When companies export products or services, long payment terms can often create working capital challenges. The up-front cost of producing, shipping and delivering the goods can be tricky for businesses to manage. Export finance helps businesses release working capital from cross-border or domestic trade transactions, that would otherwise be tied-up in invoices or purchase orders (for up to 180 days). Export finance is specialist finance that can help a company to grow and increase trade.

There are several different types of export finance, so structuring varies, depending on which product is most suitable for your business. Often the supplier will request a Letter of Credit or a Bank Guarantee, which is financial security of payment to reduce non-payment risk once they deliver the product or ship the goods. In other cases, the customer might not pay your company for up to 90 days after the product has been received. Once the invoice has been issued, receivables or invoice finance can be used to advance payment. 

Generally speaking, sellers of goods or services want to get paid as soon as possible, even before the trade, and buyers want to delay payment for as long as possible, to maintain strong cash flow and provide the buyer time to sell on to their end customers. This means that third parties can add value by offering some form of financial guarantee, bridging the finance gap, and ensuring trust between the buyer and the seller.

Export finance can be one simple financial instrument or several different facilities which can be structured to ensure some form of financial guarantee and establish trust between a buyer or seller. Whether it is a guarantee of payment from a customer when goods are exported, the advance payment of a transaction so that goods can be produced, or the discounting of invoices from clients to avoid 30-180 day payment delays, export finance can help reduce working capital problems.

Export finance is looked at and reviewed on a case by case basis. Generally, a financier would ask for the following in an application:

• Audited financial statements
• Full business plans
• Financal forecasts
• Statement of Accounts
• Credit reports
• Details and references of the directors
• Information on assets and liabilities
• History of the company

Export finance helps businesses grow without having to take on other investment such as equity investment, which could involve giving away a share of your company, having additional shareholders and could limit the way you want to grow. Export finance facilities are generally standalone from existing bank facilities, so are often available to those with current overdrafts or loans. Some export finance facilities, such as Letters of Credit, might not get in the way of existing facilities, nor do they always appear on Balance Sheets.