Could export credit agencies be agents for UK exporter confidence?

A well-known private equity fund has investments in a number of UK exporters of goods and services. Its CEO approaches leading export credit agency (ECA) and trade finance law firm Sullivan & Worcester, having just heard of what – to them – is a novel product: loan support from export credit agencies. 

This CEO, who works with major UK banks and fund managers, only became aware of this funding from a radio advertisement by UK Export Finance (UKEF), the UK’s ECA.

Of course, this story makes a case for radio, but much more than that, it is emblematic of the fundamental opportunity which many UK exporters are missing. ECAs can support exporters in accessing finance by guaranteeing the underlying borrower: giving a guarantee to a bank for an exporter’s working capital needs, providing insurance for part of a transaction, giving a direct loan, or attracting contracts and managing risks overseas.

Let’s boil this down.

Guaranteeing stability

ECAs have different end goals from commercial banks: to either support exporters or reach a wider developmental goal, whether this is supporting SMEs or hitting climate development targets. 

ECAs also have great insight into and knowledge of various international markets. Market intelligence is perhaps the most undervalued benefit. ECAs know which projects are being tendered in which markets; they know which domestic companies have successfully bid for similar international work; they can connect exporters with opportunities and provide guidance on the bidding process. When approaching a tender with ECA backing, the financing is more assured.

UKEF, for instance, is supporting the construction of hospitals in Ghana, capital equipment exports to Uganda and Côte d’Ivoire, and wind farms in Taiwan.

In the Uganda and Côte d’Ivoire scenarios, on which Sullivan & Worcester advised, UKEF provided standard buyer loan guarantees (SBLGs) to the London Forfaiting Company (LFC) to back the export of capital equipment. This enabled overseas financing to Uganda and Côte d’Ivoire buyers and thereby helped secure multi-million-pound UK export contracts. 

ECAs can come together for developmental goals. UKEF, for example, has been instrumental in structuring a financing package for transactions supporting healthcare – UKEF’s key sustainable development goal (SDG) number 3, “Good Health and Well-Being” – across the continent of Africa. Such methods can align geopolitical and geographical government strategy with domestic exporting capabilities.

Too good to be true?

If ECAs make access to finance so much easier, why are they so paradoxically under-utilised? The answer: awareness, or a lack thereof.

The private equity CEO who reached out to Sullivan & Worcester had a bank relationship from a working capital perspective. His usual bank contacts weren’t focused on, or looking at, the availability of getting credit support through ECAs. The structure put in place by Sullivan & Worcester allowed the loan to be made directly to the purchaser of goods; the borrower would be the purchasing entity, with ECA support given to the bank to actually provide this loan.

Involving an ECA can be key because the cost and tenor of the loan can be made much more competitive. In turn, making the underlying exports much better value, all because of the ECA’s involvement. From an exporter’s perspective, it is a fait accompli: purchase our goods.

Another significant barrier is the assumption that export credit support is only for corporate giants. When people hear about UKEF backing Jaguar Land Rover – the story woven into the radio advert – smaller companies assume they’re not in the same league. But headline-grabbing deals create a distorted picture of who can actually benefit.

The reality is that ECAs work extensively with medium-sized businesses, accessing export credit to expand internationally and compete more effectively. The support is available, it is just not generating headlines. The Uganda and Côte d’Ivoire transactions, where UKEF provided SBLG guarantees to LFC to back the export of capital equipment, are good examples of this.

Play to your strengths

ECAs hold a characteristically deep understanding of the priorities for domestic exporters.

In the UK’s case, everyone wants to hear about critical minerals exports, something for which UKEF might provide supply finance support (providing a loan or guarantee to overseas projects with UK suppliers). Emerging industries – for which demand is unlikely to slow in the coming years – are funded preemptively.

But there is simultaneous, strong support for the industries which, put bluntly, the UK is good at. A strong services sector, UK intellectual property (IP) exports are of an extremely high calibre; construction companies, too, can build domestically and abroad. 

In focusing on a country’s domestic context, ECAs indirectly support the “tier 1” and “tier 2” small and medium-sized enterprises (SMEs) that employ most of a country’s private sector working population but need the most funding – thereby simultaneously fulfilling the growth agendas of government and trade agendas of treasuries.

The support mechanisms are there: guarantees, insurance, direct lending, market intelligence and relationship facilitation. 

What is often missing, especially for those who think that video killed the radio star, is the initial awareness that these tools exist and the knowledge of where to find them. Don’t rely solely on your existing bank contacts. Ask specifically about export credit teams. Consider specialist legal advisers who work in this space regularly. 

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ECAs often function as a buoy in stormy seas, stable amidst the volatility promised by nearshoring objectives, redrawn alliances, and the transition towards a cleaner trade system. They have the potential to provide crucial support for SMEs, whether on a financial or expertise basis.