EFIC helped GP Graders bank by providing a documentary credit guarantee

GP Graders, a Melbourne-based manufacturer of fruit-grading and packing machinery, has developed a reputation in the cherry industry for its world-leading equipment.

When negotiating to sell equipment to a buyer in Turkey, GP Graders turned to Export Finance and Insurance Corporation (EFIC), Australia’s export credit agency, to help structure a competitive finance package.

Under the deal, GP Graders will receive payments for the equipment by means of a documentary credit (also called a letter of credit), issued by a Turkish bank, for approximately €360,000 (A$673,000). EFIC is providing a documentary credit guarantee to Westpac, GP Graders’ bank, which guarantees the payments due from the Turkish bank under the documentary credit.

Under the documentary credit, the buyer will pay the Turkish bank for the equipment over a five-year period, while GP Graders will receive payment once it presents specific documents to Westpac verifying that it has provided the equipment.

A documentary credit guarantee from EFIC can be a cost-effective way for eligible SME exporters to assist their overseas buyers to source financing and to protect contract payments.

According to GP Graders’ director Stuart Payne, EFIC’s involvement in the Turkish deal made possible the buyer’s five-year payment term—a “deal winner” for the Australian exporter.

“With the cost of machines in the vicinity of A$1 million, it’s important to be able to put together financing packages that help us gain a competitive advantage in these major deals,” said Mr Payne.

EFIC has worked with Westpac to support other GP Graders transactions by providing documentary credit guarantees in respect of documentary credits issued by Turkish banks.

“In 2001, only five per cent of our business was export,” said Mr Payne. “Now it’s 75 per cent, to countries such as Turkey, Greece, Chile and Italy.”

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