2 June 2021

EKN for more secure business transactions and lower risks

An order from a research facility is often a big undertaking for a small company, involving financial risks and various requirements for guarantees, such as bank guarantees and delivery guarantees.

Do you need investment finance? Advance payment before delivery?

Supplier companies needing a bank loan, such as for investments in conjunction with an order, can apply to EKN, The Swedish Export Credit Agency, for bank guarantees. This could also concern guarantees for advance payment from the facility. EKN is a Swedish public agency whose mission is to promote Swedish exports, and its services are aimed at companies of all sizes.

Can be crucial for a business order – contact EKN at an early stage

In certain cases, support from EKN can be crucial if a company is to fulfil an order. Greger Leijonhufvud, Regional Manager at EKN, recommends contacting the agency already when submitting a bid.

“Talk to us at an early stage. We can explain how we can help, and what applies when you conduct business in different countries. A lot can be done to reduce the risks. If the contract involves issues beyond our area, we can mediate contact to other organisations.”

Three common challenges, and how EKN can provide support

1. When you need to finance the export contract

It costs money to grow. When a company wins a big order, or is moving into a new market, it needs capital – materials and components must be bought, and the company may have to recruit extra personnel. Fulfilling that big order can require some new capital, and that can be a challenge for the cash flow.

“Most banks want to help their corporate customers with a loan in these situations, but the bank requires security. That’s where our working capital credit guarantee comes in. Now during the Covid-19 crisis, EKN can offer guarantee cover of 80 percent of the risk when the bank approves a loan, so the bank is more likely to say yes,” says Greger Leijonhufvud.

In practical terms, the guarantee means that, if you apply for credit of SEK 5 million, and EKN is in the picture, the risk to the bank is actually only SEK 1 million. Furthermore, using the EKN working capital credit guarantee is cost-neutral for companies.

EKN shares the risk with the bank, and therefore also receives its fee from the bank, based on the interest rate they set for the loan. For companies, this means there are no extra costs involved when using EKN.

2. When you need an advance payment for the order

When you have received an important order, you often need an advance payment from the customer before you can start production. Before a customer abroad makes such a payment, they will often want an advance payment guarantee.

“It’s the Swedish export company’s bank that can issue such a guarantee, but this entails a risk for the bank,” explains Greger Leijonhufvud. “Even with a signed order, the bank may feel there is insufficient security to issue a guarantee of, say, 30 percent of the entire order value.”

EKN has developed a solution for these types of situations – a counter guarantee. This covers 75 percent of the bank’s recourse risk, i.e. the risk of the customer abroad requesting reimbursement of the advance payment. The counter guarantee can be issued regardless of where in the world the exporter’s customer is located.

The counter guarantee reduces the bank’s own risk, and can increase the bank’s credit limit for the export company. And the counter guarantee does not cost the export company any extra – instead, EKN gets its fee from the bank.

3. When you want to be able to offer your customer credit, but want a guarantee you will be paid

EKN also makes it possible to protect the company’s invoices in export transactions.

“Our guarantee for trade receivables means that EKN covers the risk of non-payment. The guarantee covers 95 percent of the invoiced amount, so you can be sure you will receive compensation, even if your customer is declared bankrupt or cannot pay,” explains Greger Leijonhufvud.

This guarantee usually applies mainly for business transactions outside the EU and other high-income countries, but during the current pandemic you can insure your invoices regardless of where in the world your customer is located.

With this guarantee of payment, you can give the customer abroad better payment terms. In times of uncertainty, such as during a pandemic, the ability to offer a longer period of credit can be a competitive advantage, and the customer may be more likely to choose your company rather than a competitor.

Read more about what EKN can offer, www.ekn.se

EKN, the Swedish Export Credit Agency, is a Swedish government agency tasked with promoting Swedish exports and the internationalisation of Swedish business. The agency does this by offering export companies and banks guarantees against the risk of non-payment. EKN also has various financing solutions that increase the chances of banks approving credit to export companies and their subcontractors, as EKN covers the bank’s risk. EKN guarantees are for export companies of all sizes and their subcontractors.