Export Finance | The 2021 Ultimate Guide for Exporters | TFG Business Hub

TFG Export Financing Guide

Trade Finance Global / Export Finance | The 2021 Ultimate Guide for Exporters | TFG Business Hub

Export Finance | The 2021 Ultimate Guide for Exporters | TFG Business Hub

When companies export products or services, long payment terms can often create working capital challenges. The up-front cost of producing, shipping and delivering the goods can be tricky for businesses to manage. Export finance helps businesses release working capital from cross-border or domestic trade transactions, that would otherwise be tied-up in invoices or purchase orders (for up to 180 days). Export finance is specialist finance that can help a company to grow and increase trade.

Featured Insights

ICC Banking Commission announces new committee in a major management reshuffle The International Chamber of Commerce (ICC) Banking Commission recently announced a single Steering Committee for its work on trade, supply chain and export finance, comprising one Chair and 12 Vice-Chairs.
Not all plain sailing – Three Important Functions of Marine Bills of Lading Closing a deal between an unknown buyer and seller is difficult. Add to this the cross-border element and the many different agents on the way, and trade suddenly gets complicated.
BREAKING: COVID-19 increases trade finance SME default rates in 2020, ICC Trade Register suggests The ICC has published its 2019 and 2020 interim findings from its Trade Register on the performance of short-term trade and supply chain finance assets.

Access trade, receivables and supply chain finance

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
Get started

Videos – Export Finance

Export Finance Podcasts




Export Finance – Frequently Asked Questions

How does Export Finance work?

There are several different types of export finance, so structuring varies, depending on which product is most suitable for your business. Often the supplier will request a Letter of Credit or a Bank Guarantee, which is financial security of payment to reduce non-payment risk once they deliver the product or ship the goods. In other cases, the customer might not pay your company for up to 90 days after the product has been received. Once the invoice has been issued, receivables or invoice finance can be used to advance payment. The gap until payment is received is bridged by a financier. Export finance is generally secured, that is, a financier will use the goods or products, the invoices, future cash flow, or the company as security for advancing cash.

Why is export finance important?

Generally speaking, sellers of goods or services want to get paid as soon as possible, even before the trade, and buyers want to delay payment for as long as possible, to maintain strong cash flow and provide the buyer time to sell on to their end customers. This means that third parties can add value by offering some form of financial guarantee, bridging the finance gap, and ensuring trust between the buyer and the seller.

Much trade is done cross-border, which can increase the risks involved when importing or exporting goods.

Exporting goods to another country or domestically to a new buyer is inherently risky. Therefore a growing company will want to mitigate some of these risks and also structure their finance in such a way as to allow sustainable growth.

What problems do companies face when exporting?

When a company is growing, it is very difficult to finance in the right way and have the correct processes in place. We aim to assist in that journey and in the event that it is suitable, we have found that export finance can provide significant comfort to both buyers and sellers in a transaction. An example of this is a Letter of Credit (LC) facility; where company X is exporting to company Y. Company X wants to know that payment will be received for its goods. A Letter of Credit facility is set up by the buyer and seller’s banks. On the basis of the conditions specified in the LC, both parties have the comfort of knowing that the other will release goods and payment when a product is shipped or documents are received. This product is used within international trades and structures to promote trust with new counterparties.

The problems that many businesses face are simple distrust or lack of understanding in relation to their counterparty. In the event that there is sometimes blind trust or the incorrect mechanisms in place, then there may be goods sent with non-payment, dispute, internal problems and/or product irregularity, with no security or insurance in the case of enforcement.

How can exporting help a business?

Export finance can be one simple financial instrument or several different facilities which can be structured to ensure some form of financial guarantee and establish trust between a buyer or seller. Whether it is a guarantee of payment from a customer when goods are exported, the advance payment of a transaction so that goods can be produced, or the discounting of invoices from clients to avoid 30-180 day payment delays, export finance can help reduce working capital problems.

Export Finance: What are the requirements?

Export finance is looked at and reviewed on a case by case basis. Generally, a financier would ask for the following in an application:

  • Audited financial statements
  • Full business plans
  • Financial forecasts
  • Statement of Accounts
  • Credit reports
  • Details and references of the directors
  • Information on assets and liabilities
  • History of the company
What are the benefits of export financing?

Export finance helps businesses grow without having to take on other investment such as equity investment, which could involve giving away a share of your company, having additional shareholders and could limit the way you want to grow. Export finance facilities are generally standalone from existing bank facilities, so are often available to those with current overdrafts or loans. Some export finance facilities, such as Letters of Credit, might not get in the way of existing facilities, nor do they always appear on Balance Sheets.

Other types of export finance include:
    • Cash flow from the business or lending
    • Trade finance
    • Letter of Credit (LC), including Standby Letters of Credit (SBLC), which may be used as an insurance policy
    • Confirmations from other banks if required in the cycle
    • Structured finance
    • Cash against documents
    • Financial instruments – bonds/prom notes
    • Insurance backed facilities

Strategic Partners


Contents

Access trade, receivables and supply chain finance

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
Get started

Latest News

02Aug

UKEF and Barclays support children’s clothing company through Wales’ first General Export Facility

0 Comments

UK Export Finance supports Swansea based exporter of iconic children’s character-themed clothing with a General Export Facility. Character.com sells a range of… Read More →

30Jul

Trade between Moscow and the EU increased to USD 27.46 billion in the first quarter of 2021

0 Comments

From January to March 2021, trade between Moscow and EU member countries rose to USD 27.46 billion, representing a 2%… Read More →

28Jul

ICC Banking Commission announces new committee in a major management reshuffle

0 Comments

The International Chamber of Commerce (ICC) Banking Commission recently announced a single Steering Committee for its work on trade, supply… Read More →

27Jul

UK Export Finance backs First Subsea major offshore wind farms

0 Comments

UK Export Finance backs First Subsea Ltd major offshore wind farm contract in an effort to push forward the renewable… Read More →

19Jul

Not all plain sailing – Three Important Functions of Marine Bills of Lading

0 Comments

Closing a deal between an unknown buyer and seller is difficult. Add to this the cross-border element and the many… Read More →

15Jul

EU unveils plan to become first climate-neutral continent by 2050

0 Comments

European Union unveiled new legislation to help meet its goal of reducing net greenhouse gas emissions by at least 55%… Read More →

14Jul

City Bank secures $30 million trade finance loan from CDC Group

0 Comments

The UK’s development finance institution and impact investor, CDC Group, has announced the close of a $30 trade finance loan… Read More →

13Jul

From an insurer of last resort to a trade facilitator

0 Comments

Swiss Export Risk Insurance SERV gives EPC contractors access to attractive ECA-covered financing through its ECA pathfinding approach. This also… Read More →

07Jul

Podcast: Sanctions – Rolls Royce, on the tactical complexities of voluntary reporting

0 Comments

Reporting Export Incidents, whether on a voluntary or involuntary basis, as well as investigating non-compliance in relation to trade finance… Read More →

01Jul

Eksfin: new Norwegian export credit agency

0 Comments

Export Finance Norway, the result of a merger between former government agencies GIEK and Export Credit Norway, officially opened its… Read More →

Back to Top