Finance for large export projects

In this article Hans Meulenkamp from GEA Ireland argues that it's reasonable for companies to expect some help from their suppliers in securing export financing, especially when the going gets tough

It's been a while since oiling the wheels of commerce has been as hard as it is today.

Banks are reining in, preferring to ride out their largely self-created storm.

Companies too, alarmed by global financial uncertainties, are playing it safe.

But playing safe in business is not a long-term strategy.

Fortune, they say, favours the brave.

During the difficult times, it's often the company that takes a calculated risk while everyone else is hiding in the shadows that emerges first into the warm glow of sunshine.

Obtaining funds and guarantees, however, especially for large export projects, perhaps in developing countries, is not easy.

That's often when dealing with a multinational supplier, such as GEA, able to take a global approach to raising capital while having local contacts and providing local knowledge, can help.

Even in what is now recognised as a global economy there are still substantial differences between the official export credit systems of the OECD: it pays to know one from another.

For example prices can vary for export guarantees.

So does the willingness of financial institutions to take on credit risk on some countries, banks and corporations.

For this reason, to obtain the best possible terms, it's often best to obtain finance from outside the customers' own country.

By providing export finance, a supplier makes it possible to offer long-running export credits to customers of capital goods in emerging markets where the local situations do not permit the same conditions.

These conditions might include, for example, lack of liquidity in the banking system, central bank regulations, or local legislation requiring investments above a certain level to be financed through the supplier.

Even though it might appear more risky for banks in the developed countries to lend to undercapitalised banks and companies in developing countries, most operate in local markets where competition is sufficiently tough to compel them to look outside their own countries if they wish to expand their lending activity.

Global suppliers that take their responsibilities as long-term business partners should be able to help companies achieve finance for projects at reasonable rates even during the difficult financial climate we are experiencing now.

They should, for example, be able to: conduct negotiations with banks that have a specialist knowledge of the customer's country; liaise with export credit agencies to obtain the best guarantee terms; negotiate with investment funds and insurance companies; arrange financing terms with the customer and their bank; and assist with writing Letters of Credit and guarantees and the financial articles of the contract.

GEA Process Technologies Ireland is part of the euro4.3 billion GEA Group.

By using the Group resources and the company's wide circle of contacts in over 50 countries, it has the ability to construct attractive financing for projects that would have been difficult if not impossible to achieve locally.

This ability has always been a valuable resource for GEA customers.

While the financial climate worldwide remains uncertain, for many companies it could be the difference between continued prosperity or stagnation.

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