Export Finance is designed to help UK businesses sell overseas. There are different products available which can help you get paid and access short term loans and bonds to help you fulfil overseas orders.
Your business must be ‘carrying on business’ in the UK
What is Export Finance?
Exporting comes with large upfront costs, which can put a strain on your business’ finances and working capital. Export Finance eases that strain by taking on some of the risk of trading abroad.
How Export Finance can help your business
There are different types of Export Finance available to UK companies looking to sell their product or service abroad.
- Bonds and guarantees Many overseas customers will ask for your bank to issue a bond or guarantee in return for payment as part of the terms of the contract, allowing them to "call" the bond from the bank if you don't fulfil your side of the contract. These can take the form of advance payment, performance or warranty bonds.
- Letters of credit A letter of credit guarantees that you will receive payment on time for the full amount as agreed in the contract and in the event of non- or partial payment, the buyer's bank will cover any shortfall. This reduces risk for the seller and potential finance providers.
- Working capital loans There are lots of different Export Finance providers in the UK who offer loans to help businesses fulfil overseas contracts and orders. You can also borrow against assets, including invoices, to secure a loan. 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, mitigating the lender's risk and increasing the possibility of securing finance. Alternatively, insurance against non-payment may be available.
Bonds and guarantees and letters of credit are designed to reduce the risk involved for Export Finance providers. Without a letter of credit, you may find it difficult to access Export Finance. You may also need to purchase insurance against non-payment to access finance.
Am I eligible for Export Finance?
Your business will be assessed by the finance provider, who will look at things like your credit history, your ability to repay, assets on your balance sheet and your business’ finances before a decision is made.
Benefits of Export Finance
Diversify and increase sources of revenue for your business
Grow your customer base internationally
Makes your international offer more competitive
Risks of Export Finance
Defaulting and your credit reportAs with any loan, if you default on loan repayments you may be faced with charges and your credit report may be affected.
Fees may be involved to arrange letters of credit and bonds and guarantees. You need to be aware of the full cost of any services you require.
What you need to know about working capital loans for exporting?
- What’s the full cost of the loan?
- How will the loan be repaid?
- How long do you need the loan for?
How UK Export Finance (UKEF) can help your business
UK Export Finance (UKEF) is the government's Export Credit Agency (ECA) and can help you sell your product overseas by providing guarantees to lenders and export insurance.
In overseas markets it may be more difficult to get payment up-front for a product, which means businesses who want to trade abroad need to put down significant security before they are approved for finance.
UKEF mitigates that risk by insuring loans with a guarantee to reimburse the finance provider in the event of non-payment. This takes away some of the risk for Export Finance providers and increases their appetite.
The Export Working Capital Scheme
The Export Working Capital Scheme is provided by UKEF and helps exporters pre- and post-shipment with export contracts.
The scheme works by providing a guarantee to finance providers – including traditional banks and alternative lenders – who offer Export Finance.
Essentially, UKEF will guarantee up to 80% of an Export Finance loan, reducing the risk for lenders and increasing their appetite for lending.
UKEF charges a premium for its guarantee, which it receives via the interest paid by the business to the Export Finance provider.
Is Export Finance right for you?
About your business
|Business stage||Established with assets and a trading history|
What's your next step?
Carrying on business – A routine and continuous involvement in an activity undertaken for making profit. Essentially this means that your business operates in the UK routinely or continuously rather than as a one off.
Call a bond – When a business calls a bond they request funds equal to the value of the bond direct from the issuing bank, i.e. the client’s bank. The bank’s client is then in arrears with their bank rather than the business who calls the bond.