Export Finance | What is Export Finance?

TFG Export Financing Guide

Trade Finance Global / Export Finance | What is Export Finance?

Introduction to Export Finance

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

Trade digitalization milestones: a series of fortunate events If you blinked and put your feet up this bank holiday weekend, you probably missed out on a few important milestones for digitalizing trade.
FCI reports 6.6% drop in global factoring statistics in 2020 The first estimates for the factoring industry worldwide in 2020 have been announced today by the FCI’s Peter Mulroy. Factoring declines were recorded in most regions except Asia Pacific.
TFG Partners with TXF for Global Commodity Finance and Global Trade Virtual 2021 Trade Finance Global (TFG) is excited to announce that we have partnered with Trade and Export Finance (TXF) for two of their upcoming 2021 flagship conferences

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

05May

Trade digitalization milestones: a series of fortunate events

0 Comments

If you blinked and put your feet up this bank holiday weekend, you probably missed out on a few important… Read More →

29Apr

New electronic Bill of Lading introduced by MSC using WAVE BL’S platform

0 Comments

MSC customers will be able to receive the bill of lading electronically, without any change or disruption to their day-to-day… Read More →

27Apr

Moving to the cloud: Volkswagon’s TRATON migrates trade finance to improve efficiencies

0 Comments

Surecomp®, the leading provider of global trade finance solutions for banks and corporates, today announced that automotive multinational TRATON SE… Read More →

26Apr

UK and Indonesia strengthen trade ties launching the Joint Economic and Trade Committee

0 Comments

The UK and Indonesia have today (Monday 26) concluded the first round of exploratory trade talks and committed to further… Read More →

22Apr

HSBC and Tata Steel successfully execute a blockchain-enabled, paperless trade transaction – a global first for the steel industry

0 Comments

HSBC India and HSBC UAE have successfully executed a blockchain-enabled, live trade finance transaction between Tata Steel Ltd. (India) and… Read More →

21Apr

FCI reports 6.6% drop in global factoring statistics in 2020

0 Comments

The first estimates for the factoring industry worldwide in 2020 have been announced today by the FCI’s Peter Mulroy. Factoring… Read More →

21Apr

TFG Partners with TXF for Global Commodity Finance and Global Trade Virtual 2021

0 Comments

Trade Finance Global (TFG) is excited to announce that we have partnered with Trade and Export Finance (TXF) for two… Read More →

21Apr

Government “desperately needs” strategic framework for trade, parliamentarians and International Chamber of Commerce warn

0 Comments

The APPG for Trade & Export Promotion has set out an 11-point trade framework, including targets to double intra-Commonwealth trade… Read More →

20Apr

Afreximbank Records Double-Digit Growth in Profitability Amid Impact of Pandemic

0 Comments

African Export-Import Bank (Afreximbank) on 31 March 2020 released its audited financial statements for the year ended 31 December 2020,… Read More →

20Apr

UKEF doubles support for sustainable projects to £2.4 billion in 2020

0 Comments

UK companies help bring new hospitals, clean energy, and transportation to developing countries following record levels of UK Export Finance… Read More →

Back to Top