De-stocking throughout 2009 has fuelled UK exporters’ need for immediate cash on winning a contract and the new Guide to Financing Exports from the British Exporters Association (BExA) sets out the options for trade finance.
Susan Ross, chair of BExA and director of Aon Trade Credit, the UK’s largest credit insurance broker, has edited this practical guide.
Exporters can either finance a portfolio of debt or a single contract through the international arm of their clearing bank or a specialist trade finance bank. Over the last 12 months, however, banks have become more cautious, charging more and preferring certain business sectors and export destinations. They are reviewing their risks more regularly and taking a more rigorous approach to breaches of covenant as they operate within the regulatory framework of Basle II.
The guide is helping exporters in this new financing climate by addressing:
- how to write contracts to lessen the need for external finance;
- the advantages and disadvantages of the various financing techniques;
- the relevance of debt protection and credit insurance;
- description of the terminology used; and
- advice on medium term finance and leasing.
Susan Ross, chair of BExA and director of Aon Trade Credit, said: BExA’s Guide to Financing Exports is part of a series that also looks at export credit insurance, letters of credit, bonds and retrieving goods back following non-payment.
“Export finance uses a host of technical terms, which from the outside can seem quite complicated and daunting. In BExA’s view, it is quite simple and the guide seeks to cut out and clarify the jargon. Trade finance has the advantage that banks like it – by definition, debts are measurable and have a date when they should convert to cash. As such, trade finance is usually a more effective way of obtaining working capital finance than an overdraft. Plus trade finance grows and contracts along with the sales of the company.”
Download the cashflow guide for UK exporters
