UK Export Finance: clearing your path to trade
Export finance and insurance can increase your capacity for growth. It can mean higher levels of finance compared to conventional lending. You can give your overseas buyers time to pay, while protecting your cash flow.
There are many ways to arrange this. The right one for you will depend on your circumstances but you could:
manage your working capital without using finance
work with your existing bank finance arrangements
seek more support by shopping around for export finance and insurance
Support is available, for example, to help you secure additional working capital, to insure against non-payment by customers buyers, or to fulfil requirements to obtain performance bonds.
Most exports to EU countries are sold on short credit terms of typically up to six months. However sales of capital goods or construction projects are usually arranged on longer terms, and very large capital goods such as aircraft can be supplied on payment terms of 10 years or more.
Specific issues you may need to manage can include:
- having to wait for payment, restricting cashflow
- exposure to the risk that the buyer cannot (or will not) pay for the exports – for example, if the buyer goes bankrupt
- being asked by the buyer to provide a performance bond in return for an advance payment. The bond needs to be issued by the exporter’s bank, which is likely to ask for cash security, another potential cashflow restriction
HM Government support
Exporters can talk to their bank or approach other specialist financial organisations to try to secure working capital, and speak to insurers or brokers to source insurance against the risk of not being paid.
Where exporters are unable to find the working capital they need, UK Export Finance (UKEF) may be able to help by sharing some of the risk with their bank.
We can consider support for all exporters, large and small, across a wide range of sectors. In recent years we have supported UK exports to the EU in most sectors, including the agricultural, construction, creative & media sectors, energy, food & drink, IT, leisure & tourism, medical, scientific equipment and water sectors.
We provide guarantees with the resulting obligations carrying the full faith and credit of HM Government – the most powerful partner a UK exporter can hope to find.
A wide range of support
Types of assistance UKEF is able to offer, in the right circumstances, include:
Bond support –Under our Bond Support Scheme we can offer guarantees to banks issuing performance or other contract bonds in relation to UK exports to China. This often means the bank can issue the bond and also expand working capital facilities for exporters, as the extra credit is guaranteed by UKEF.
In 2016 UKEF helped a builder of bespoke catamarans, Blyth Workcats of Essex obtain the performance bond it needed to secure a German contract. Without a UKEF guarantee for its bank, the need to set aside its own cash cover against this bond would have made it impossible to fulfil the contract. UKEF guaranteed a proportion of the bond helping release cash to fund its work on the catamaran, a new scientific survey vessel for a German university.
“UKEF support was paramount for this project” said Stuart Davidsen, the production and design manager at Blyth. “Our bank couldn’t cover 100% of the risk for the bond. Thankfully UKEF was able to take on 50% of the risk. We couldn’t have gone ahead without it.”
Working capital support – UKEF’s Export Working Capital Schemecan enhance your bank’s ability to lend you working capital to support export-related activity. Under the scheme, we provide partial (typically 80%) guarantees to lenders to cover the credit risks associated with export working capital facilities. The scheme is particularly useful in circumstances where a UK exporter wins an overseas contract that is larger than it is used to handling, or manages to win a number of contracts at the same time, but may struggle to finance them all at once
Both the bond support and export working capital products are accessed through participating banks. If your bank representative is unfamiliar with the products, they can be referred to our ‘Bank toolkit’, which can accessed at www.gov.uk/uk-export-finance.
Export Finance Advisers – your free resource
UK Export Finance’s regional network of Export Finance Advisers (EFAs) stand ready to offer free trade finance information to UK companies who are exporting or considering exporting to Europe
The EFAs act as local points of contact to introduce exporters and prospective exporters to finance providers, credit insurers, insurance brokers, trade support bodies and sources of government support. They can also help explain UK Export Finance’s own product range, complementing what is available in the private market.
For more information and to book a meeting with an EFA, visit: www.exportingisgreat.gov.uk/finance-and-insurance