UK Export Finance (UKEF), the country’s export credit agency, is launching a new buyer finance offering to support export contracts of smaller values.
The so-called ‘small deals initiative’ will see UKEF guarantee the loans of overseas buyers of British goods. It will enable UK companies to be paid upfront for their exports, while their buyers can benefit from deferred payment terms. Three transactions have already been concluded as part of the new initiative, with more deals hoped for later in the year.
UKEF tells GTR that there is no formal minimum value for deals done under the new scheme, but that in practice this support would be most appropriate for contracts involving capital goods or services upwards of £500,000. “For smaller value export contracts, UKEF’s other products such as export insurance or the export working capital scheme may be more appropriate,” says a spokesperson. The new offering is expected to be of particular value to smaller companies taking their first steps into exporting.
The small deals initiative will be supported by new partnerships with banks and non-bank lenders. UKEF says that it has already agreed partnerships with Bank ABC and the London Forfaiting Company. “They are working proactively with UKEF on live smaller deals, while promoting their ability and willingness to arrange and lend for smaller-sized transactions,” the spokesperson says, adding that other banks are developing their abilities to support this type of deal.
This new initiative will be run by a dedicated underwriting team, led by UKEF business manager Steve Head.
It will include revamped products as well as “simplified processes” for underwriting transactions, allowing banks and other financial institutions to more easily support smaller deals, UKEF says.
As it irons out the details of the new scheme, UKEF was unable to clarify which parties are expected to bring these transactions to UKEF’s attention, the exporter or bank. Banks have historically been criticised for not doing their bit to market UKEF’s products, such as its bond support and working capital schemes, to their clients.
“We are considering a large number of leads, which are being presented by a mix of sources including banks, exporters and UKEF representatives such as our regional export finance managers,” UKEF says.
The initiative was unveiled by Liam Fox, the UK’s secretary of state for international trade, at the UK Trade and Export Finance Forum in London last week. Fox also made mention of UKEF’s new general export facility, launched in March, calling the announcements “potential gamechangers” for the UK’s export industry.
The new facilities follow UKEF’s announcement at the end of last year that it would increase its direct lending facility (DLF) in the years after Brexit.
Under the DLF, fixed-rate finance is available to cover new international sales by any business exporting from the UK, to any country where UKEF medium-term cover is available, and can be made in sterling, US dollars, euro or Japanese yen.
The boost will come in two “one-off” amounts of £1bn for the financial years 2020/21 and 2021/22, and will focus on developing markets following the UK’s departure from the EU.