Originally written by Mark Abernathy and posted on AFR 18.08.2016
The importance of the Efic Small Business Export Loan scheme comes sharply into focus when considering the stretched cash flow of many exporters.
Take Intersective, a Sydney-based education technology company that builds platforms and apps to aid in experiential education such as on-the-job learning, apprenticeships, mentoring and collaboration.
“Ninety per cent of what we learn in the workplace is via on-the-job learning and mentoring,” says co-chief executive of Intersective, Beau Leese. “Our platforms allow clients to structure the learning, facilitate it and ensure it can operate across different locations.”
The ability to facilitate collaborative learning across different locations is particularly important in the “knowledge economy”.
“There’s two billion people in the knowledge economy and they need effective experiential learning,” says Leese, whose company partners with Deloitte, Ernst & Young, the CSIRO, the NSW Government and many major universities. “The knowledge economy relies on problem solving, innovation and collaboration.”
Intersective has an experiential learning platform called Practera, on which clients can build their own programs. But when Intersective scored a major institutional contract in Vietnam, it needed to cover the costs involved in meeting the contract.
“The institution is large, and we are small,” says Leese. “So when the project had a few small delays, we needed external finance to meet our costs.”
The Vietnam project would come with a significant pay-cheque but it needed a bolstered team of developers to meet the deadlines.
“We have a team of 20 people in Sydney, and some in the UK, US and Malaysia,” says Leese. “But we needed more.”
The company approached their bank, which did not respond to its calls. So Intersective tried the EficDirect platform – an online application portal for small businesses wanting export finance.
“We had the funds in five days,” says Leese, who co-founded the business with Wes Sonnenreich four years ago.
Leese says the loan, which was taken on 12-month terms, has allowed the company to complete the contract and also increase its team of developers by two people.
“Most businesses need finance to expand their business and their market,” says Leese. “When small businesses need finance for exporting, it can be hard to source.”
Zonte’s Footstep, a winery in South Australia, also uses Efics export loans. The company may not produce the massive volumes of the major wine makers but still sells more than 50,000 cases per year.
“We’re on a sustainable growth rate of 20 per cent per year right now,” says managing director, Anna Fisher. “But we need finance to support the growth, especially since the largest growing part of our business is exporting.”
Zonte’s Footstep established in 2003 at McLaren Vale and was exporting by 2004. Its single largest market is now Canada where it sold 8000 cases last year, doing particularly well in Ontario with its four varieties of classic Australian shiraz wines, as well as a Malbec and Pinot Grigio.
Stress of success
But successful exporting in the wine business brings some stress. “From pruning to receiving our payments, takes around 550 working capital days,” says Fisher, also a CPA. “You become very good at cash-flowing it, but if you want to boost growth you need external finance.”
She says that the vines pruned in June will be harvested in March 2017 and go to market between March and June 2018, having triggered the most expensive part of the process, the end-tail bottling, labelling and packaging.
Zonte’s Footstep’s growth has meant increased costs, and Fisher says the bank-sourced credit had hit its cap.
“We couldn’t go to the bank, so we tried the Efic export loan for small businesses…the EficDirect products were really aimed at us.”
The application took two hours, having taken a day to collect the accompanying documentation.
“The money was in the bank in two weeks,” says Fisher, having borrowed $250,000 for 12 months. “We applied in April and Efic allowed us to borrow against our purchase orders.”
Most of Zonte’s Footstep’s Canadian business is conducted through the LCBO (Liquor Control Board of Ontario), which controls liquor sales throughout a province with the population of Victoria and New South Wales combined.
The LCBO issued monthly purchase orders for Zonte’s Footstep wines, until July 2016, giving the SA winery some collateral to borrow against.
“We had just under $500,000 worth of outstanding purchase orders,” says Fisher, “Our inventory is our biggest asset, so finding a way to raise credit against it was significant for us, as we try to grow our export markets.”
There is a set repayment structure which suits the business, she says.
She says the winery has enjoyed several years of 40 per cent per annum growth, and controlling it to 20 per cent growth is sustainable as it aims for 60,000 cases this year.
Zonte’s Footstep is selling in Sweden – its second-largest export market – and developing a market in China, as well as building its sales and presence in Canadian provinces British Columbia and Alberta. She says the Canadian market likes the Australian wine varieties, and the quality-price trade off.
While the Efic export loans were intended to fill the market gap for unsecured loans – backed by contracts and purchase orders for goods – one emerging sector has no goods, only services: tourism.
Frankland Island Cruises has been running day trips to the Frankland Islands on the Great Barrier Reef, since 1992. It has a luxury catamaran and has a permit to land limited visitors each day on Normanby Island.
“Some islands have hotels on them, but Normanby Island and the islands around it are restricted areas,” says managing director of Frankland Island Cruises, Ron Cusik. “The turtles still nest on the island and we have to land and remove all of our equipment – nothing can be left behind.”
The company takes tourists to the island for four and a half hours, including snorkelling, helmet diving, kayaking and lunch, and its business has been largely built on individual bookings with some groups booked through companies.
For the current tourism season, Frankland Island Cruises was approached by Japanese tourism agency, HIS, to book 80 days of chartered cruises, finishing in October.
“To take the contract we needed two extra vessels, more employees and a lot of extra equipment,” says Cusik.
The tourists needed access to clear-bottom kayaks, semi-submersibles, stand up paddle boards and helmet diving, and they wanted 14 staff on each cruise, where the company usually takes nine or 10. Six of the employees on the main boat are now Japanese.
Cusik says one of the biggest costs was an extra boat and crew to do the “set-up” on the island and then the “pack-up” after the guests leave, in order to fulfil the requirements of the permit.
“We had to outlay around $700,000 just to be able to meet the contract.”
There was a $200,000 deposit from HIS and then Frankland Island Cruises had to find the balance.
Cusik says his existing bank did not want to back the contract. “They said they didn’t deal in marine. It was as simple as that. We couldn’t go to a new bank because they’d want two years of business before we could borrow.”
However, the Japanese company, HIS, was on its side. It put a lot of marketing into the packages, and because of the amount of hardware Frankland Island had to supply, the demographic of the visitors was expanded.
“This market has been dominated by the 18-25 year-old market,” says Cusik. “But once HIS got behind it, they expanded it into families. So now we have a growing market – it’s pretty exciting.