Funding for exporters: what is available and how it works

The exporter's cash gap

Exporting typically stretches the working capital cycle further than domestic trading, because production or procurement has to be funded before shipment, shipment itself can take weeks depending on the destination, and overseas buyers often expect longer credit terms than domestic customers. The gap between paying suppliers and receiving payment from an overseas buyer can run to several months on a single order, which is exactly the gap export finance is designed to bridge.

Pre-shipment finance

Pre-shipment finance funds the cost of producing or procuring goods before they are shipped, typically advanced against a confirmed export order or contract rather than general working capital need. It allows an exporter to take on larger orders than their own cash reserves would otherwise support, and is usually structured as a facility that is drawn against specific orders and repaid once shipment documents are presented or payment is received.

Lenders assess pre-shipment finance primarily on the strength of the underlying export contract or order and the buyer's creditworthiness, alongside the exporter's own track record of fulfilling similar orders previously.

Export invoice finance and post-shipment funding

Once goods have shipped, export invoice finance releases cash against the resulting export invoice in much the same way as domestic invoice finance, typically advancing 80% to 90% of the invoice value, with the balance released on payment. Because overseas buyers often take longer to pay and can be harder to assess from a UK lender's perspective, export invoice finance sometimes carries additional requirements such as credit insurance or a letter of credit backing the underlying invoice, particularly for buyers in higher risk markets.

UK Export Finance and government backed support

UK Export Finance, the UK's export credit agency, provides guarantees that sit behind commercial lenders, effectively sharing the risk on export finance facilities and enabling lenders to fund transactions or buyers they would not otherwise support on their own book. This includes guarantees on working capital facilities specifically for export contracts, bond support to help exporters provide performance guarantees to overseas buyers, and buyer credit facilities that allow an overseas buyer to finance a purchase from a UK exporter.

Accessing UK Export Finance backed products generally goes through participating commercial lenders and specialist brokers rather than direct application, and eligibility depends on factors including UK content in the exported goods or services and the specific market being exported to.

Currency and country risk

Beyond the cash flow timing gap, exporters face currency risk where invoices are denominated in a foreign currency and country risk where the buyer's home market carries political or economic instability. Forward contracts and currency hedging tools can lock in an exchange rate for future receipts, protecting margin on contracts agreed in a foreign currency. Credit insurance, which covers non-payment by an overseas buyer, is worth considering for larger or higher risk export contracts and can also make a lender more willing to fund against the resulting invoices.