Moves to expand SME funding options

The government has announced a new scheme providing export finance support for SMEs, in a bid to boost a post-Covid recovery

UK Export Finance (UKEF) has launched the general export facility (GEF) in partnership with the UK’s five largest commercial banks.

GEF supports a range of trade finance products including trade loans, bonds, letter of credit lines, CapEx and invoice financing.

The facility enables UKEF to provide a partial guarantee to lenders of up to 80% of the credit risk on facilities typically worth up to £25m, with UKEF’s support no longer tied to individual export contracts.

In order to qualify for GEF as a UK exporter, a business must self-certify that in any one of its last three financial years, at least 20% of its annual turnover has been made up of UK export sales or, alternatively, that in each of its last three financial years, at least 5% of its annual turnover has come from UK export sales.

Financial support can be directly accessed from HSBC, Lloyds Bank, Natwest, Santander and Barclays, the major providers of trade finance in the country, which can put in place UKEF’s guarantee automatically.

UKEF said other lenders will be added to the facility in due course to ensure that it is available for as many businesses as possible.

Graham Stuart, minister for exports, said: ‘The new GEF will make a huge difference for entrepreneurs who need the financial backing to go global and benefit from our free trade agreements. It will help us bring genuine optimism back to exporters.

‘We were the only top ten exporting nation to grow exports last year. I’m determined for that success to continue as we recover from Covid-19.

‘By transforming access to the world’s best export credit agency, we can unlock the entrepreneurial energy needed to make that a reality.’

However, Greg Taylor, head of financial solutions at MHA MacIntyre Hudson, said that while support to fund exporters was long overdue, relying on high street banks to provide financial support could prove the scheme’s pitfall, given earlier experiences with the coronavirus business interruption loan scheme (CBILS).

 Taylor said: ‘In theory the GEF will help UK manufacturers take advantage of free trade agreements, however, the fact that financial support will initially be provided by high street banks is a concern.

‘In fact, over the last 10 months, banks could have done a much better job administering the various Covid-19 relief schemes, including the CBILS scheme which was plagued by low loan approval rates and rejections of relief for businesses not already a client of the relevant bank.

‘On the whole getting a CBLIS loan was a long and drawn out process and it is a risk that the GEF scheme follows this path too.

‘On top of this, there are longstanding issues exporters face when securing funding. For example, businesses trading predominantly with fast growing economies like Brazil have historically found it tough to secure loans and so have smaller SMEs with a turnover under £5m. The new GEF scheme does not seem to help much on these fronts either.’

Taylor suggested that bringing specialist export financiers onto the scheme quickly would be a key element in making the GEF work for SMEs, saying the Covid-19 relief schemes suffered from a lack of sector specific knowledge among staff who assessed and approved the loans.

Separately, the Institute of Financial Accountants (IFA) has announced a partnership with the Funding Options marketplace to provide a service for SMEs looking to access finance.  

Stuart Lawson, chief revenue Officer at Funding Options, said: ‘The collaboration between the two organisations is built on complementary skills and knowledge - accountants know SMEs and we know SME business finance.

‘This year, a large proportion of the financial support SMEs have received is from the government-backed schemes.

‘However, as we look ahead to 2021, these schemes will eventually cease to exist and as economic recovery gathers pace, the role of the accountant will become even more critical. UK business owners will be leaning on their accountants a lot more to help them pursue the right finance options to help their businesses grow and succeed.’

John Edwards, IFA CEO, said: ‘2020 has been a challenging year for many organisations but we look ahead to 2021 with renewed optimism. Businesses and our practising members will need access to finance during this difficult period, whether it is to support growth, to pursue a business opportunity or to provide a short-term cash injection.

‘Partnering with Funding Options will provide our members and their clients with on-going, valuable information and finance solutions to future proof their businesses.’

Useful link:

General Export Facility guidance

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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