It has been three years coming. But yesterday the Government announced an expansion of the role of the Export Finance and Insurance Corporation (EFIC) to provide financial support to a wider range of transactions for Australian SMEs exporting or investing overseas.
EFIC already provides funding to SMEs. EFIC's manager Robyn McLean says while EFIC is not a lender of last resort, SMEs (up to $100 million revenue) are their main client base.
"We are not competing with the banks but we do step in when the banks won't lend," she says. "We do the due diligence and then we monitor very closely." EFIC's terms are commercially competitive with the banks. "We often work with banks, doing the due diligence and then they come in as partners."
Once the legislation is passed, EFIC will be able to provide loans to Australian SMEs investing in offshore operations, allowing them to serve existing export customers better as well as tap into new foreign markets and establish global supply and distribution chains.
The amendments will also simplify the legislation, streamline access and reduce compliance costs for applicants.
Changing the legislation was first mooted by the Howard Government to bring practices in line with the different way SMEs go global. Traditionally, SMEs built a base in Australia and then ran their overseas operations from here. But modern exporting means companies build networks and invest in operations offshore. When the Rudd Government was elected, it was back to the drawing board.
Minister for Trade, Simon Crean says Australian exporters are finding it difficult to access finance for expanding their operations internationally. "Expanding EFIC's powers to better support Australian exporters will give a boost to this growing and dynamic sector of Australia's economy," he says.
EFIC CEO Angus Armour says: "This should offer long-term benefits to Australian exporters, but is particularly important now, when banks and other commercial financial providers are reassessing their risk profiles."
He says the 2009 EFIC Global Readiness Index showed that access to finance continues to be the most significant barrier faced by Australian businesses going global. "This expansion of EFIC's ability to support Australian SMEs is a direct response to the globalisation of markets and the growing participation of Australian businesses in it," he says.
Exporters eager to access a loan will have to wait. The legislation is not expected to be passed until next year.
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