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Summary
- The UK Export Finance (UKEF) has launched a financing scheme for international buyers in order to bolster the exports
- The government has mandated the lenders to provide a credit line of up to £30 million
- The financing scheme has been primarily instituted to benefit the smaller businesses and other small-scale enterprises in the UK
With the completion of the Brexit transition and the introduction of the newly-orchestrated arrangement between the United Kingdom and the European Union, the government is taking periodic measures in order to keep up the cross-border trade. The UK Export Finance (UKEF) on Tuesday, 23 February, launched a financing scheme for the international buyers in order to bolster the exports from the UK as the country advances ahead with the new trading regime.
The new Standard Buyer Loan Guarantee (SBLG) scheme is designed and curated to benefit the buyers, as well as the UK exports in carrying a smooth trade. The buyers exporting goods from the UK can avail flexible repayment terms, while the UK exporters can ensure that they are paid upfront. The government has mandated the lenders to provide a credit line of up to £30 million to the overseas companies buying from the UK.
Government-backed financing
The financing is backed by the government, therefore, the respective lenders can extend the financing without realising the risk. There has been a radical deviation in the level of exports since the onset of the new year as Britain experienced stiff cross-border regulations from the neighbouring countries after the cases of mutated virus strain began to multiply. The situation, coupled with the range of transitions due to the implementation of the new post-Brexit arrangement, has seemingly dampened the cross-border trade.
Under the Standard Buyer Loan Guarantee, a loan up to 85 per cent of the contract value with the UK enterprise will be guaranteed by the UKEF. The loan value can vary between £1 million and £30 million. The financing scheme has been primarily instituted to benefit the smaller businesses and other small-scale enterprises in the UK, helping them to secure export contracts with overseas buyers.
Stimulating exports
The international buyers who are availing a credit line under the scheme have the option to repay the loan amount from their respective lenders over a period of time as prescribed at the time of loan arrangement. While, on the other hand, the UK-based exporters can ensure timely and upfront payment on behalf of the overseas buyer at the time of fulfilling the contract.
Under the SBLG scheme, the UKEF has been working with a range of lenders to offer loans to prospective overseas buyers doing business with UK exporters. The step can turn as a much-needed aid for the international buyers at a time when most of the trading partners are experiencing a dearth of business due to restricted trading routes, supply chain and sluggish demand on the back of coronavirus-induced limitations.
The SBLG scheme is likely to catalyse the demand for the small and medium-scale exporters of the UK, cumulatively helping the domestic economy in its path of recovery from the pandemic bottoms. Particularly to finance smaller contracts, the financial support spearheaded by the UKEF can be accessed more easily.
