Export finance

Short-term loans and bonds to help UK businesses fulfil orders from customers overseas and receive payment.

Exporting goods comes with large upfront costs, which can put a strain on your business’ finances and working capital. Export finance eases that burden by taking on some of the risk of trading abroad.

This type of finance is designed to help UK businesses sell overseas. There are different products that can help you get paid and access short-term loans and bonds to be able to fulfil orders from other countries.

If you're looking to sell your product or service abroad, there are different types of export finance available to you.

Bond or guarantee

As part of the terms of the contract, many overseas customers will ask for your bank to issue a bond or guarantee in return for payment. This allows the customer to 'call' the bond from the bank if you don't fulfil your side of the deal.

These finance products can take the form of:

  • advance payment bonds
  • performance bonds
  • warranty bonds

Letter of credit

This guarantees that you'll receive payment on time, for the full amount agreed in the contract. If you're unable to make a payment in full or in part, the buyer's bank will cover any shortfall. This reduces the risk for you, as seller, and any potential finance providers.

Working capital loan

There are many providers in the UK that offer loans to help businesses fulfil overseas contracts and orders.

When securing a loan, you can borrow against assets, including invoices.

If you're finding it difficult to secure export finance because of the risks involved, you may be able to get a guarantee or insurance from a third party, reducing the lender's risk and making securing finance more possible.

When you apply for export finance, the provider will assess your business. Before they make a decision, they will look at things such as:

  • your credit history
  • your ability to repay
  • assets on your balance sheet
  • your finances

You can use export finance to:

  • diversify and increase sources of revenue for your business
  • grow your customer base internationally
  • make your international offer more competitive

Defaulting and your credit report

As with any loan, if you default on your repayments (in other words, fail to make them), you may have to pay charges. This might also affect your credit report.

Fees

There might be a charge for arranging letters of credit and bonds and guarantees. You need to be aware of the full cost of any services you require.

Business stage

Established, with assets and a trading history

Annual turnover

Any

Sectors

All

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All

UK Export Finance (UKEF)Link opens in a new window is the Government's export credit agency. It can help you sell your product overseas, by providing export insurance and guarantees to lenders.

In overseas markets, it may be more difficult to get payment upfront for a product. This means if your business wants to trade abroad, you might need to put down significant security before you're approved for finance.

UKEF mitigates that risk by insuring loans with a guarantee to reimburse the finance provider if you, as the borrower, fail to make your repayments. It does this through the Export Working Capital Scheme.

What is the Export Working Capital Scheme?

The Export Working Capital Scheme Link opens in a new windowhelps exporting businesses with their export contracts before, and after, they ship their products. It is run by UKEF.

It works like this. Your business takes an export finance loan from a finance provider (such as a traditional bank or another lender). Through the scheme, UKEF gives the provider a guarantee of up to 80% of your loan. UKEF then charges a premium for its guarantee, which it receives via the interest you pay the finance provider.

This all helps to reduce finance providers' risk and increase their appetite for lending.

Other finance options

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Corporate Venture Capital is an investment made by a large company into a smaller business, in return for a share of that business.

Corporate Venture Capital

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An early stage business - no revenue or profit is needed - willing to give up a share of control.

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£1m+ of finance within 6-12 months of your application for things like acquisition or research and development.

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Purpose of financessss Acquisition, research and development
Amount of finance £1m+, depending on business
Duration of finance 3-5 years
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Time of finance 6-12 months
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Annual turnover Depends on the business
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Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

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Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

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Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
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Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
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Venture Capital invests in businesses with high growth potential, often after Angel investors have got the business started.

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Early stage businesses, regardless of whether they have made a profit or revenue, with an annual turnover of less than £3m.

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Significant growth and £1m+ of finance within six to 12 months with the option for multiple funding rounds.

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Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Venture Capital
Purpose of financessss Acquisition; research and development
Amount of finance £1m+, depending on funding round
Duration of finance 5-10 years
Cost of finance None
Time of finance 6-12 months
About your business
Business stage Early stage; no revenue or profit needed
Annual turnover Depends on the business, but is often below £3m
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