Export Finance and Insurance Corporation (EFIC) financed a producer offset loan to production company Ulah Pty Ltd, set up by producer Anthony I. Ginnane, to finance production costs of the film.

According to Alex Fernandez, EFIC’s head of Alliance and Product, SME and Mid Market, the loan helps cash flow restraints by outlaying funds before the government Producer Offset tax rebate comes in.

“We are proud to suppor Antony I. Ginnane in the export of a confronting Australian story through our Producer Offset loan,” Fernandez said.

The film follows the story of a radical Palestinian who holds hostage a holocaust survivor after a failed suicide bombing.

“The film touches on issues of ideology, faith and freedom but ultimately is the story of family and a mother’s love,” Fernandez said.

Ginnane, said the loan came when the production was facing a funding gap.

“EFIC’s support gave us the financial breathing space we needed to tell this story about the power of compassion and reassure our international partners that we could meet our agreements to distribute the final production to international audiences,” Ginnane said.

The EFIC Producer Offset loan assists in financing eligible Australian film, documentary and television productions.

EFIC provided over 100 facilities worth nearly $600 million, supporting exports and overseas investments in 2010-11: a year of global financial unpredictability, a high Australian dollar, and an appetite for debt to finance large-scale projects. EFIC also faced an increased demand for SME products against an uneven recovery in the global economy.

The SME team in particular had another strong year of growth with 90 facilities signed with SMEs worth $136.7 million, across a wide range of sectors. This includes a strong uptake of the foreign exchange facility guarantee provided through Travelex, and the Producer Offset loan, both introduced in May 2010.

Over 45 percent of EFIC’s signings in dollar value were delivered to the construction industry, followed by ship building and repair services at under 18 percent. 16 working capital guarantees worth $54.5 million had also been provided by EFIC by 30 June 2011 after ANZ and Westpac signed agreements to support exporters financing requirements in 2010.

“We are continuing to adapt our products and approaches in this environment to help Australian firms win new export contracts and protect their offshore investments,” said CEO and Managing Director Angus Armour, adding that with the environment remaining turbulent, many exporters will still need the services of EFIC to assist in doing business overseas.

“Markets remain uncertain and credit conditions overseas will remain tight in the year ahead. As a result, we anticipate increased demand for EFIC to support Australian exporters.”

Cash flow stumbles

Christian Vollbehr, member of the management board at global credit insurance agency Coface Deutschland, says that a client may delay payment for a number of reasons, all of which will affect a business’ cash flow: “Sometimes they ask for an extension of payment and come up with reasons to delay payment, or they start a commercial dispute used as a delaying tactic.”

Recent political instability in certain countries will affect payments; even if your customer wants to pay you, they may not have access to their bank because of civil unrest. Whatever the delay, it means export payment terms of 90 days can blow out to months, even years, which severely affects your ability to pay your suppliers and run your business.

One remedy, if you’ve already sent goods overseas and your customer has decided not to accept it at the last minute, is to minimise your losses by selling the goods to another customer nearby. “You need to know at any time where your product is sitting. Is it still on the ship, is it in port? Is it somewhere in transition? Can you redirect it? It’s good to know people in-country who can help you on the ground,” says Vollbehr. “You could make some losses but you don’t lose the ability to trade.”

For service exports, or if your goods have already been accepted, you can enlist the help of a debt collection agency. Choose one in-country because they will be better equipped to deal with the local laws concerning debt collection. Having a local representative working on your behalf also makes the threat more real for your debtor.

Next time, try obtaining payment in advance. “That’s the safest way–but you can’t usually ask for that for competitive reasons,” Vollbehr admits. Also look into secure terms “where you have either documentary credit or any other type of secure terms, like letters of credit that are considered reasonably safe”. This depends on the stability of the banking infrastructure in the market, however. “If you have guaranteed payments and the banks shut down, what’s the value of that guarantee? There’s no 100 percent payment guarantee unless you get money up front.”

Also check the risk profile of your buyer and the market in case there are environmental conditions that point to future payment problems. “Watch the media to see what’s happening. Risk changes every day. If you’re setting terms, set them realistically in terms of that market and the industry you’re part of,” says Vollbehr, adding that competitors may be a good source of this information.

He also recommends being strict with your payment terms and keeping track of your debtors. “Keep it alive, update whatever you have.”

The international credit risk management agency’s 2010 Corporate Credit Risk Management study of 511 SMEs found the number of companies exporting grew by 30 percent compared to 2009, with 23 percent of those involved in international trade saying exports accounted for at least half their annual income.

Sixtyfive percent of these companies offered overseas clients more than 60 days to pay, compared to only 27 percent in 2009, and the number of international customers trading on credit terms increased by 15 percent.

