UK Export Finance (UKEF) has overhauled its supplier credit facility programme to make its support more accessible to the large proportion of SME trade that is financed by non-bank lenders.

Launched this week, the British export credit agency’s new standard buyer loan guarantee (SBLG) allows it to guarantee a loan of up to 85% of a UK company’s export contract value, enabling British exporters to get paid upfront while their overseas buyers can repay the loan from their lender over a longer period.

The SBLG’s predecessor facility was only available to financiers who had entered into an overarching master guarantee agreement with UKEF. With one exception – the London Forfaiting Company – these were all traditional bank lenders, including HSBC, JP Morgan and Standard Chartered. Under the new scheme, this requirement has been removed, and replaced with transaction specific documentation which caters for alternative lenders.

“Coronavirus has hit global supply chains hard with overseas buyers struggling to access the capital they need to import goods and services, restricting trade. That’s why UKEF is working with a range of new lenders to issue loans backed by SBLG,” says UKEF in a statement.

Another notable difference between the new SBLG and the supplier credit facility is in transaction values. Under the new programme, lenders can provide finance for contracts of up to £30mn – up from £5mn previously – to overseas companies buying from the UK. The repayment period will usually be two to five years, although this can be increased depending on the sector and demand, and a minimum of 15% of the contract value must be paid directly to the exporter by the buyer before the facility starts to be repaid. Of the 15%, a down payment of at least 5% should be received upon contract signature.

According to UKEF, this increase will support its small deals initiative, which was set up in 2019 to address the globally recognised gap in financing support for export contracts of this size.

As the SBLG scheme is contract specific, and the UK exporter is UKEF’s customer under this product, the OECD rules on local content for ECA cover don’t apply, which means there are no restrictions on the source of goods sold by UK firms under the programme.

“This means UKEF’s financial support can be accessed more easily, particularly to finance smaller contracts to benefit SMEs, which will help stimulate demand for UK trade and propel economic growth as the country builds back stronger from the pandemic,” says UKEF.

CDE Global, a Northern Irish company which provides wet processing equipment for construction and recycling operations, is among the first to benefit from the SBLG. It secured a multi-million-pound contract with a Tunisian customer to expand production capabilities at a silica quarry in Oueslatia. In absence of a financial solution from the commercial market to support extended repayments in Tunisia, UKEF offered it a nine-year facility to finance the contract for its buyer. The financing was arranged by non-bank financier AF Capital Partners, which has come in as a new partner with UKEF under the SBLG programme.

“This scheme allows buyers to make their choice based on the quality of the goods alone. For CDE, it has single-handedly brought an export contract to the UK that was otherwise being awarded to a German competitor,” says Andrew Woolfson, partner at AF Capital Partners.

Industry participants have long called for UKEF to smooth the way for alternative financiers to support SME exporters. In its 2019 UKEF benchmarking report, independent national trade organisation the British Exporters Association (BExA) highlighted a need for UKEF to “continue to develop non-bank lenders and provide SMEs with options when their exports test the appetite of their house bank”, noting in its 2020 follow-up report that there had been “minimal progress” in this respect.

A UKEF spokesperson tells GTR that it is now supporting transactions with new non-bank partners under the SBLG, and expects more alternative lenders to come in as a result of the programme’s overhaul.