This page is about UK Export Finance’s Bond Support Scheme and it explains what it is, how it works, its benefits, its key features and how to apply for the facility.
What is the Bond Support Scheme?
Under the scheme we provide partial guarantees to banks under a master bond support agreement in respect of UK exports. Where a bank issues a contract bond (or procures its issue by an overseas bank) in respect of a UK export contract, we can typically guarantee 50 per cent of the value of the bond and up to 80 per cent for advance payment and progress payment bonds.
What are the benefits of the Scheme?
The benefits are:
- the guaranteed bank is able to issue the bond (or procure its issue by an overseas bank) even if it doesn’t have sufficient risk appetite on the exporter for the full amount;
- the bank receives a guarantee from us to cover the percentage of the amount due to it if the exporter fails to reimburse the bank following a call being made on the bond by the buyer;
- the bank can, for the duration of our guarantee, increase its risk appetite for the exporter;
- for advance payment and progress payment bonds, the bank can increase the amount of working capital available to the exporter.
The guaranteed bank is protected against the failure of the exporter to reimburse it under its counter-indemnity if a bond is called and the bank is obliged to pay the beneficiary (buyer).
The following criteria must be met:
- the guaranteed bank should normally be incorporated in an EU or OECD country and be regulated by a regulator acceptable to us;
- the exporter must be carrying on business in the UK;
- the bonds required should normally have a value of more than £1m but under no circumstances may it be less than £25,000; and
- the export contract must have a minimum of 20% UK content.
- (Note: for bonding requirements under £1m, the Department for Business Innovation and Skills (BIS) Export Enterprise Finance Guarantee (ExEFG) Scheme may be more appropriate. However, UK Export Finance will consider any applications that cannot benefit from support under the ExEFG.)
There is no maximum value for each bond, although the total value of bonds to be issued under each export contract should usually be greater than £1m. Under no circumstances may it be less than £25,000. We will typically guarantee 50 per cent of the full value of a bond, but for advance payment, progress payment or other cash-related bonds, we may guarantee up to 80 per cent of their value.
There is no maximum or minimum term for a guarantee. We will look at each case on its merits.
There is no fee for the application. The premium payable for our cover is determined on a case by case basis.
How to apply
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The information available in this article is not intended to be a comprehensive description of our overseas investment insurance and many details which are relevant to particular circumstances may have been omitted. Investors must read the policy to see whether it meets their needs.
When considering applications, underwriters will look at each case on its merits.