Export Finance and Pre-Export Funding

Export Finance and Pre-Export Funding#

Pre-export finance bridges the gap between receiving an order and getting paid. A manufacturer needs $500K in materials and labor to fulfill a $1M export order but won't get paid for 90-120 days after shipment. Pre-export loans (typically 60-80% of order value) are secured against the confirmed order, export credit insurance, or LC. Interest: 3-8% above base rate.

Export Credit Agency Support#

ECAs like UK Export Finance (UKEF), US Ex-Im Bank, and Euler Hermes provide: guarantees for bank loans to exporters, buyer credit (lending directly to foreign buyers), and insurance against political and commercial risks. UKEF covers up to 80% of contract value. ECA support makes banks willing to lend — the government guarantee removes most credit risk.

Structured Export Finance for Large Contracts#

For contracts above $5M: use structured finance combining pre-export loans, LC confirmation, trade credit insurance, and receivables finance into a single package. Structure: ECA guarantees 85% of contract, bank lends against ECA guarantee at LIBOR+2%, trade credit insurer covers the 15% gap. Total financing cost: 3-5% of contract value. Without structure: bank requires 30%+ cash collateral.

• Pre-export finance funds production before shipment — critical for SMEs fulfilling large international orders