2011 events including the Japanese tsunami, eurozone crisis, sovereign debt default by Greece, the debt ceiling drama in the US and the Arab Uprisings meant that the global slow down was unsurprising.

Emerging markets and commodities which are increasingly important to Australian exporters, were also softening towards the end of the year. EFIC Senior Economist Dougal Crawford said that, “despite their relative out-performance, emerging markets have slowed noticeably, as a result of tighter monetary policy to rein in inflation and slowing export demand.”

Looking ahead to 2012, the EFIC report said that the biggest economic risk will continue to be the eurozone. Senior Economist Ben Ford said that the outlook is that Europe may do enough to avoid a chain of sovereign debt defaults, “But it seems unlikely that this would be enough to promote growth-oriented adjustment.” He believes, “the outlook for the eurozone is one of prolonged stagnation-cum-recession. Under these circumstances, the risk of future sovereign debt restructurings or moves by some member countries to exit the currency union won’t disappear.”

Australian exporters will be looking to their major trading partners in Asia to see whether they manage to grow regardless of international concerns. According to Crawford, “the region’s growth is becoming more self-sustaining. But it is still reliant on the eurozone as a market for exports. And it has its own home-grown vulnerabilities.”

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.”

Working in collaboration with Export Finance and Insurance Corporation (EFIC), Travelex is now able to offer eligible SME exporters access to additional hedging facilities with a face value of up to $2 million without the need for a deposit. The increased limits have been made possible through the expansion of EFIC’s foreign exchange facility guarantee which was created with Travelex in March 2010.

Andrea Govaert, EFIC’s executive director SME and Mid Market, said the partnership between EFIC and Travelex is all about helping SME’s. “Our work with Travelex is another way we can work in the commercial market to support SME’s in their export growth,” she said.

Simon Glendenning, general manager Mid Market at Travelex Global Business Payments, said the increased limits are targeted at supporting SME’s with an annual turnover of less than $10 million.

“While many providers have been reducing credit lines for small businesses in the last 12 months, Travelex recognises that now, more than ever, SME exporters need the ability to hedge their sales,” he said. “We are giving SME exporters greater flexibility with their hedging arrangements, providing certainty over the value of their invoices and their profitability over the long term.”

The project involves the procurement of equipment, installation and operation training work for Japan’s Grant Aid programme. The programme is designed to improve the weather forecasting system and meteorological warning facilities in Samoa.

Export Finance and Insurance Corporation (EFIC) is providing ES&S with export working capital support, by offering a six month $500,000 export working capital guarantee to ANZ, ES&S’s bank.

“EFIC’s support enabled us to access additional working capital to undertake this contract and provide essential improvements to Samoa’s weather forecasting and meteorological warning facilities while continuing to expand our overseas business,” said Colin Cookes, owner and chairman of ES&S.

“Often an exporter with aspirations to grow will leap in because they’re too eager,” says Craig Michie, CEO of Taurus Trade Finance, a lender that provides working capital to SMEs. “We recommend getting all the advice you can before you sign up with an overseas partner.”

Cashflow is usually the main concern for smaller businesses. Michie advises getting a letter of credit where possible. “A ‘sight’ LC is the best way to ensure your exports don’t impair your cashflow,” he says.

In his experience, LCs are becoming increasingly difficult to obtain as overseas buyers use their powers of negotiation to force better terms from exporters. “That can leave small to medium exporters with 30, 60 or 90-day payment terms,” he says.

Often banks won’t step in to help an relatively unproven exporter or will demand a ‘bricks and mortar’ guarantee in the form of a director’s home or other personal property. “Assets such as this are not linked to a company’s trading cycle and are a poor response to exporters’ funding needs,” says Michie.

Export Finance and Insurance Corporation (EFIC) might be able to help you if your bank can’t provide finance or insurance cover, but other options are available.

Financing options
Taurus is one financier that can step in to help exporters. “We offer a service whereby we take on the debt from the overseas buyer and pay the exporter upfront,” says Michie. Taurus conducts initial credit checks on the overseas party and gains legal ownership of the export debt.

