Member Article

£5 billion export refinancing scheme launched for SMEs

The Government has launched its £5 billion Export Refinancing Facility (ERF), aimed at equiping UK exporters with competitive long-term financing to overseas buyers of their products.

Plans were announced in the Chancellor’s Spring Budget and were outlined to Bdaily by Business Group director at UK Export Finance, Steve Dodgson.

Loans in excess of £50 million, to purchase capital goods and services, will be made available to firms who can access high value opportunities in emerging markets.

The ERF scheme allows overseas buyers to access the highly competitive funding of the debt capital markets to refinance export finance loans after their initial funding by the banks.

Government will support UK bids for these projects which typically involve lengthy contract negotiations. It is the first time this financing approach is being used for civil project finance by an export credit agency.

Under the new facility, UK Export Finance will guarantee repayment of bonds issued by the buyer to refinance the initial loan.

This will allow the bonds to be competitively priced at a fixed rate, which takes account of the UK’s credit rating. Should the borrower be unable to refinance the loan, UK Export Finance will become the lender until alternative funding is found.

Irene Graham, executive director of Business Finance at the British Bankers’ Association, said: “The BBA’s export finance banking specialists have worked closely with UKEF and HM Treasury on the development of this facility and are pleased it is now launched.

“Competitive pricing of UKEF-backed loans is key to UK exporters winning long-term export contracts, and we are supportive of a flexible ERF scheme that can further support long-term projects and finance options at competitive rates.”

The new ERF is part of wider UK Export Finance plans to expand the ways in which it supports UK exports.

Elsewhere, the £3 billion Direct Lending Facility programme will see UK Export Finance lend directly to overseas buyers at the lowest interest rates allowed by international agreements. This facility, which complements the ERF, is expected to become operational by the end of June 2014

This was posted in Bdaily's Members' News section by Tom Keighley .