Australia’s Export Finance Australia (Export Finance Australia) will be refocused to increase its capacity to finance small and medium sized businesses seeking to capitalise on global trade opportunities.
Traditionally, SMEs find it more difficult to secure export finance through banks, particularly when exporting to emerging markets.
Under CEO Andrew Hunter, Export Finance Australia has been focused on simpler and more streamlined credit application processes, to reduce the time and cost of doing business with Export Finance Australia.
These initiatives will now be complemented by an important proposed amendment to the Export Finance Australia Act which is aimed at reducing a costly administrative burden on business. Currently, Export Finance Australia can only lend directly for the export of ‘capital goods’ which are used in the production of other goods, and are not an end product. For example, currently Export Finance Australia can only directly lend for the export of dairy cows, but not milk.
The same restriction on direct lending currently applies to exporters of all other goods, including anticipated areas of export growth, such as pharmaceuticals, food and fibre, medical products or consumer goods such as wine. In these instances, currently Export Finance Australia instead provides a financial guarantee to a bank, which then does the actual lending.
This is costly for business as it requires two lots of credit approvals and associated duplication of legal and lender fees. This restriction will be removed, reducing costs for businesses.
As part of the refocus, Export Finance Australia will no longer provide financing for resources projects located in Australia or related infrastructure. This reflects a recommendation of the Productivity Commission. Export Finance Australia will, however, continue to offer financial services to SME suppliers where their product or service is integral to an Australian resource-export project.
In a further refinement, Export Finance Australia financing for large resources projects located outside Australia will in future only be provided if the Export Finance Australia board is satisfied that its provision is not crowding out the private sector, is not occurring at the expense of SME transactions and the project has significant Australian content, including through SME supply-chain participation.
As a result of these changes, it is expected that Export Finance Australia will do a greater proportion of its business with SMEs, which by number are the vast majority of Australian exporters.
These positive reforms follow an earlier boost for SME exporters from a capital injection to Export Finance Australia of $200 million in the 2014-15 Budget. This reversed a prior raid on the Corporation’s capital by the previous Labor government, which undermined the integrity of its balance sheet.
Following the restoration of Export Finance Australia’s capital base, it is now the right time to ensure Export Finance Australia’s commercial activities are focused on its core mission of supporting Australian exporters, particularly SMEs, which are the engine room of our economy.