In large mining and infrastructure projects involved in resources, green energy or critical minerals, SMEs provide a range of goods and services – forming a crucial part of Australia’s export supply chain.
Many of these businesses require finance to help cover their working capital needs, or to provide their buyer or financial institution with security for a contract or loan.
They’re the kinds of businesses that could receive finance from Export Finance Australia. But many aren’t aware they qualify for support from Australia’s export credit agency – because they don’t directly export their own goods and services.
Finance to support business growth
Aleks Henderson is Export Finance Australia’s mining and construction sector lead. She has seen many SMEs involved in these sectors’ supply chains that find finance a challenge.
“In Western Australia, we’re seeing a lot of businesses growing rapidly, but then struggling to access additional capital or meet their bank’s guarantee requirements for new contracts,” said Henderson.
For example, SMEs in the construction sector may be required to provide between 50 to 100 per cent of cash to cover a bank guarantee – an amount that may be beyond many businesses’ capacity. This is where Export Finance Australia could provide support.
“We can provide contract security at a minimum of 20 per cent cash cover for these SMEs, freeing up cash and potentially reducing their need for further finance,” explained Henderson.
One business that has benefited from Export Finance Australia’s support is Grounded Construction Group. The business designs and installs accommodation camps and site facilities across Western Australia’s remote mining sites.
Prior to working with Export Finance Australia, Grounded Construction Group had much of its cash tied up in bank guarantees. This led to cash flow issues.
The business was introduced to Export Finance Australia, which provided it with bank guarantees to support some of its upcoming projects.
Grounded Construction Group were introduced to Export Finance Australia to support some of its upcoming projects.
Securing finance with bonds
For many mining and construction businesses, negotiating an advance payment can enable them to mobilise and cover the upfront costs of materials. This can also mean they can get on-site sooner, leading to better outcomes for a project.
“We’re seeing contractors successfully negotiate advanced payments to support with mobilisation and upfront cost for materials,” Henderson said. “But to secure this deposit, they’re being asked for a bond.”
Export Finance Australia could help SMEs in this position by providing an advance payment bond. These bonds act exactly like a bank guarantee, enabling businesses to meet the advance payment conditions without tying up a large portion of their working capital.
Export Finance Australia supported McNally Group Contracting with a bond to support its contract security requirements. The business was winning more contracts based on its solid reputation.
As the value of its contracts grew, so did the level of security that it needed to provide to obtain finance.
Businesses that form part of an export supply chain can also secure loans in conjunction with bonds or guarantees from Export Finance Australia.
Electrical, civil and plant hire services provider, DCI Electrical, required extra working capital and contract security to cover its operating expenses and deliver on the contract conditions for two large mining projects.
Export Finance Australia provided DCI Electrical with a loan to support its mobilisation and working capital needs, and a bond to meet its contract security requirements.
DCI Electrical required extra working capital and contract security.
Loan assessments with a difference
Many SMEs’ financial statements may not reflect the strength of their business or its capacity to service a loan.
Export Finance Australia assesses finance applications based on a business’s ability to deliver. It considers cash flow, its policies and procedures, and whether it has delivered on a similar contract as part of its assessment. This due diligence can also be reassuring to miners issuing contracts.
“Alongside banks, Export Finance Australia can offer flexible finance solutions, including loans, bonds and guarantees,” said Henderson.
Another option for finance
Any business contributing to the mining and construction supply chain should consider contacting Export Finance Australia to explore financing solutions.
“Our door is always open to businesses, bankers and advisors to discuss finance options and how we can support their export journey – especially SMEs who provide a critical part of the larger export supply chain,” said Henderson.
To contact Export Finance Australia, call 1800 093 724 – or find out more at exportfinance.gov.au/supplychain
By Export Finance Australia
