Products We Offer

This section briefly explains the export credit products that the New Zealand Export Credit Office (NZECO) provides to New Zealand exporters and banks.

The Products

The NZECO provides export credit insurance to exporters and banks against the risk of non-payment under an export contract arising from defined political or commercial risks. The NZECO’s products relate to medium to long term financing (between one and fourteen years) offered by an exporter because this cover is generally unavailable from the private sector.

It is important to note that the NZECO’s insurance is only part of the financing package. The primary objective of the NZECO is to insure / guarantee the risk of non-payment of a credit or loan. The NZECO does not provide the actual loan nor does it directly finance the credit. Accordingly, the exporter must engage with their bank or financier to help prepare the best solution to enable finance terms to be offered to their buyer.

The range of NZECO’s products are summarised below (click on each link for more detailed information about each product).

US surety bond guarantee

NZECO will assess an exporter's ability to deliver on the proposed US or Canadian Federal or State contract and then provide a performance guarantee to a US surety company who will then issue a bond to the US buyer, on behalf of the exporter.  This NZECO guarantee is for 100% of the bond value.

Contract bond guarantee 

NZECO will assess an exporters' ability to deliver on the proposed contract and then provide a performance guarantee to either the exporters’ bank, bond provider, or a Surety Bond provider from the buyer’s country who will then issue a bond to the overseas buyer, on behalf of the exporter.  The Contract Bond Guarantee is for up to 100% of the bond value.

Working capital guarantee

 NZECO will assess the bank’s assessment of an exporters' performance and evaluate a firm’s ability to deliver on the proposed opportunity and then provide a working capital guarantee to the exporters’ bank.  This NZECO guarantee is for up to 20% of a firm’s total bank credit facilities.

Pre-credit guarantee

Covers production costs incurred prior to the shipment of the goods. Useful for exporters who produce custom-made products that are not possible to recoup costs.

Supplier credit

The NZ exporter grants credit to its international buyer as part of an export supply contract. The NZECO provides the exporter with a guarantee covering the risk of default on repayment of the credit.

Financing guarantee

A bank grants a credit to the international buyer or the buyer's bank in the form of a letter of credit, a bank guarantee or bills of exchange. The NZECO provides the lending bank with a guarantee, which covers the risk of default on repayment of the credit.

Buyer credit

A bank provides a loan to the international buyer or the buyer’s bank, in order to finance the NZ exporter’s supply of goods or services on credit terms. The NZECO provides the lending bank with a guarantee, which covers the risk of default on repayment of the loan.

Project financing guarantee

A bank grants credit to a company whose sole aim is to establish and run a specific project. The NZECO provides the bank with a guarantee, which covers the risk of default on repayment of the credit.

Types of Risk Covered for All Products Except Bonds and Working Capital

The NZECO insures the risk of non-payment or late payment by an international buyer (or borrower) due to specified commercial or political risks.

Commercial Risks

Commercial risks are linked to a buyer’s ability and willingness to pay, and may include:

• Insolvency of your buyer;
• Your buyer’s wrongful failure to meet contractual payment obligations to you.

The NZECO assessment of commercial risks is based on your buyer’s creditworthiness, as well as their industry and market position.

Political Risks

The political risks are linked to the financial and political conditions in the buyer’s country and include:

• Acts of war, civil disturbances, administrative or legislative measures that prevent performance of your export contract;
• Imposition of laws or decisions that prevent the conversion of local currency, or block the international transfer of payments due under your export contract;
• Cancellation or non-renewal of your buyer’s import permits.

The NZECO’s assessment of political risk is guided by the OECD’s country risk gradings which attempt to measure the likelihood that a country will default its external debt. Visit the Country List tab to view the NZECO’s individual country risk gradings.

Level of Risk Covered

The NZECO can provide up to 95% cover against non-payment when the claim is due to a political problem and up to 90% when the claim is due to a commercial problem.

Starting Point of Credit

For most export transactions the credit period starts at the time of delivery of goods (although there may be exceptions for some industries).

In connection with sales of capital equipment for turnkey installations the credit period can be counted from the day of final delivery. If the exporter has responsibility for assembling and commissioning the equipment according to the agreement, the credit period can be counted from the day it is ready for commissioning.

Length of Credit Period

Generally, the economic life of the goods/services should be longer than the credit term sought.

The maximum credit term is determined by the NZECO according to the size of the transaction, as well as OECD guidelines that place maximum terms in respect of certain countries and goods.

Types of Risk Covered for Bonds

NZECO is not issuing the bond itself but will be guaranteeing the performance of the exporter to a bond issuer (either from NZ or a surety provider overseas).   This NZECO guarantee is for 100% of the bond value.

The duration of the bond will depend on the buyers’ requirements and NZECO does not have a minimum or maximum term for the bond.  It is likely, however, that most contracts (and associated bonds) will have a duration of between 1-3 years.

Types of Risk Covered for Working Capital

NZECO will provide the bank with a working capital guarantee so that they may issue additional working capital (up to 20% of a firm’s total bank credit facilities) without requiring additional security from the exporter.  This NZECO guarantee is for 100% of the additional working capital provided.

The working capital guarantee is a short-term guarantee only for a period of between 3 and 12 months.