be a significant percentage of the contract value. To issue a bond, your bank may require security for its full amount, tying up too much of your working capital.
If your bank can’t help you with a bond, and you meet our eligibility criteria, EFIC may be able to assist. An additional advantage of dealing with EFIC is that our security requirements may be substantially less than the amount of the bond. A bond from EFIC can help you meet your export contract or tender submission requirements, without tying up your working capital.
Foreign exchange facility guarantee
Adverse movements in exchange rates are an inherent risk of doing business in international markets. A foreign exchange facility can help you protect your export profits from exchange rate fluctuations by locking in exchange rates and allowing you to hedge your currency exposure.
If you have or have approval for a foreign exchange facility with Travelex, a foreign exchange facility guarantee from EFIC can enable Travelex to increase your foreign exchange trading limit without the need for additional security. This can help to free up your working capital to take on further export contracts.
Producer Offset loan
A Producer Offset loan is a loan from EFIC to a production company to finance eligible Australian film, documentary and television productions with international distribution agreements.
EFIC’s loans complement the Australian Government’s Producer Offset incentive, which provides refundable tax offsets (rebates) for producers of Australian feature films, documentaries, television and other projects.
The loan can free up cash flow for a production and bridge the funding gap between when a production company incurs production costs and when it receives the Producer Offset.
How can EFIC help you?
EFIC unlocks finance for Australian exporters big and small. If access to finance is preventing you from pursuing viable export and investment opportunities, contact us on 1800 887 588 or fill out our online form.
EFIC’s compliance with legislation and OECD guidelines together with its credit assessment and other policies influence the actual solutions (which may be different from or in addition to the above) for any particular transaction.
To the maximum extent permitted by law, EFIC will not be liable for any direct or indirect loss or damage incurred by any person on the basis of information in this general summary.
© Export Finance and Insurance Corporation 2009