Less than half (42 percent) reported their day sales outstanding (DSO) was less than 30 days for overseas clients, with 37 percent’s average DSO 60 days or more, compared to 23 percent last year.

“There has been a fundamental shift in payment terms in the past 12 months,” Country and General Manager of Coface Australia Christian Voll behr said, warning that a company needs to be in a relatively strong financial position to lengthen credit terms.

Australian companies have also become more lenient with overdue or non-payments, opting for amicable negotiation (64 percent) instead of third party intervention or litigation (18 percent). In 2009 34 percent resorted to one of these actions.

Nine out of 10 companies said they outsourced overdue receivables, mainly to collection agencies.

The Russian state authority for insurance (FSSN) delivered the licence to the Moscow-based ZAO Coface Rus Insurance company, Coface’s subsidiary, last week.

One of the four major players in the Russian credit insurance market, Coface has widened its presence in Russia through the new licence and now offers credit insurance for four years through a technical agreement with local partner Kapital.

Delivering its own trade receivables management offer, the new organisation will benefit both the client and Coface. On top of improved risk control, there will be an increased quality of service for its clients, and an easier access of Russian companies to Coface credit insurance expertise.

Didier Bourgeois, country manager for Russia, confirms these benefits, adding, “Coface’s ambition is to become market leader in trade receivables management in Russia, thanks to its worldwide presence, deep knowledge of local risks and large bouquet of services offered to Russian and international customers”.

Coface’s worldwide strategy to become the first global European rating agency could be achievable with Coface also producing credit ratings on Russian companies. It recently took full control of its Russian rating company, buying back 100 percent of the shares.

Global financial crisis survivors Australia, Canada and New Zealand have retained the highest ranking of A1, while the USA, currently on A2, has been placed under positive watch with an upward forecast of 2.3 percent.

However, with a more dampened outlook, the Euro Zone has been reviewed downward to 0.8 percent, though Coface indicates that industrialised countries as a whole should post 1.6 percent growth this year.

“This ending of the crisis is characterised by a positive growth shock of 4.5 points, without precedent, but deceiving,” remarked François David, president of Coface. “If emerging countries have nearly recovered their pre-crisis growth level, the United States shows a respectable but risky recovery and the ending of the crisis is very painstaking in Europe.”

The website uses three categories in its assessment of risk:

1. Country Risk: Understand the average level of short-term non-payment risk associated with companies in a particular country.
2. Sectors: Evaluates sectors risks in the world economy.
3. Business Climate: Assess overall business environment quality in a country.

Information available at the Coface Country Risk and Economic Research portal.

A release by the agency stated: “Since the second half of 2009, Coface has recorded a net reduction in payment defaults. Payment defaults, still up 19 percent in the first half of 2009, declined 40 percent in the second half.”

However, the upgrades came with a warning about bubbles, particularly overcapacity in China, public debt and asset price bubbles brought on by the stockmarket, leaving the organisation to foresee “a very soft recovery in developed countries”, although “the dynamism of emerging countries rebalances world growth”.

Coface has eased the rating outlooks for all industrialised countries except the UK, Ireland, Italy, Greece, Portugal and Spain, which remain rated A3, some still under a negative watch.

“It is apparent that Dubai’s issues are not yet properly assessed, let alone dealt with,” said David Morrison, analyst with trading firm GFT. “On top of this, Greece’s credit downgrade brings other eurozone countries back into focus – Ireland and Spain – which has pressured the euro.”

European banking shares slid overnight as markets fretted about the sector’s exposure to Dubai. At the same time, Greece was hit by a second blow to its credit rating overnight, marking falling confidence in its economic policy, and raising the prospect of crisis budget measures and increasing strains in the eurozone.

Credit rating agency Fitch downgraded Greek long-term debt ratings, hours after Standard & Poor’s warned it could take the same step if the new government did not take aggressive action to slash the huge public deficit.

Morrison said traders were running for cover due to “concerns of a sovereign debt default”.

“This decision shows Australia’s strong reputation in finance and trade finance in particular and will give us a stronger voice in a range of multilateral fora,” said Minister for Trade Simon Crean.

“The presidency of the Berne Union is an opportunity for Australia to continue to play a significant influencing role in shaping infrastructure around trade finance issues as well as shaping the agenda to promote free trade, influence the continuation of open and transparent trading rules and develop a sustainable response toward recovery from the global financial crisis.”

Members of the Berne Union finance about 10 percent of the world’s trade, and collaborate on financing issues such as risk and trade management strategies. It also has close ties with the International Monetary Fund, the World Bank, the Organisation for Economic Co-operation and Development and the International Finance Corporation.