EFIC provided an export working capital guarantee to Knog's bank
When Melbourne-based urban cycling accessories company Knog Pty Ltd (Knog) experienced increasing demand for its innovative products in North America, Europe and Asia, the company needed additional cash flow to fulfil its distributors’ orders.
Export Finance and Insurance Corporation (EFIC), the Australian Government’s export credit agency, provided a US$600,000 export working capital guarantee to Knog’s bank, Westpac, enabling the bank to lend this amount to Knog to help ease its cash flow.
Knog designs, markets and delivers urban cycling accessories, including lights, locks, cycle computers, bags, gloves, clothing, leather goods and bike tools. It exports to over 40 countries through a network of distributors.
As demand for Knog’s products was growing substantially, the size of distributors’ orders increased. They requested payment terms of up to 60 days, rather than full payment upon shipping. Suppliers also asked for more favourable credit terms as Knog’s orders became a larger part of their business.
‘The mismatch between when we have to pay our suppliers and when we get paid by our distributors is a challenge for us’, said Knog’s Chief Executive Officer Hugo Davidson. ‘With the help of EFIC’s export working capital guarantee and Westpac, we have a more even cash flow and can pay suppliers earlier. This should also help us negotiate favourable supply prices and offer better payment terms to our main distributors’.
An export working capital guarantee from EFIC to an exporter’s bank guarantees repayment of amounts that the bank lends to the exporter to finance one or more export contracts.
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