Dynamic Business

It is also time consuming to ensure buyers’ payments are made correctly and on time. Often your overseas buyers do not want the expense of documentary transactions, such as what happens with traditional trade products, and in effect demand to open account trading with extended trading terms.

Funding your export growth enables you to grow your business, and exposes your products to a greater audience. Export receivables finance (ERF) is a facility suited to businesses that have export or credit insurance and require a capital injection to fund business growth or cash flow constraints, and want to fund this on the strength of their international business sales. This facility has been designed so you have the international money owing to you working more quickly for you.

ERF is a working capital loan facility designed to give you access to funds based on the strength of your international or domestic business sales, instead of waiting for your debtors to pay within your normal trading terms. Financial institutions can make a percentage of your approved sales invoices available to you, provided you have suitable export or credit insurance. The maximum finance term is based on your individual buyer payment terms covered under the insurance policy, which is generally less than 180 days.

Because the facility is able to accommodate both export invoices and domestic sales, it suits Australian businesses that trade in both the domestic and global market. Finance can be provided in a nominated foreign currency or in Australian dollars, at your discretion.

There are a range of draw down options available with ERF, however the standard option is to finance against your outstanding debtor list (a summary of outstanding debtors covered by the credit insurance policy). ERF accommodates most major insurers and does not impact on the relationship you have with your client broker or insurance provider.

The benefits are:
No change to security—it works with your existing finance arrangements so you can increase your access to funds without necessarily needing additional security, equity in your property or financial reporting requirements.
Greater bargaining power—you have immediate access to working capital upon dispatch of your sale under your ERF facility to ensure you are in a better position to negotiate favourable terms with your suppliers and end buyers.
Room to grow your business—your ERF facility limit grows as your business and export or domestic debtor sales grow.
Easy to do business—you can conduct business on an open account to maximise your trading flexibility.

The best feature for smaller businesses is that both these facilities are drawn from sales. As most SMEs do not normally have a large asset or equity base from which to draw security, these facilities are extremely appealing because they do not require fixed securities. Generally, all that is required is:
* Fixed and floating charge given by the borrower;
* Directors’ or shareholders’ guarantee and indemnity;
* Facility agreement; and
* A suitable export or credit insurance policy.

The other main feature relates to relative growth. As the business grows and the debtors grow, the facility limit grows, which provides your business with the cash flow to continue growing your business.

— Geoff Cox is the general manager of trade and supply chain finance and working capital services at NAB and a Dynamic Export panel expert

* The information given in the article is intended as a guide only. Please see your financial institution for more specific information in relation to your business.