“We have exporters who make use of our service again and again,” says Michie. “For them, it’s well worth the fee we charge to ensure continuous cashflow.” Other exporters take advantage of Taurus’s facility until their export revenues are constant enough to go it alone.

Michael Cradock, director of Newcastle-based Morgan Cradock, agrees that some growth-focused exporters are too slow to acknowledge their financing requirements: “The important thing for us is to talk the potential exporter though the entire process, taking in every eventuality.”

Cradock offers consultancy advice to technology SMEs. “We look at how an enterprise is interacting with its potential market and make sure they understand their sales and growth objectives.”

As international projects and contracts increasingly use suppliers from multiple countries, the agreement will help Exim banks and agencies to work together to support exporters from member countries.

Head of product management and risk transfer at EFIC, Chang Foo, believes that risk-sharing arrangements benefit exporters, buyers, project sponsors and the banks involved. “For an Australian company, it creates a one-stop shop for financing when they’re sub-contracting to an Asian firm or using Asian suppliers: only one set of documents needs to be negotiated with the agency providing the loan,” he said.

Risk-sharing will also free up an agency’s capacity to support more exports, Foo believes.

Foo said EFIC is increasingly being called on by Australian corporate clients to finance large domestic projects with an export focus in the resources and infrastructure sectors. The agreement will help EFIC provide stable, long-term finance.

“Risk sharing agreements mean that we can pool resources to meet these financing needs,” Foo said. “As most exports from these projects are destined for Exim member countries, especially China, Japan, Korea and India, agencies from these countries have a vested interest in working with EFIC to get the projects up and running.”

EFIC endorsed the agreement at the 16th Annual Meeting of the Forum in Busan, Korea, along with the Exim Banks of China, India, Indonesia, Japan, Korea, Malaysia, The Philippines and Thailand.

The index also showed that for businesses without existing offshore operations, 26 percent planned to take the initial global step, eight percent in the next 12 months.

The GRi further revealed that finance remains one of the key barriers to global growth, with 43 percent of respondents indicating that it hindered expansion, with more than a quarter saying it was their top barrier, though this was comparatively better than 2009, when 58 percent nominated finance as a barrier.

The results indicate that global credit conditions have eased, although many businesses still use retained earnings to fund global growth.

More than 900 businesses responded to the survey, one of Australia’s most comprehensive insights into exporters’ experiences of going global, covering the drivers, destinations and barriers to international business.

For further analysis, see www.efic.gov.au/gri.

The Producer Offset loan complements the Federal Government’s Producer Offset incentive, which provides refundable tax rebates for producers of Australian feature films, television and other projects.

Designed for smaller producers that have difficulty attracting finance in the commercial market, “the loan can free up cash flow for a production and bridge the funding gap between when a production company incurs production costs and when it receives the Producer Offset through the taxation system,” explained Angus Armour, CEO and managing director of EFIC.

“Financing is often a challenge in the film industry, especially for smaller productions. Great Australian productions can often suffer when there is a gap in financial support. Screen Australia welcomes EFIC’s new Producer Offset loan as another financing option for Australian producers,” said Dr Ruth Harley, CEO of Screen Australia.

EFIC will lend up to 85 percent of the estimated Producer Offset, between $100,000 and $500,000, to eligible production companies that provide the required security, including a completion guarantee. To be eligible, the production must also have an international distribution agreement.

For full eligibility criteria visit www.efic.gov.au/producer_offset_loan

EFIC’s foreign exchange facility guarantee will provide the potential for Travelex customers to increase their foreign exchange trading limits, allowing them to expand their hedging programs protecting their profits. Importantly, the customer will not be required to provide additional security to Travelex in order to take advantage of the guarantee.

Foreign exchange hedging protects exporters from adverse currency movements but not all exporters have a facility allowing them to cover all of their needs without significant cost or tying up working capital.

“With EFIC’s foreign exchange facility guarantee, exporters will be able to access increased limits from Travelex, providing them with the ability to better protect themselves against currency volatility,” said Kerry Agiasotis, Travelex’s regional managing director for Asia-Pacific and Japan.