UK Export Finance (UKEF) has announced plans for a new invoice financing scheme for exporters in a bid to boost exports through supply chain efficiency.
GTR has learned that the new scheme will allow an exporter to set up a supply chain discounting facility with its bank, through which suppliers can receive up to 95% of their payment on invoice submission. The facility will be based on an export contract and support will be based on the buyer’s creditworthiness.
UKEF will provide the bank with a guarantee for up to 80% of the amount of credit provided through the facility. The finer details of the scheme, which is due to be launched next year, are still being ironed out.
The new product is designed to encourage banks to participate in invoice financing schemes for exporters by allowing them access to financing to pay their suppliers early. This will ensure exporters have more time to pay for supplies of goods and raw materials, while helping smaller companies in export supply chains secure prompt payment to support their cash flows.
UKEF has launched a number of new products and initiatives since the Brexit referendum in a bid to better position its support for exporters following the UK’s exit from the European Union. Only 9% of UK companies are exporting according to the department for international trade (DIT). It estimates around 300,000 companies produce goods and services that could be exported, but have no overseas sales.
Earlier this month, the DIT announced the launch of a new government review to investigate how the UK can grow its exports. The Export Strategy Review will work closely with businesses and government to explore the barriers to exporting and identify how it can unlock potential opportunities overseas.
Earlier in the year, the export credit agency (ECA) launched the Bank Delegation scheme, which gives banks authority to issue UKEF guarantees for their customers.
The new guarantee model delivers two products – the Bond Support Scheme (BSS) and Export Working Capital Scheme (EWCS). It is designed to widen eligibility to direct suppliers for UKEF’s trade finance products and is based on the supplier’s creditworthiness. It also aims to speed up the time in which UK exporters receive decisions on applications.
The scheme was announced as one part of a three-pronged approach by UKEF to reach out to more UK exporters; through increased accessibility, scalability and flexibility. While the Bank Delegation scheme targeted increased accessibility, the ECA simultaneously launched an online application platform that allows bank partners to make submissions online to target increased scalability.
Last year, the ECA announced it has increased pre-approved local currencies in which it can offer support from 10 to 40, enabling more overseas buyers of UK exports to pay in their own currency.