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What is Export Finance?

In spite of the many attractions of exporting, one of the biggest threats to UK businesses trading internationally is payment terms. In a similar vein to doing business at home, exporters encounter problems with longer payment terms of 30-120 days.

Adding to this, not getting paid on time or at all can put a strain on business cash flow, stifling growth and in some cases leading to insolvency.

Let’s take a closer look at how export finance can help avoid cash flow problems to help a business thrive. And if you need an immediate export finance quote just fill in our simple form.

Do You Need a Specialist Export Finance Quote?

  • Find the right funding to grow your international trading and pursue bigger opportunities
  • Bridge the Cash Flow Gap Between Paying Your Suppliers & Getting Paid
  • Release the Value of Outstanding Invoices
  • Competitive Foreign Exchange Service Minimises Risk
  • We Will Never Sell Your Data

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Export Finance is the term to describe the specialist range of finance focussed on the export market.

Export financing aims to support businesses reaching an international market. Once a shipment has left domestic customs, there can be a significant time period while the goods are in transit, and are then collected by the importer.

Especially where emerging markets are concerned, the ability to extend attractive payment terms to the importer is often a huge part of winning an order.

Export finance aims to maintain positive cash-flow cycle during the gap.

How Does Export Finance Work?

Export finance is a finance agreement similar to factoring, whereby money is advanced against the value of unpaid invoices.

It’s a form of asset based finance, specifically tailored to businesses insolved with exporting to international markets.

Effectively, it’s a loan whereby invoices (in this case those held by a foreign debtor) are used as collateral for an advance.

What are the Potential Credit Problems for Exporters?

Typically, companies asked to send their goods and services overseas can’t charge 100% payment upfront. While this would be the best scenario, competitive markets mean the availability of preferential credit terms has become a key factor in choosing multi-national trade partnerships.

Many buyers prefer to arrange trading relationships whereby they can pay for goods once they have received them through customs, for example. In this scenario, the exporter has an immediate cash-flow impact, as well as being held hostage to the speed with which something can clear customs.

Exporting Disrupts the Cash-Flow Cycle Line

Export timings may be 30, 60, 90 or even 180 days. During this time the exporter has:

– a cash-flow deficit while it waits to be paid
– the risk that the importer may run into business difficulty, such as insolvency, during the period before the goods arrive.

What is Export Factoring?

This type of factoring is suited to small and medium-sized exporters that export consumer goods with open account terms.

This is when goods are shipped and delivered before payment is due, typically within 30-90 days. Put simply, a factor or factoring company buys the exporter’s foreign accounts receivables and provides an advance to the business of up to 80% of the value of the invoice typically without recourse where the factor assumes full liability for non-payment.

The facility virtually eliminates the risk of non-payment by foreign buyers, allowing the UK exporter to offer open account terms with confidence.


Export factoring improves short-term cash flow and boosts the businesses competitiveness in an international marketplace. As part of the process, the factoring company manages credit control and collection services on behalf of the business to allow business owners to focus on business operations.

Factoring foreign accounts receivables is a viable alternative to export credit insurance, long-term bank financing, expensive short-term bridge loans or other types of borrowing that create debt on the balance sheet.

What is UK Export Finance?

In addition to private finance, the UK government has its own export credit agency which can offer various forms of finance. Intended to support British companies ability to export widely, UK Export Finance can help with:

  • Credit Insurance
  • Overseas Investment Insurance
  • Loans or Loan Guarantees to bank

You can reach more about the governments export and insurance products and services here.

How can Trade Finance help Support Exporters?

Export finance (sometimes classified as ‘trade finance’) can help exporters release working capital from cross-border transactions that would otherwise be tied up in customer invoices and purchase orders (POs) for up to 120 days. These facilities are typically standalone from bank lending, therefore, they do not get in the way of existing facilities or appear on balance sheets.

In broad terms, sellers of goods or services want to get paid as soon as possible (even before trading) and buyers want to delay payment for as long as possible to maintain liquidity and give themselves time to sell on to the end-customer. In this scenario, export finance providers can offer financial guarantees and bridge the finance gap from outlay to payment as well as establish trust between the seller and buyer. 

Export finance takes many forms, helping to reduce cash flow problems with payment guarantees from a customer when goods are being exported, advance payments for access to additional working capital and the discounting of customer invoices to avoid payment delays.
Export factoring can bring considerable cash flow benefits to exporting businesses.