Helping protect your export contract payments and overseas investments
As an Australian business exporting or investing internationally, you’ll know that doing business overseas involves risks. While some of these are within your control, many are not.
EFIC helps protect your business against a wide range of risks that are beyond your control, such as your buyer failing to pay and political events disrupting your overseas investment.
Our solutions help minimise your risk of non-payment while meeting your buyer’s need for finance or a long-term payment schedule. We can also provide insurance against the risk that your buyer may unfairly demand payment on a contract bond.
If you’re investing in a country where the uncertain political environment could impact your investment, our political risk insurance can protect you against financial loss caused by political events.
Our solutions
In general, the longer the payment period in your export contract, the higher the risk of non-payment by overseas buyers 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 help protect your export receivables. The insurance provides cover against the risk of non-payment due to defined commercial and political events.
When competing for export contracts in global markets, a potential buyer will often require you to provide an advance payment or performance bond. These bonds (also known as guarantees) give the buyer assurance that if you don’t perform your contractual obligations, upfront payments they have made will be returned or that there are funds they can call on to reduce their losses.
However, if you’re dealing with a new buyer or one in an unfamiliar country, you may be concerned about the risk that your buyer could demand payment on a bond without a valid reason and without notifying you. In this case, it is likely that you would be required to pay the full value of the bond. Unfair bond calling insurance from EFIC is designed to protect you from loss in these circumstances.
When you participate in an overseas investment or project, you accept that it will involve commercial risk. However, your investment may be located in a country with an uncertain political environment. Because of the unique nature of political risks, and their potential to cause significant losses to an investment or project, you may consider taking out political risk insurance (PRI) with EFIC to help protect against financial losses caused by defined political events.
Whether you are involved in the overseas investment or project as investor or contractor, we have a PRI policy designed to protect your interests.
A documentary credit guarantee from EFIC can also help protect your export revenue. Under a documentary credit guarantee, 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 (also known as a documentary letter of credit) issued by your buyer’s bank.
A documentary credit guarantee from EFIC enables your bank to confirm that it will make payment under the documentary credit. It gives you increased confidence that if you provide your bank with the documents required by the documentary credit, you will receive payments due to you.
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.
With a foreign exchange facility guarantee from EFIC, Travelex can increase the trading limit on your foreign exchange facility. This means you can extend your hedging program to more of your export contracts and better protect your export profits.
How can EFIC help you?
With EFIC’s support, you can enter the international marketplace with greater confidence. To help safeguard your contract payments and overseas investments, 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