Export Finance

Whether you are exporting, importing or investing overseas there are some financial decisions you need to make.

Trading internationally brings a new dimension to business finances. Crossing borders increases risks, therefore the right processes need to be put in place to ensure that time spent chasing debtors, applying for finance or dealing with the fluctuations in exchange rates can be spent elsewhere.

There are a number of financial services available that can enable you to eliminate the risks associated with working overseas and accessing finance when trading internationally, including:

Letters of Credit Guarantee Scheme

A the Letter of Credit Guarantee Scheme is a guarantee to a bank to enable UK exporters to get their letters of credit confirmed by the bank.

To use Letters of Credit Guarantee Scheme: 

  • you must be a UK based exporter

  • goods must be exported from the UK or must be imported

  • issuing bank must be based outside the EU and other specified high income countries. 

Find out more about our letters of credit service.

 

Export Insurance Policy (EXIP)

An insurance policy extended directly to UK exporters to protect them against non-payment.

Why may you use it?

When a UK company delivers a product or service overseas there is always a risk that the customer does not pay, or delays payment for an unacceptable length of time. There are often unintended reasons for this, such as when a customer goes bankrupt or due to an unforeseen political event.

Eligibility

  • UK-based exporter with at least 20 per cent of contract value being UK content

  • Customer based overseas

  • Exporter must have been refused cover for the contract by a private insurer

  • If the length of the contract is less than two years your overseas customer must be based outside the EU and other specified high-income countries

Direct Landing Facility

The provision of loans from UKEF directly to overseas customers to enable them to purchase UK exports.

Why may you use it?

A foreign buyer of your goods and services may need a loan in order to pay you for your exports. However, your customer may be unable to get this from a commercial bank because of the country they are in or because the relatively small size of the loan means private sector lending is not economically viable.

Eligibility

  • UK-based exporter with at least 20 per cent of contract value being UK content

  • Customer based overseas

  • Exporters must have been refused loan financing for their contract by two banks

Buyer and Supplier Credit Financing Facility

A guarantee to a bank which enables it to make a loan to an overseas buyer to pay for a UK export of capital goods and services. The loan is typically repaid over a period of five years or longer. The UK exporter will receive payment via the credit facility as amounts fall due under the export contract.

Why may you need it?

A foreign customer may wish to pay for a UK export of capital equipment over an extended period of time but the exporter might want payment once the goods or services are supplied. In this case, the customer may ask a bank to provide a credit facility which enables the UK exporter to be paid as amounts fall due under the export contract.

Providing such a facility involves extended repayment terms, the bank takes a significant long-term credit risk on the borrower. Banks will therefore often only provide such a credit facility if the borrower’s payment obligations are guaranteed by entities such as UKEF.

Eligibility

  • UK-based exporter with at least 20 per cent of contract value being UK content

  • Customer based overseas

  • The bank providing the finance must be acceptable to UKEF

Bond Support Scheme

A guarantee provided to a bank, can issue a bond which needs to be provided by an exporter as part of a UK export contract

Why may you need it?

If you sign an export contract with an overseas customer, it's common to ask that customer for an advance payment in order to cover some initial costs. In turn, that customer may ask you to provide a bond from your bank, which your customer can call on if you do not fulfil your contractual obligations. There are several types of contract bonds.

The problem is that, as a condition of issuing a bond, the bank will require the exporter to reimburse the bank should it have to make a payment under the bond. Banks often ask exporters to provide cash to cover this undertaking, leaving smaller companies without the working capital they need. Banks also cap their exposure to their customers and limit the total value of bonds they'll issue for a company. So you might exceed this limit if you win several export contracts at once and they all require bonds.

Eligibility

  • UK-based exporter with at least 20 per cent of contract value being UK content

  • Customer based overseas

Export Working Capital Scheme

A guarantee provided to a bank so that UK-exporting companies can access the extra working capital they might need to deliver a sizeable export contract.

Why may you need it?

If you have secured a relatively sizeable export contract, you may well need additional funding to pay for extra supplies. However, commercial banks may not be able to provide you with the full amount of money you need. This may be, for example, because of your company's financial condition or because the bank feels there is not enough security or because the size of the contract relative to your company size makes it a higher risk

Eligibility

  • UK-based exporter with at least 20 percent of contract value being UK content

  • Customer based overseas

  • The maximum value of the finance must be no more than 75 per cent of the export contract's value, and advances must be used only for the purpose of paying or reimbursing the exporter for expenses incurred performing that contract

Bond Insurance Policy

Insurance provided direct to an exporter to protect against a demand for payment under a bond which is unfair or caused by political events

Why may you need it?

If you sign an export contract with an overseas customer, they might ask you to provide a bond – i.e. a legal promise to pay – issued by your bank which guarantees your performance or ensures your customer will get any money back that it has paid to you in advance. A problem can occur if your customer demands payment under the bond.
This may be an 'unfair calling', for example if the customer decides it no longer wants the goods, or it may be a 'fair calling', for example if export licenses are cancelled or if war is declared. Either way, you are likely to need insurance if you are to avoid incurring losses, but this type of insurance may not always be available from the private sector.

Eligibility

  • UK-based exporter with at least 20 per cent of contract value being UK content

  • Customer based overseas

  • If bond is valid for less than two years, your customer must be based outside EU or other specified high-income countries

  • Does not cover tender or bid bonds or bonds for contracts which the UK government is financing through its aid programme

Although a company can conduct due diligence checks when trading overseas, there are still a number of risks that may arise and knowing how to access the right finance is essential when trading internationally. In order to prevent these risks affecting your business and assist with Trade finance, the Chamber can help to connect you with a number of service providers, to support you in accessing the right finance solutions for carrying out your international journey securely.

If you would like to be put in touch with a regional UK Export Finance Adviser please email exportbritain@gmchamber.co.uk or call 0161 393 4368/55 and we will put you in contact with somebody that can help.