EKN's Extended Guarantee Boosts Financing for Swedish Exporters, Aiding SMEs
EKN's new extended guarantee helps reduce bank risks in export financing, enabling faster payments and improved cash flow for Swedish exporters, with significant benefits for SMEs.
- • EKN introduced an extended guarantee to reduce banks' risks in export financing, facilitating more export deals.
- • Stricter capital adequacy regulations had previously limited banks' ability to discount invoices for exporters, especially SMEs.
- • The guarantee now covers risks from contract breaches and disputes, encouraging banks to approve more export transactions.
- • Exporters can receive faster payments without new loans, improving cash flow and competitiveness.
- • SEB and EKN aim to support Swedish exporters, particularly in emerging markets with scarce local financing.
Key details
Sweden's Export Credit Agency (EKN) has introduced an extended guarantee designed to reduce banks' risks in export financing, thereby facilitating increased export transactions, particularly benefiting small and medium-sized enterprises (SMEs). This development aims to alleviate challenges faced by exporters when securing financing for large orders with extended payment terms.
Patrik Achtman, Head of Export Credits at SEB, highlighted that banks have previously been constrained by stricter capital adequacy regulations that limited their ability to discount export invoices. These regulations forced banks to carry theoretical risks on their balance sheets, restricting financing options even for creditworthy exporters covered by EKN insurance. The newly introduced guarantee provides banks with protection against risks arising from contract breaches and disputes between buyers and sellers, effectively lifting these risks from banking institutions. This adjustment enables banks to approve more export transactions and offer quicker payments to exporters by allowing invoice discounting without the need for additional loans, improving cash flow.
The new guarantee particularly supports SMEs exporting capital goods to emerging markets where local financing options are scarce. SEB aims to increase transaction volumes for Swedish exporters using this mechanism, and while the extended guarantee may involve slightly higher premiums, Achtman recommends exporters familiarize themselves with EKN's terms to maximize their competitive edge in international trade.
Prior to this guarantee expansion, banks' growing capital requirements had made financing exports more difficult, especially for smaller companies dealing with substantial orders and longer payment periods. By reducing banks' risk exposure, EKN's extended guarantee now acts as a critical tool for improving liquidity in Sweden's export sector.
In summary, EKN's extended guarantee is a pivotal step in empowering Swedish exporters, providing them with faster access to capital through invoice discounting and enabling banks to support export transactions with reduced risk. This initiative promises to strengthen Sweden's export industry's global competitiveness and especially bolster SMEs navigating challenging markets.