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Export finance and risk management

If you’re considering expanding into international markets, we can help you work out the best options for your business and understand the risks involved with trading overseas.

Exporting products and services can be challenging and may have a significant effect on your company’s finances and cashflow. The costs involved in setting up and running an export operation and the extended sales cycle can be a big investment at first.

Accessing export finance

If you’re thinking about starting to export, accessing external finance could help you cover the costs of working capital demands and smooth out the process for completing sales and receiving payment. Securing export finance could also allow you to offer better payment terms to customers, making you more competitive in your target markets.

Find the best finance option for your business

If you’re considering expanding into international markets, we can help you work out the best options for your business. Our Finance Readiness specialists work with Scottish companies to find the right route to funding for them.

We have also published a series of guides explaining different funding options and what you can do to become investor-ready.

Read our guide to finance for exports 

Research funding and investment options

Managing financial risk

Expanding into overseas markets can feel like a step into the unknown. Although a great opportunity to grow sales, it can be expensive to get a foothold at first. Control over stock and fluctuating currency and financial market conditions are all potential challenges to your operations.

It’s vital to understand the market conditions in the countries and markets you are considering for exports. Our Market Research team can provide you with insight into any country or market to help you understand the trading environments in each.

We also recommend this webinar produced by Bibby Financial Services which explains the financial risks of exporting, including what to look out for in contracts and terms and conditions, the importance of International Commercial Terms (‘Incoterms’) and how a financier can help you overcome risks.

Watch the webinaropens in a new window

The top three global trade credit insurers provide a range of resources to manage country risk:

UK Export Finance (UKEF) has a number of products to help businesses manage their credit risk domestically and overseas:

Trade credit insurance can be used to help protect your cash flow from loss due to credit risks involved in exporting. These articles by Open to Export introduce trade credit insuranceopens in a new window and explain why insurance can help mitigate against non-paymentopens in a new window.

Great.gov.uk has published guidance on insuring against non-paymentopens in a new window and managing non-paymentopens in a new window.

UKEF have a number of products to help businesses manage their credit risk domestically and overseas:

If you're quoting or pricing your goods or services in the local export market currency, you need to be aware of and manage exchange rate fluctuations and risk. There are three main types of currency risk to be aware of: transaction, translation, and economic risk.

You can adopt risk management solutions and establish foreign exchange (FX) management policy to help to mitigate this risk. These resources from Open to Export will help you get started:

You can also find foreign exchange rates issued by HMRCopens in a new window on a monthly basis in CSV and XML format.

Moody’s produce a list of countries by credit ratingopens in a new window, showing long-term foreign currency credit ratings for sovereign bonds.

Great.gov.uk has published guidance on insuring against non-paymentopens in a new window and managing non-paymentopens in a new window.

Understanding methods of payment

Having the ability to offer and accept different methods of payment can help you get paid on time and in full, and to mitigate against non-payment. While business to consumer transactions usually involve payment at the point of sale, business to business sales payments can be more complicated.

Principal payment types

The main payment terms used in international trade are:

  • Advance payment – the safest and most secure method for an exporter, as you receive payment in full before releasing a product or service
  • Letter of credit – a guarantee from your buyer’s bank, promising to pay if the buyer can’t, subject to the terms and conditions of sale being met
  • Bank collection or documentary collections (D/C) – your bank collects payment from your buyer’s bank on your behalf; used primarily for shipments by sea
  • Open account – the least secure method for an exporter, as goods or services are shipped, then an invoice issued with terms for payment stipulated (for example, within 30, 60 or 90 days, or upon fulfilment)

The Exporting is Great websiteopens in a new window explains these options in more detail.

It’s best to talk to your bank about the solution that fits best with your exporting plans.

Open to Export resources

Open to Export provides free information and advice from the Institute of Export and International Trade to help businesses export and expand. Their webinars and articles on payment terms include:

A more detailed guide to letters of creditopens in a new window is available from Trade Finance Global.

Contact a specialist

Want to know more? Our Finance Readiness specialists can help you find the right solutions for your business.

Submit an enquiry