More Government help for exporters: new UK Export Finance products
This page provides information on new products made available from UK Export Finance in 2011. For details on the full range of UK Export Finance products and services, please go to the Products & services tab at the top of this page, or read the Quick guide to UK Export Finance, which can be found on the right hand side of this page.
Risk of Non-Payment
Under an export contract, there is always a risk of not being paid by the buyer or of not being able to recover costs that were incurred performing the contract due to it being terminated in circumstances beyond the exporter’s control.
UK Export Finance’s Export Insurance Policy may be able to provide an exporter with cover against those risks, such as specified political or buyer-related events, which prevent them being paid, lead to the contract being terminated, or prevent its performance.
Contract Bonds
Under an export contract, the buyer may require the issue of an on-demand contract bond (for example, an advance payment, performance or retention bond) in order to assure itself that the exporter will meet its obligations. To issue this bond, the exporter’s bank will want a financial guarantee. The security for this guarantee, however, may be the amount the buyer has paid, leaving the exporter back where it started in terms of cashflow.
UK Export Finance’s Bond Support Scheme can offer a partial guarantee to the bank on the exporter’s behalf (of up to 80% of the value on cash-related bonds), with the intention of freeing up funds with which to perform the export contract.
Working Capital
In order to fulfil an export contract, the exporter may require money up front in order to be in a position to provide goods or services. Specifically, the exporter may have won more or larger contracts than usual, but a bank may be cautious in lending any further funds to meet the exporter’s needs for more working capital, thus constraining the ability to grow the company.
UK Export Finance’s Export Working Capital Scheme can offer a partial guarantee to the bank on the exporter’s behalf (of up to 80% of the value in some cases), so that it can gain access to the working capital with which to perform the specific export contract, whether before or after shipment, until paid by the buyer.
Foreign Exchange Risk
When entering into an export contract in a foreign currency an exporter may be exposed to unfavourable changes in exchange rates over the course of the contract. In order to control the risks of this occurring, the exporter may ask the bank to fix the exchange rate in order to bring certainty to this aspect of the deal. However, the bank will also want to be sure that the foreign currency will be delivered as agreed, giving rise to a credit risk on the exporter.
If an exporter has benefited from an existing guarantee under our Working Capital Support Scheme, UK Export Finance may be able to assist by increasing its guarantee in order to support the bank in providing the exporter with foreign exchange protection.
More Information
Further information on each of the products mentioned above can be found in the Quick Guides on the right hand side of this page.
For details on the full range of UK Export Finance products and services, please go to the Products & services tab at the top of this page, or read the Quick guide to UK Export Finance on the right hand side of this page, which provides an overview of all UK Export Finance products and services.
