As an exporter, the critical issues arising from the credit crunch are, ‘How will I finance my export activities?’, and sec¬ondly, ‘How will I get paid for what I have done?’
John Collins, chief credit officer at EFIC, says, “The Australian experience to date has been better than most countries. But this shortage of working capital is certainly becoming a trend in developed economies, so depending on the depths and duration of the crisis, it may develop into an issue for our exporters.”
Financing projects of scale is now becoming dif¬ficult, even in the Australian market. This reflects the difficulties which most banks are facing in having to pay higher rates for borrowing. As a defensive measure, banks may reduce their expo¬sures, resulting in a decrease in short-term trade lines and postponing of decisions about longer term funding of customer projects.
In these circumstances, EFIC’s role is to step forward and help exporters to continue growing their business internationally. EFIC has a range of solutions available to assist exporters with oth¬erwise sound business strategies encountering difficulties in the current situation.
EFIC can provide export loans or a working capital guarantee such as EFIC Headway. EFIC Headway provides a guarantee to a par¬ticipating bank to enable it to lend additional funds to eligible exporters, without requiring ad¬ditional security from the exporter.
Sometimes overseas buyers require Advance Payment Bonds or Performance Bonds as assur¬ance that exporters will meet their obligations under an export contract. A bank might be able to provide such a bond, but if this is not feasi¬ble, EFIC may provide the bond, where eligibility requirements are met. This could free up an ex¬porter’s working capital, providing them with the security to compete in global markets.
While the recent weakness in the Australian Dollar has helped exporters become more com¬petitive in their pricing, the cost of funding ex¬port business with the Australian Dollar equiva¬lent value has increased.
EFIC can supplement the banks and over¬come financial barriers facing exporters. They can offer reassurance regarding payments to ex¬porters for their exports through documentary credit guarantees and medium term payments insurance.
Export payments insurance for contracts of over two years is designed to reduce the risk of loss in an export contract arising from defined events, such as the insolvency of an overseas buyer. If an export contract is worth $A5 million or more, EFIC may be able to issue a guarantee to an approved bank. The bank can then use the EFIC guarantee as security to provide a loan to an overseas buyer, enabling the deal to go ahead.
For more information, please contact Export Finance and Insurance Corporation (EFIC) on 1800 093 724, or visit their website www.efic.gov.au
Credit crunch: Issues facing Australian exporters
As an exporter, the critical issues arising from the credit crunch are, ‘How will I finance my export activities?’, and sec¬ondly, ‘How will I get paid for what I have done?’
John Collins, chief credit officer at EFIC, says, “The Australian experience to date has been better than most countries. But this shortage of working capital is certainly becoming a trend in developed economies, so depending on the depths and duration of the crisis, it may develop into an issue for our exporters.”
Financing projects of scale is now becoming dif¬ficult, even in the Australian market. This reflects the difficulties which most banks are facing in having to pay higher rates for borrowing. As a defensive measure, banks may reduce their expo¬sures, resulting in a decrease in short-term trade lines and postponing of decisions about longer term funding of customer projects.
In these circumstances, EFIC’s role is to step forward and help exporters to continue growing their business internationally. EFIC has a range of solutions available to assist exporters with oth¬erwise sound business strategies encountering difficulties in the current situation.
EFIC can provide export loans or a working capital guarantee such as EFIC Headway. EFIC Headway provides a guarantee to a par¬ticipating bank to enable it to lend additional funds to eligible exporters, without requiring ad¬ditional security from the exporter.
Sometimes overseas buyers require Advance Payment Bonds or Performance Bonds as assur¬ance that exporters will meet their obligations under an export contract. A bank might be able to provide such a bond, but if this is not feasi¬ble, EFIC may provide the bond, where eligibility requirements are met. This could free up an ex¬porter’s working capital, providing them with the security to compete in global markets.
While the recent weakness in the Australian Dollar has helped exporters become more com¬petitive in their pricing, the cost of funding ex¬port business with the Australian Dollar equiva¬lent value has increased.
EFIC can supplement the banks and over¬come financial barriers facing exporters. They can offer reassurance regarding payments to ex¬porters for their exports through documentary credit guarantees and medium term payments insurance.
Export payments insurance for contracts of over two years is designed to reduce the risk of loss in an export contract arising from defined events, such as the insolvency of an overseas buyer. If an export contract is worth $A5 million or more, EFIC may be able to issue a guarantee to an approved bank. The bank can then use the EFIC guarantee as security to provide a loan to an overseas buyer, enabling the deal to go ahead.
For more information, please contact Export Finance and Insurance Corporation (EFIC) on 1800 093 724, or visit their website www.efic.gov.au