Quick guide for exporters to the Export working capital scheme

This page is about UK Export Finance’s export working capital scheme (the ‘scheme’), and explains how it works, its benefits, its key features and how to access the scheme.

What is the export working capital scheme?
The scheme is being introduced to assist UK exporters gain access to working capital finance (both pre- and post-shipment) in respect of specific export contracts. Under the scheme, we will provide partial guarantees to banks to cover the credit risks associated with approved export working capital facilities. Where a bank provides such a facility in respect of a UK export contract, we can typically guarantee 50% of the risk.

The scheme is initially being introduced on a pilot basis. This will enable us to assess the level of demand and to determine whether any changes need to be made to the scheme in the light of experience.

It is envisaged that the scheme will be particularly useful in circumstances where a UK exporter wins an overseas contract that is higher in value than is typical for it or succeeds in winning more overseas contracts than it has done before. The types of transaction supported under the scheme are likely to be structured working capital facilities where, for example, the bank may wish to introduce additional control mechanisms relating to drawings under the facility or to monitor repayment in line with the cash flows arising from the underlying contract. The scheme is not intended to cover funding provided as part of a general overdraft facility.

How does it work?
Quick guide for exporters to the Export working capital scheme

What are the benefits of the Scheme?
The principal benefit for the UK exporter is that it is able to obtain the necessary working capital finance from its bank to support an export transaction in circumstances where its bank does not have sufficient risk appetite for the full facility amount.
Risks covered
The bank is protected, to the extent of UK Export Finance’s guarantee, against the failure of the UK exporter to repay amounts due under the working capital facility upon its expiry, cancellation or termination.

Eligibility
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 facility must relate to a contract between the exporter and a buyer outside the United Kingdom (which includes the Channel Islands and the Isle of Man) under which the exporter supplies goods and/or services to that buyer;
  • advances under the facility must be used to pay, or reimburse the exporter for payment of, expenses incurred in tendering for or performing that export contract;
  • the export contract must have a minimum of 20% UK content;
  • the maximum value of the working capital facility cannot be greater than 75% of the export contract’s value; and
  • the export contract to which the facility relates should normally have a value of more than £1m but under no circumstances may it be under £25,000.
    (Note: for export working capital 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 for smaller amounts where they cannot benefit from support under the ExEFG.)

Maximum / minimum facility amount
There is no maximum (or minimum) value for the working capital facility, although the total value of the export contract should normally be greater than £1m. Under no circumstances may it be under £25,000.
Maximum / minimum term
The facility must have a maximum term of less than two years. There is no minimum term.

Cost
There is no fee for the application. The premium payable for our cover is determined on a case by case basis.

How to apply
Contact UK Export Finance Articles

Disclaimer
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.

Topics: Credit Facilities, Getting Started, Insurance & Risk, Loans, and Payments
Menu
Export Action Plan