The inability to secure finance is a significant barrier to SMEs winning tenders in the resources industry, a new report commissioned by Australia’s export credit agency (EFIC), has found.
The survey of 2000 Australian SMEs showed that while resources sector growth has created opportunities for SMEs across the country, obtaining finance, fulfilling lenders’ security requirements and a drawn-out credit process are major impediments to SMEs successfully bidding on resource contracts.
The research also showed that of those SMEs that had secured a tender, 85 per cent required extra finance to win or execute the contract.
Robert Dravers, EFIC Director, SME and Mid-Market, said it was concerning that such a large proportion of SMEs faced financial barriers in securing business opportunities in the resources industry and that they seemed unaware of the finance options available.
“Greater awareness of other financing options, including the support that EFIC can offer onshore contractors assisting in the delivery of an export, is needed in order to ensure that SMEs can take advantage of Australia’s strong resource sector, join the supply chain and potentially take on larger contracts than they would otherwise be able to,” he said.
The survey also showed that networks are vital to securing contracts, with 66 percent of SMEs finding out about tenders through word-of-mouth.
Mr Dravers said that while winning tenders can be tough, planning, preparation and access to suitable finance in a timely fashion are the keys to success.
Despite the difficulties associated with obtaining finance, the opportunity to join Australia’s resources industry is attracting interest from SMEs nationwide.
“Surprisingly, the research showed that more than two-thirds of SMEs looking for resource sector contracts are based in either NSW or Victoria, even though most projects are in Western Australia or Queensland” Mr Dravers said.
Other key findings included:
The most common areas for SME tendering are services, with only six percent involved in exploration
The average value of contracts tendered for is just under A$1 million
Close to a third of SMEs who have not yet been successful in securing a tender said a lack of readiness was a contributing factor to their failure
Four out of five of SMEs that have won contracts in the supply chain said they subsequently faced financial constraints, which prevented them from looking for other opportunities or additional contracts.
A full copy of the research report can be downloaded at: www.efic.gov.au\manufacturingnews.
* Export Finance and Insurance Corporation (EFIC) provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their business overseas.
As the Australian Government’s export credit agency, EFIC helps successful businesses to win, finance and protect export trade or overseas investments when banks are unable to provide full financial support.
EFIC works directly with exporters or with their banks to provide loans, guarantees, bonds and insurance products which can be tailored to meet the needs of both large and small exporters.
Export Finance and Insurance
Ph: 1800 887 588