Documentary credit guarantees 
 

 Documentary credit guarantees 

As an exporter, a documentary credit guarantee from Efic enables you to rely on your bank in Australia for payment, rather than your buyer’s bank overseas. A documentary credit guarantee can help both protect your export revenue and finance your export activity.

If your bank is unwilling to take the risk on your buyer’s bank for payments due to you under a documentary credit (also known as a documentary letter of credit), Efic can provide a documentary credit guarantee to your bank and assume the credit risk on your buyer’s bank. As Efic’s guarantee secures payment under the documentary credit issued by your buyer’s bank, it enables your bank to confirm that it will make payments to you.

A documentary credit guarantee can help protect your export contract payments. 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.

In addition, if you’re unable to obtain working capital to finance an export contract because your bank won’t confirm a documentary credit, a documentary credit guarantee from Efic may help. If your bank is comfortable with your ability to meet your performance obligations under an export contract, the guarantee from Efic can enable your bank to confirm the documentary credit, discount the payments under it and make working capital available to you.

What are the benefits?

  • Gives you increased confidence that if you comply with the terms of the documentary credit, you will receive payment
  • There is no recourse to you if the buyer’s bank doesn’t pay your bank
  • May enable your bank to advance working capital to you

How does the document credit guarantee work?

 Work flow diagram for document credit guarantee

  1. You enter into an export contract with your overseas buyer
  2. Your buyer instructs their bank to issue a documentary credit (also known as a documentary letter of credit) to your bank to make export contract payments to you
  3. Your buyer’s bank issues the documentary credit to your bank
  4. Efic issues a documentary credit guarantee to your bank, securing payment on the documentary credit by the buyer’s bank
  5. Your bank confirms the documentary credit. When you have performed your contractual obligations, you deliver to your bank the documents stipulated in the documentary credit
  6. Your bank makes payments to you.

Terms and conditions

Terms and conditions will be negotiated during the application process. The following guidelines provide an indication of typical requirements:

Eligibility

You should be an Australian exporter producing goods or services for export which have substantial Australian content. Read more about Efic's Australian content guidelines.

Generally, the export contract to be supported by the guarantee will have a value of between $1 million and $10 million.

Maximum value

The guarantee is normally for up to 100% of the amount of the underlying documentary credit, which is generally limited to 85% of the export contract value.

Term

The guarantee will apply for the duration of the underlying documentary credit.

Fees & charges

Fees and charges vary depending upon a number of factors including Efic’s risk assessment, term and security.

Security

No security is required from the Australian exporter.

NOTE: The information provided, including on terms and conditions, is supplied as a general guideline only. Efic’s compliance with legislation and OECD guidelines, together with its credit assessment and other policies, influence the actual terms and conditions that may be applicable to any eventual transaction with Efic.

The information provided does not comprise advice or a recommendation and Efic makes no representation or warranty relating to it. 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 this information.