Sole trader Jan Kladívko successfully finds a new customer at an exhibition in Azerbaijan. He has already exported several supplies. Other prospective customers from that and other countries come forward. He finds markets for his Czech nails in India, Serbia and Turkey. He recruits new employees and sets up a private limited company. Foreign importers show an interest in his nails and other materials for a hundred million crowns. While this is a huge triumph for Mr Kladívko, he doesn’t have the resources to produce goods on such a scale. He already has insurance with EGAP covering him for default, guaranteeing payment from suppliers for his goods. However, as Mr Kladívko’s company needs to finance production, he requires pre-export credit from the bank, which is also covered by EGAP. Following an analysis, a three-party insurance contract is signed between Mr Kladívko, the bank and EGAP. If Mr Kladívko exports the goods in a due and timely manner, this contract will end. If he is unable to make a delivery properly (or if, for instance, insolvency proceedings are brought against him), this is an insured event and EGAP pays the money to the bank.
Pre-export financing the production for export (pre-export credit) is a credit provided by the bank to the exporter (or producer) for financing the production for export and in case of positive experience with a certain exporter also for financing investment into production for export.
The Insured is the bank and the insurance may be agreed only in connection with insurance of any type of export credits, e.g. for sufficient reinsurance of payments of export claims. The maturity term of the export credit has influence on the amount up to which the pre-export credit may be insured. If the maturity of the export credit is maximally 2 years, the pre-export credit may be insured up to the amount of 85 % of export value and if the maturity is longer, up to the amount of 75 % of export value. The pre-export credit for investments into the export production may be provided only if at least 75 % of production is determined for export and repayment of at least 75 % of pre-export credit is assured contractually.
Ing. Petr Martásek, Director of Export Credit and Investment Insurance Department
+420 222 842 340
+420 222 844 130