TRADE minister Mark Vaile has announced the establishment of a $US50m bonding line by Export Finance and Insurance Corporation (EFIC) in co-operation with Liberty Mutual Surety to assist Australian SME exporters in the US government procurement market.
The facility is designed to assist Australian SME exporters overcome difficulties they may experience in securing a bonding line from their banks because of insufficient tangible security and the lack of familiarity by US surety bond issuers with Australian exporters.
Surety bonds are performance guarantees that provide compensation to the buyer if the supplying company does not fill its contractual obligations.
The US market is unusual because it typically requires suppliers to post bonds for up to 100% of the contract value for performance obligations particularly in the construction industry compared with 10-15% elsewhere.
Additionally, all surety bonds must be issued by a licensed company in the state where the work is performed.