Efic re-emerges as an SME export champion

Australia's export credit agency Efic helped provide export working capital to 206 small and medium businesses in the 2013/14 financial year. Efic managing director Andrew Hunter has sharpened the agency's focus on SMEs and plans to increase that number to 400 a year in four years time.

Hunter joined Efic last year and has spent the past 14 months talking to government, the market and business about Efic's purpose.

The biggest need he found was SMEs struggling to finance their export businesses. "It is always difficult for SMEs to get working capital for export unless they have collateral," Hunter said.

"Over the past year I have turned our attention to the SME sector."

Last week, Trade Minister Andrew Robb announced that the Government would amend the Export Finance and Insurance Corporate Act to give Efic the power to lend directly.

Under its current mandate Efic gives a company an export guarantee, which the company must take to its lender.

Hunter said: "The company has to go through two credit processes to get our guarantee and then the bank finance. For an SME the duplication of legal costs and fees could be expensive."

Efic will be able to lend directly, although the two-stage process may still operate for companies that want to work with their banks.

The amendments will also enhance Efic's capacity by allowing it to lend for the export of all goods. Currently it is limited to supporting the export of capital goods.

Hunter said only about five per cent of exports qualified as capital goods. "We could finance the export of a herd of dairy cows but we could not finance the export of milk," he said.

The amendment will stop Efic providing finance for resources projects and related infrastructure located in Australia. This is consistent with the renewed focus on SME exports and it is also consistent with a 2012 Productivity Commission recommendation that such projects should be left to the private sector.

The Productivity Commission was critical of Efic's focus on doing business with large companies. It found that three-quarters of the value of Efic signings in 2010/11 were facilities provided to large corporate clients.

Hunter said the Productivity Commission recommendations, which were highly critical of several other aspects of Efic's performance, had played an important part in the restructuring of the agency.

Hunter said that, in addition to the proposed amendments, there had been a lot of work going on within Efic to change its business model. It simplified its documentation and reduced the time taken to process finance applications.

"Our documents used to look like bespoke contracts. Now they look like standard credit applications," he said.

"Previously, the average transaction was taking 180 days to complete. We have taken that down to 90 days and I am hoping we can take it down further."

Efic has also changed its financing threshold from a A$500,000 minimum to $100,000. Hunter said one benefit of improved efficiency was that the agency could take on smaller loan amounts.

One challenge for an organisation whose role is to identify "market gaps" is to get the word out to SMEs. Hunter has appointed SME business development managers in Perth, Brisbane and Melbourne and the agency is doing more work through its distribution network (banks, industry associations and business chambers) to make more SMEs are aware of its services.

The Government signalled its support for Efic when it announced a $200 million capital injection in the Budget.

Trade Minister Robb said in a media release last week: "Following the restoration of Efic's capital base it is now the right time to ensure its commercial activities are focused on its core mission of supporting Australian exporters, particularly SMEs, which are the engine room of our economy."