Financing the purchase of overseas goods as well as that of export sales can be a challenge for many companies. Consequently many organisations decide not to trade overseas or to restrict their trading overseas despite the outlook being very promising.

The good news is that Export Finance is not only available from the banks.

As well as your bank there are several independent Funders that can provide funding for both the purchase of overseas goods and the financing of an export invoice worldwide – at an agreed advance percentage rate.

Even though you may have an existing funding relationship you can still secure alternative finance for an overseas transaction or transactions that would not conflict with your existing arrangements.

What is Trade Finance?

Trade Finance provides funding or guarantees for the purchase of overseas goods. Typically, the Trade Financier would pay your supplier in advance for the goods on your behalf and you in turn would pay the funder 90 days from this date.

3 key benefits of Trade Finance

  1.  It provides valuable additional working capital

    1.  It is flexible working alongside existing funding arrangements

    2.  It can provide funding for seasonal trade and large one off contracts

The 3 key criteria to qualify for Trade Financing

  1.  Goods must be finished or require light assembling only

    1.  Goods are purchased for a back to order and not for stock

    2. There is a proven historic relationship with the Supplier and the goods being supplied

Trade Financing case study:

A supplier of women’s garments was successful in securing a €250,000 order from a European retailer. However they did not have the available working capital to pay their supplier for the goods.

They approached an independent Trade Financier who agreed to pay the supplier in advance on their behalf and offered them in turn 90 days from receipt of the goods to pay back them back the amount being advanced.

Without this funding the UK Exporter would have missed out on these additional sales and profit. Moreover this arrangement did not conflict with their existing invoice banking arrangements.

What is Export Receivable Funding?

The funding of domestic sales invoices is common practice for many UK companies. However many of these financiers will restrict the percentage advanced for export invoices to as little as 40% of the invoice value.

However, there are Export Receivable Finance providers that offer 80% advanced funding for approved export transactions.

Typically, the Financier would advance 80% of the gross invoice value on receipt of an approved invoice and in turn you will benefit from 90 days from the end of the month (maximum 120 days) before this invoice needs to be paid back to the Funder.

4 key benefits of Export Receivable Financing

  1.  It provides valuable working capital to support increase growth

    1. The funding availability is linked to increased export sales.

    2. Typically there is no requirement to provide personal guarantees or indeed any other collateral other than the invoices being financed.

    3. It can provide debtor protection cover for non-payment of an invoice due to the insolvency of the overseas debtor.

3 key criteria

  1.  Prior debtor and country credit approval is required.

    1.  It is restricted to approved goods and services

    2.  Amounts that are not paid by 90 days from the end of the month from the invoice dates will be clawed back by the funder.

Export Invoice Finance Case study

A supplier of frozen food was successful in securing a contract to supply an oversea restaurant chain with €175,000 a month of goods which were typically not held in stock.

Unfortunately, the company did not have the working capital to fulfil the contract and their current Financier was only prepared to advance 40% of the invoice value.

They approached an alternative Specialist Export Invoice Financier who was prepared to advance 85% of the ongoing invoices. This provided the required working capital to secure the contract.

We hope you have found this information useful. It’s likely you will have questions that require answers tailored to your exact situation. Please get in touch if this is the case.

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