1. United Kingdom >
2. Import/Export >
3. Export finance

Export Finance and Insurance

When an exporter gets an order to supply goods or services to a buyer overseas, it can ask to be paid upfront - at the time the buyer places the order, or before the goods and services are delivered if the exporter needs time to make the goods.

This is a safe way of exporting because the exporter knows it will get its money before the goods or services are delivered.

However, this approach might also mean the exporter will not enter into as many export contracts as it could because its buyers may require time to pay, ie credit terms. Most buyers these days need credit from their suppliers.

For example, a buyer might be unwilling to place an export order unless it is allowed to pay for the goods or services only when they have been delivered.

This means that the exporter has to offer credit for 30, 60 or 90 days, or however long it takes for the goods to arrive, before the buyer will pay and the exporter will receive payment.

In fact, most exports from the UK are sold on short credit terms, usually up to 180 days.

Credit: potential problems for exporters

When an exporter gives credit to its buyer it faces 2 particular problems:

1. It has to wait for its money - this affects its cash flow.

2. It is exposed to the risk that the buyer won’t or can’t pay for the exports - for example, between the time the exporter ships the goods and them arriving at the buyer’s premises, the buyer may have gone bankrupt and be unable to pay. This could then lead to the exporter becoming insolvent if it involved a large sum of money.

Exporters can go to their bank or to specialist financial organisations to help them get finance, and to credit insurers to get insurance against the risk of not being paid. But if some exporters are unable to get help from these private sources, UK Export Finance may be able to assist.

Bond Insurance Policy

A bond insurance policy is for UK exporters, where a UK bank issues a bond on their behalf to an overseas buyer, or a counter-guarantee to a bank in the buyer’s country, as a condition of an export contract.

The policy protects the exporter against loss caused by:

• The unfair calling of the bond (or any related counter-guarantee)
• The fair calling of the bond (and any related counter-guarantee) due to certain political events

Bond Support Scheme

Where a bank issues a contract bond (or indemnifies an overseas bank providing the bond) in respect of a UK export contract.

Buyer Credit Facility

The benefits are:

• The exporter is paid as though it has a cash contract
• The buyer or borrower has time to pay over a number of years and can borrow at fixed or floating rates
• The lending bank receives a guarantee from us for full repayment of the loan plus interest

Direct Lending Facility

Benefits of a Direct Loan

The benefits are:

• The exporter is paid as though it has a cash contract

• The buyer or borrower has time to pay over a number of years and can borrow at a very competitive fixed rate of interest

Export Refinancing Facility

The ERF is available to banks funding non-sterling buyer credit loans, typically with values above £50m that are intended to be refinanced in the debt capital markets ( DCM).

Export Insurance

The Export Insurance Policy insures an exporter against the risk of not being paid under an export contract or of not being able to recover the costs of performing that contract because of certain events which prevent its performance or lead to its termination.

Export Working Capital Scheme

The scheme assists UK exporters in gaining access to working capital finance (both pre and post-shipment) in respect of specific export contracts. Under the scheme, we provide partial guarantees to lenders to cover the credit risks associated with export working capital facilities. Where a lender provides such a facility in respect of a UK export contract, we can typically guarantee 80% of the risk.

The scheme is particularly useful in circumstances where a UK exporter wins an overseas contract that is higher in value than is typical for it or succeeds in winning more overseas contracts than it has done before.

Letter of Credit Guarantee Scheme

Where a UK bank adds its confirmation to a letter of credit issued by an overseas bank to finance an export from the UK, we can typically guarantee between 50% and 90% of the value of the letter of credit.

Line of Credit

Lines of credit can be set up to enable:

• A variety of overseas buyers to purchase unrelated capital goods or services (known as a general purpose line of credit)
• An individual overseas buyer to purchase a wide range of capital goods or services for a particular project (known as a project line of credit)

Finance can be made available in the main trading currencies (including sterling, US dollars and euro).

Overseas Investment Insurance Policy

An overseas investment insurance policy covers the risk of loss resulting from certain political events in connection with an investment made by an investor in the United Kingdom in an enterprise outside the UK.

The policy can also cover losses arising in connection with a guarantee given by the insured in respect of an investment made by another person in an enterprise outside the UK in which the insured has an interest.

Supplier Credit Financing Facility

• For a loan to an overseas buyer to finance the purchase of capital goods and/or services from an exporter carrying on business in the UK – known as a Supplier Credit Loan Facility
• To cover payments due under bills of exchange or promissory notes purchased by a bank from an exporter carrying on business in the UK, who has received them in payment for capital goods and/or services supplied to an overseas buyer – known as a Supplier Credit Bills and Notes Facility

Finance can be made available in the main trading currencies (including sterling, US dollars and euro). Other currencies can be considered.

gov.uk

Click here to Ask an Expert about Export finance in United Kingdom