Export financing

On May 17 Mikhail Merkulov Arricano Real Estate Plc Director General held a lecture on the topic: "Business Financing: Example of export financing" in the European Business Association within EBA Education Update.

Arricano company uses this tool in its practice since 2013. Due to export financing individual contracts for the construction of the Prospekt shopping mall and RayON shopping center were provided. Today, the company conducts talks with representatives of the Czech Republic, Poland and China in order to get the resources for the development of other projects.

Mikhail Merkulov, Arricano CEO, said: "Export financing - is a very convenient tool which in case the project is capital-intensive helps to loosen the financial burden and prolong the payment. In addition, the credit rate in this case is lower than the bank rate. And the client is minimally involved in the administration and documentary support of this project. Thus, the advantages of export financing are obvious. However, interested companies in order to get money with the help of this tool should fulfill an important homework. Firstly, the company should operate transparently. Arricano regularly conducts audits and publishes corporate annual reports, guaranteeing transparency and reliability to its partners, including at London Stock Exchange. Export Finance experts draw attention to the work of the management team, comparing the dynamics of the market as a whole with corporate performance. That means export financing is effective and realistic for the company with an impeccable reputation, which conducts a transparent business in Ukraine."

Ildar Usmanov, chief consultant of the Office of sector studies of the SE "Derzhzovnіshіnform" of the Ministry of Economic Development and Trade of Ukraine, commented: "Arricano company's experience is really unique. And Prospekt shopping mall itself is also conceptually unique. Export financing as a tool is really effective even in agriculture and other related sectors. I believe that Arricano’s experience will be a good incentive for the development of the Ukrainian economy as a whole, as well as an example of getting alternative sources of funding for other companies, too. "

Igor Baranov, Arricano Company Director of Capital Markets, adds: "Potential borrowers should take into account the specific features of export financing. The subject of financing is an export contract, so this tool will be ineffective for the projects with a high proportion of local origin costs. However, our company used this mechanism in a number of projects in order to finance the supply of modern, technologically sophisticated and innovative equipment for the shopping center, and the local cost of the project budget were financed by a bank loan. It is also important to consider the presence of mandatory pre-payment condition of the export contract, since the pre-payment is at least 15% of the borrower's own funds. The bank can also require opening a bank account outside Ukraine or there could be other peculiarities of currency flow regulation."

"It's wonderful that Arricano company is ready to share its knowledge and, importantly, practical experience in attracting foreign investment, with other member companies of the European Business Association. I am sure that the information that representatives of various business segments received during the meeting was extremely useful, it provides pabulum for reflection and helps to look at a number of already familiar things from a different angle”, - notes Yaroslav Kutovoi, European Business Association Director of Education.


Reference information about export financing

In Europe, export projects, including developer’s, can be financed without the involvement of the classic bank loans secured by the borrower's assets. In Estonia it is a tool KredEx that provides guarantees for Estonian companies. Among other European export agencies one can mention Euler Hermes in Germany, EGAP in the Czech Republic, KUKE in Poland.

Export financing is the financing of projects guaranteed by export agencies. It is possible to use credit resources of major European banks and government export agencies in order to implement manufacturing or construction projects. Construction projects can include objects for different purposes: residential, commercial real estate, production facilities. Production projects may include projects related to the acquisition of equipment, transportation, technology, produced in the European Union. Low interest on the loans and possibility of getting a long-term credit are attractive features of European export financing.