Support for West Midlands Exporters

Transcription

1 Support for West Midlands Exporters Ian Fletcher International Trade Director Transaction Services UK 20 November 2014

2 What is an exporter concerned about? How to break into a new overseas market How to finance the order opportunity Getting paid 2

3 Things to be considered when selling overseas Credit terms Due to longer transport times it may be necessary to provide longer credit terms (it takes about 45 days to transport goods to the Far East and only 2 hours to Leeds) Integrity and credit standing of buyer Will they/can they pay? Country risk How stable is the country s economy? Are exchange controls in place? Is there a likelihood of sanctions? Are there any import restrictions? Import duty and/or taxes? Quantity Economically sales are made in full container loads. Is it viable to ship small orders? Funding The funding cycle for selling overseas can put strain on a company s banking facilities It can also increase costs Currency Movement in currency can erode profit margins 3

4 Managing risk Importers risk Exporters risk 4

5 Foreign exchange Overseas Buyer equiv. Order taken US$/ = 2.00 Payment received US$/ = 2.10 US$100,000 50,000 US$100,000 47,619 5% movement in exchange rate 5

6 What else concerns an exporter? How do I fund the export growth in my business? 6

7 Export trade cycle Order received Goods shipped Docs raised Payment due date Await payment from Debtor Pre-shipment finance 1. Bank debt 2. Use LC to raise finance Post-shipment finance 1. Bank debt 2. LC 3. Invoice finance/factoring 7

8 UK Government schemes UK Export Finance: the operating name of Export Credits Guarantee Dept (ECGD) Established in 1919 Guarantees to banks and credit insurance 1980s guarantee schemes withdrawn 1991 short-term credit insurance business privatised 2011 re-launched short-term schemes & rebranded as UK Export Finance 2012 Regional Export Finance Advisors appointed 8

9 UK Government schemes UK Export Finance: the operating name of Export Credits Guarantee Dept (ECGD) Short-term schemes Letter of Credit Guarantee Scheme Bond Support Scheme Export Working Capital Scheme 9

10 UK Export Finance Letter of Credit Guarantee Scheme Risk sharing between NatWest & UK Export Finance UK Export Finance guarantees confirmations added to letters of credit from emerging markets Features LCs with repayment terms of up to 1 year Exports have to be outside EU & OECD developed markets Banks will be indemnified for risk sharing of up to 90% Exporter s eligibility will be subject to our normal transactional due diligence Benefits Enables us to confirm LCs even if we do not have the risk appetite for the full amount Exporter is protected against default of the foreign buyer and the foreign bank 10

11 UK Export Finance Bond Support Scheme Scheme to help exporters raise contract bonds Bonds issued in favour of overseas buyers and UK Export Finance guarantees up to 50% of value of the bond (for performance type bonds) or 80% of value of the bond (for advance payment bonds) UK Export Finance shares the risks with the bank of not being reimbursed by the exporter following a call on a bond Features Minimum 20% of UK originated content No separate Government fees Benefits Improved and increased access to bond credit lines from banks Potential improved access to working capital, especially under APG bonds 11

12 UK Export Finance Working Capital Scheme Introduced to assist UK exporters gain access to working capital finance (both preand post-shipment) for specific export contracts UK Export Finance provides guarantees to cover credit risks associated with approved working capital facilities Minimum contract value 25k Maximum finance 75% of contract value of which UK Export Finance guarantees at least 50% of the risk Features Minimum 20% of UK originated content No separate Government fees Benefits To exporting customers increases working capital support for customers involved in export contracts Particularly valuable for paying key suppliers during the pre-export phase, when there are no debtors that can be financed in other ways 12

13 UK Export Finance Export Insurance Policy Insures an exporter against the risk of not being paid under an export contract or of not being able to recover the costs of performing that contract because of certain events which prevent its performance or lead to its termination Key benefits The exporter is protected against loss due to specified risks Up to 95% cover is provided Risks covered Insolvency of the buyer Political, economic or administrative events outside the UK that prevent payments from the buyer under the export contract Hostilities or civil disturbances outside the UK that effect performance of the export contract Eligibility The exporter must carry on business in the UK & the buyer overseas UKEF is unable to provide cover if the buyer is domiciled in an EU or OECD country. This stipulation does not currently apply to Greece 13

14 UK Export Finance Case Study Company A 500k TNW, 6.5 million export contract to Asia Payment terms 30% deposit against APG, 6% Performance Bond, 70% against LC Lead time payment of deposit to first shipment 9 months Gross facility requirement 2.9 million 2.3 million Bonding & 600k Working Capital Solution UKEF Bond Support Scheme 80% APG, 50% Performance Bond & UKEF Working Capital Scheme 50% Guarantee Net facility requirement c 600k 14

15 UK Export Finance Bond Support Scheme Case Study Company B 300k export contract to Qatar to supply rubber expansion joints Payment terms 90% after shipment, 10% on commissioning Goods imported from Spanish supplier with added value in UK Cash flow constraints in Spain Deal restructured in order that 30% deposit paid against APG 80% guarantee received from UKEF which allowed cash to be released Spanish supplier able to manufacture goods with working capital support from UK 15

16 UK Export Finance Working Capital Scheme Case Study Company C US$3.6 million export contract to Russia to supply automation products to the automotive sector Payment terms 100% against Letter of Credit Pre-shipment finance facility of 900k required Solution 50% guarantee from UKEF 16

17 UK Export Finance Bond Support Scheme Case Study Company D Existing cash backed Bonding Facility APG, Performance & Warranty Bonds T/O c. 3 million, c.60% export Design, manufacture, install & commission process burner systems for customers in the global petrochemical & industrial process heating sectors Application to UKEF for Retrospective Cover for existing bonds UKEF supported on satisfaction that cash released would be used to fund additional export contracts 85k released into working capital 17

18 UK Export Finance Bond Support Scheme Case Study Company E Existing 500k Bonding Facility APG, Performance & Warranty Bonds Process engineers to Dairy and Brewing sectors Secured 6.2 million of new export contracts in Kenya & Tanzania Required Bonding Facility to be increased to 1 million for 4 new Bonds APGs & Performance 6 applications made to UKEF including 2 retrospective UKEF supported, 1 million facility provided 18

19 Thank you For more information contact: Ian Fletcher Tel: