“This is our largest contract in this segment,” says Oscar Olsen, Alfsen og Gunderson’s paper-industry equipment director.
The Norwegian company is a leading manufacturer of water, air, drying and cleaning technologies. Two years ago, it negotiated an agreement to sell paper-production equipment to a customer in China. The agreement was valued at NOK 30 million.
The only problem was that the Chinese customer was unable to pay the full amount immediately. The solution was export financing from Export Credit Norway and GIEK. Export Credit Norway provides financing for purchasers of goods and services from Norwegian suppliers, while GIEK issues guarantees on behalf of the Norwegian State.
Secured a favourable loan agreement
The Chinese customer, Anhui Taipingyang Special Mesh Industry, was reliant on loan funding to finance the NOK 30 million investment. However, borrowing from a Chinese bank would have been far too expensive.
“The customer indicated that it would have to pay 7% to 8% interest in China. With Export Credit Norway’s help, it secured a significantly lower interest rate,” relates Olsen, and adds:
“We competed for the deal with a German supplier, but the Norwegian financing offer helped tip the scales in our favour.”
Similar export financing solutions are available in Germany, and Olsen’s impression is that the Norwegian solution was preferred to the German one.
“We could have lost the contract.”
“Export Credit Norway’s solution played a decisive role in winning the contract at that time. While we might possibly have secured a deal at some point in any event, it is equally possible that we would never succeeded. After all, some projects fail because the customer is unable to arrange financing,” says Olsen.
Thor-Magne Johansen from Export Credit Norway assisted Alfsen og Gunderson during the process, and travelled to China to sign the agreement. In his view, there are no disadvantages to using Export Credit Norway for foreign export transactions.
“We provide competitive loans to Norwegian exporters’ customers abroad. The Norwegian State carries the payment risk, but the exporter’s sale revenue is not reduced. This gives Norwegian exporters a competitive advantage,” says Johansen.
“How does export financing provide a competitive advantage?”
“The foreign customer deals with a secure lender and benefits from competitive terms, often at lower rates of interest that a commercial bank can offer. When Norwegian exporters can make such arrangements for their customers, the chances of securing an agreement are often improved,” he says.
Oscar Olsen from Alfsen og Gunderson confirms this. He relates that this financing option is also an advantage when arranging initial meetings with potential customers.
Export financing can open doors
“Export financing is beneficial in our marketing efforts. Although we do not always end up using Export Credit Norway’s products, the availability of this option makes it easier to secure meetings,” he relates.
Olsen is very positive about cooperation with Export Credit Norway, and is particularly pleased that such products are available to small and medium-sized enterprises, not only large companies. Alfsen og Gunderson has had its eyes opened to the opportunities offered by export financing.
“We are currently involved in two projects – one in India and one in Iceland – for which we will probably use Export Credit Norway again. I am excited to see what the future holds,” says Olsen.
However, as Thor-Magne Johansen points out, borrowing costs are not the only factor that makes financing from Export Credit Norway attractive.
“We have extensive experience and knowledge of international financing transactions, often in challenging jurisdictions. This makes us a useful adviser and sparring partner for companies seeking to make sales abroad. Export Credit Norway possesses knowledge and experience which many commercial banks lack,” he concludes.