Supplier Credit Guarantee requirements and conditions

What does a Supplier Credit Guarantee cost?

EKF charges a premium for issuing a Supplier Credit Guarantee. The premium is determined based on:

  • Your buyer's credit rating: EKF assesses your buyer's credit rating, i.e. the likelihood that the buyer will pay. The higher the credit rating, the lower the premium.
  • The political situation in your buyer's country: EKF assesses the risk of political unrest in your customer's country. The lower the risk of political unrest, the lower the premium.
  • Repayment term: The repayment term refers to the number of months the customer will take to repay the credit. The shorter the term, the lower the premium.

Three price examples

The cheapest Supplier Credit Guarantee costs 0.2 per cent p.a. This could be a Supplier Credit Guarantee to a customer with an exceptional credit rating from a high-income country such as Germany, the USA or Estonia. The term is 181 days.  

In other cases the premium is around 2 per cent p.a. This could be a customer with a below-average credit rating from a country associated with some political risk, such as Azerbaijan. The term is 5 years. 

As we approach the limit in regard to transactions in which EKF is willing to participate, the premium could be as high as 4.25 per cent p.a. This could involve a customer in a country associated with major political and economic risk, such as Ethiopia.

Who is eligible for a Supplier Credit Guarantee?

Export companies that offer customers in a foreign country credit for at least six months. EKF must rate the foreign buyer as creditworthy to issue a guarantee.

How much does a Supplier Credit Guarantee cover?

There are no limits. 

How long is the credit period?

The credit period for a Supplier Credit Guarantee is up to 8.5 years in countries defined by the OECD as high-income countries, and up to 10 years in all other countries.

If the buyer is from an EU country, Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland or the USA, and if the order is for more than 5 million euro, the credit period must be at least two years.

If the customer is from any other country, the credit period must be at least six months.

Conditions

The foreign buyer is normally required to pay at least 15 per cent of the order amount in advance when the term exceeds one year. The credit must also be granted as a serial loan with principal repayments of equal size plus accrued interest.

Environmental and social sustainability requirements

EKF produces a risk assessment in regard to environmental protection and human rights based on the IFC's standards and guidelines.

What does EKF cover?

EKF pays compensation if your company incurs a loss on an export transaction or investment abroad as a result of commercial or political risk.

Commercial risk means that your company's buyer is unable to pay due to liquidation, insolvency, cancellation of the contract or because the buyer is unwilling to pay.

Political risk means that your company does not receive payment for products due to impediments in the country you are exporting to. Such impediments include war (external armed conflict and domestic political violence), currency shortage, restrictions on use of currency, import or export bans, and interventions by local authorities that make it impossible to receive payment for the products.

EKF generally pays a maximum of 90 per cent of the loss in compensation to your company. As an exporter, your company must usually cover a deductible of at least 10 per cent.