Companies looking to win contracts and tenders overseas can find financial assistance even harder to secure than it is for local work. But, as Matt McDonald writes, there is help available.
It takes a lot of work to win contracts and tenders. In fact, to do so for the first time can be a daunting prospect for your average up-and-coming SME manufacturer.
Developing an understanding of the market; finding what contracts are available; choosing the one that fits your business’s expertise and aptitude; setting out a winning application; and pricing are all critical parts of the process.
And securing contracts and tenders isn’t only about satisfying the buyer that you are up to the job and that you can offer value for money. It also involves satisfying your bank that you are a good financial risk.
To put it bluntly, failure to win over your bank is a game changer.
If the contract you are chasing happens to be overseas, convincing your bank to support your business can be that much harder.
In deciding whether or not to support your overseas tender they have to consider things like the nature or term of the investment and even the political climate of the country in which the country is being done. Military coups have a habit of disrupting economic activity.
But the situation isn’t hopeless. The Export Finance & Insurance Corporation (Efic) can offer financial assistance to companies doing business overseas.
“We’re Australia’s credit export agency and what that means is we’re all about helping Australian businesses win, grow and succeed internationally,” Efic Executive Director, SME, Andrew Watson told Manufacturers’ Monthly.
In collaboration with banks, Efic provides companies with tailored financial solutions, including working capital and bonds.
“We have for example a fantastic Melbourne company called Camatic which specialises in stadium seating and it has nearly three quarters market share of stadium seating in the NFL in the US. And when they bid for contracts like the San Francisco 49ers stadium, they need to put up performance bonds,” Watson said.
“And the Australian bank can be quite challenged in terms of providing that sort of financial assistance...that’s when we stepped in and worked with Camatic and their bank and provided bonding support that enable them to win that contract overseas.”
So, at what stage in the tender process does Efic offer help? Before the tender is won or after?
“It can be both,” Watson explained. “We’ve worked with another manufacturer also in the US that was bidding for a defence related contract and we were able to work with them to provide a letter of support and now they’ve won that contract and now they’re seeking bonding support.”
“A key risk we take a lot of the time is performance risk - that Australian business’s ability to successfully perform the contract they’ve entered into with the overseas party.”
However, while Efic has more scope to help than banks, it would be wrong for manufacturers to think that it is an easy touch. They do knock back request for financial assistance.
“We price for risk. We assess the risk. And at times we make an assessment that the life stage a company is at requires equity versus debt and our mandate is in the debt component versus the equity component,” Watson said.
And the knock-back can even come after the company has satisfied all tender criteria and won the work.
“Clearly we expect our money back but we take the view that that company with this backing should be successful in winning that contract,” explained Watson.
Watson said the numbers of companies looking overseas for work is on the rise.
“What we’re seeing increasingly is Australian SMEs looking to be closer to their customers so they are seeking ideas and options regarding overseas expansion,” said Watson.
The assistance Efic offers is purely financial. However, as Watson pointed out, practical advice and assistance is available elsewhere.
“If you want to invest in an overseas market you need to make sure you speak to the likes of Austrade, your lawyer, your accountant,” he said.
“Businesses that expand overseas and don’t get the right advice are more than twice as likely to fail as those that get advice.”
“Austrade are really good at helping companies gain information and advice and research on access to markets, what is happening in those local markets and understanding what you need to look out for and also possible introductions with the right players in those local market