The Australian government has announced amendments to the Export Finance and Insurance Corporate Act, which will allow Efic, its export credit agency, to fund more SMEs directly.
To facilitate financing to SMEs, the current laws dictate that Efic can only lend directly for the export of capital goods, which are used in the production of other non-end goods, and the same restriction on direct lending currently applies to exporters of all other goods.
In other instances Efic provides a financial guarantee to the business’s bank, which then does the actual lending. This red tape will now be removed and Efic will become more flexible to directly fund SMEs’ export operations.
“These enhancements to our ability to lend are a strong endorsement by government of our mandate to provide financial solutions to exporting SMEs and those SMEs in an export supply chain,” says Andrew Hunter, Efic’s managing director. “These changes are a positive outcome for our clients and will allow us to help even more SME exporters.”
He adds that the changes that will allow Efic to lend to small businesses for the export of all goods, not just capital goods, will expand the pool of smaller exporters that are eligible for financial support.
These changes are consistent with the government’s focus on deregulation and reducing red tape, an Efic statement reads. ”It will allow Efic to support SME exporters more efficiently and cost-effectively.”
The move should enhance Efic’s efficiency and reduce processing times and fees for SMEs.
However, reflecting a recommendation of the productivity commission, Efic will no longer support resource projects, and related infrastructure, located in Australia. “This decision will only have a small impact on Efic’s future operations,” Efic states, “as the current strong liquidity in global capital markets has meant that such projects continue to be difficult for Efic to support on market gap grounds.”
Efic’s structured trade and project finance division will continue its support for resource projects overseas, only if “the project has significant Australian content, including through SME participation”.