NewsCase StudiesEvents

Funding Export Trade

Also in the news...

UK and Switzerland's negotiations for an enhanced trade agreement

UK-Switzerland enhanced free trade agreement negotiations

Information on key security and political risks which UK businesses may face when operating in Hong Kong.

Guidance Overseas business risk for Hong Kong

Local sites and numbers of employees linked to businesses involved in international trade in goods, by subnational areas of the UK 2022

The release reports on the number of local sites and the number of employees within each ITL3 area linked to a business carrying out international trade in goods.

Foreign travel advice Sudan

FCDO advises against all travel to Sudan.

Foreign Secretary pushes for closer cooperation with Thailand

David Cameron heads to Thailand, one of the biggest economies in south-east Asia, for his first visit as Foreign Secretary to the Indo-Pacific region.

Funding Export Trade

Back to News

When a product is sold and shipped abroad it invariably takes longer to get paid. The internet and faster shipment have all played their part in making export markets more competitive, and buyers will always prefer to trade on open credit terms which allow them to have resold the goods prior to paying the seller.

Invoice discounters traditionally preferred to concentrate on funding local trade. Their financing decision was underpinned by available financial information and the confidence of understanding the legal system that should ultimately lead to the debt being collectable. These local basic requirements are not always easily achievable in export markets, giving the financier perceived extra risk. This, together with the additional perils of transfer risk, import regulations or different foreign customs took export sales outside of the skill sets on which they relied and created a reluctance to fund export sales. So, with the adverse cash flow effect and increased risk of export, what are the funding options in the post credit crunch era?

Traditionally the Letter of Credit evolved over many centuries effectively turning a trading agreement into a financial transaction which was readily discounted. Both buyers and sellers have been turning away from this trusted mechanism because of both the high cost and the relative difficulty of administration.

As the receivables finance industry has developed, competitive pressures have led a growing number first to consider and then to seek out, export receivables to fund. Naturally they still have concerns over the additional risk and will almost certainly seek comfort in a trade credit insurance policy. By obtaining an insured credit limit the seller and the financier have the comfort of knowing that the buyer’s creditworthiness has been assessed by the insurer using their local expertise in the export market. The insurer has not only joined them in having a vested interest in the buyer’s ability to pay; through their local presence, they can also assist in the obtaining of payment if required.

The world has not become a safer place for exports over night, but the evolution of information storage coupled to competitive pressure have driven credit insurance underwriters to open up the markets they will cover. Underwriters will probably share your own opinion on North Korea but in reality there are very few markets which are off cover. To find out more contact us

You are not logged in!

Please login or register to ask our experts a question.

Login now or register.