Insurance for Working Capital Financing 

This insurance covers the risk of non-payment a bank incurs when extending working capital financing to an exporter.

Working capital financing is one of the standard products banks provide their corporate customers, often against security such as a pledge on the client’s inventories or a mortgage on a ship the client is building.

Our working capital cover enables banks to provide working capital financing for more exporters of capital goods and contractors, as they are able to insure themselves against the risk of default by the exporter.

Conditions

This cover is for working capital financing which banks have extended to exporters of capital goods or contractors executing projects abroad.  As there must be a direct link to an export contract, the exporter/contractor must take out export credit insurance with us for its export contract, whether the contract provides for cash payment, a supplier credit or a buyer credit.  If a buyer credit is involved, this credit must be insured with us as well.

In the case of an insured buyer credit, for exporters/contractors in a very strong financial position who will not be receiving progress payments under their export contract, we may be able to waive the standard requirement that the exporter/contractor also insure the manufacturing risk with us. 

As we will also be insuring the risks of non-payment by the foreign buyer/borrower, our usual conditions regarding international regulations, corporate social responsibility, etc. will apply.

Additional important conditions:

• percentage of cover: maximum 80 %; the insured may opt for a lower percentage, with a minimum of 50 %.

• Atradius will share pro-rata in the security the exporter has provided to its bank for the working capital financing. Depending on the risks involved, Atradius may require additional security.

• The working capital facility must be fully paid back by the date of delivery of the capital goods/completion of the work contracted abroad.

• The maximum amount of the working capital facility cannot be higher than the exporter’s/contractor’s costs for the contract concerned, over-financing is not permitted.  The exporter/contractor must first apply all payments received from the foreign buyer to the repayment of its working capital facility until this is fully paid back.

Risk Analysis

We will analyse the risk of the exporter not paying back the working capital financing.  The risk amount we will cover - being the sum of the risks related to working capital financing, counter guarantees and over-financing under the contracts -  will be limited to three times the exporter’s/contractor’s equity.

Premium

The premium will be 80% of the interest rate the bank charges for the working capital facility less the bank’s cost of funds (Euribor plus a liquidity surcharge), with a minimum premium based on the exporter’s/contractor’s credit ratings.   Should the interest rate the bank charges for the insured portion of the facility be lower than the minimum premium, the latter will apply.