Manage cash flow

Choosing the right funding and credit options when exporting

What you’ll learn

  • the most common ways to secure finance
  • how to assess your suitability and eligibility for each method

5 ways to to secure finance

It pays to be prepared. If the big order you've been waiting for arrived tomorrow, could you fund it?

The funding that’s right for you depends on the size and stage of your business. Generally, you can either borrow money or get someone to invest in your business (also known as raising equity).

There are 5 main options for you to consider:

Bank loans

This route is better suited to companies with proven financial and credit history. You may need to shop around for a bank with experience in export finance for your type of company.

Pros

  • Your own bank may be more familiar with your business
  • Bank loans let you keep full control of your company

Cons

  • Start-up loans may be available, but generally loans are harder to get for less well-established or smaller companies
  • You may not get a dedicated account manager if your company does not have the required turnover

Finance platforms

Under the Bank Referral Scheme, if a bank can't help a company with a loan it's required to refer it to 3 online funding platforms:

  • Alternative Business Funding
  • Funding Options
  • Funding Xchange

There are also other online platforms which offer similar services.

Pros

  • Can benefit smaller and less well-established firms
  • Funders may be willing to lend when others aren't, as they may have special considerations or non-standard criteria for investment

Cons

  • Cost of finance may be higher than a bank loan
  • The referral process may take longer than, for example, peer to peer loans

Peer-to-peer finance

Businesses that want to lend are matched with businesses that want to borrow, via an online platform. The loan is usually made up of small amounts from several lenders. If you can service your monthly loan repayments and require a fast cash injection, this option may suit you.

Pros

  • These loans are often processed more quickly than a bank loan
  • May be cheaper than a bank - interest rates are either fixed or lenders bid for a loan based on their preferred rate

Cons

  • You have to submit accounts and go through credit checks and provide a personal guarantee
  • Interest rates may be higher than a bank if you can't prove your credit-worthiness

Equity options

Equity could be a good option if you don’t have the credit history to borrow through other means, or if you're an ambitious start-up with smaller up-front funds.

  • Angel investors are individuals, often successful entrepreneurs, who invest in early stage or start-up companies.
  • Venture capital (VC) companies invest other people’s money so usually want a proven investment. They invest at different stages in a company’s growth with more money being available for larger companies.
  • Corporate venture capital is provided by an established company looking to invest its own money. They tend to invest in a start-up in the same industry, to keep ahead of industry developments.
  • Equity-based crowdfunding platforms let you sell a stake in your business. Some global crowdfunding sites give investors the finished product you’re making, in exchange for their contribution.

Pros

  • Angel investors usually invest their own money, so may be prepared to take more risks
  • The venture capitalist or angel investor will not expect repayment if your company fails
  • Equity can help your export business grow quickly, offering experience, advice and connections

Cons

  • Private equity companies will want a share of your business, and in some cases control of your company
  • Venture capital companies will usually want evidence of proven investment, and may only back larger companies
  • Pitching and raising funds can be arduous and time consuming

UK Export Finance

UK Export Finance (UKEF) is the UK government’s export credit agency. It support exports from the UK by guaranteeing loans and financial products to UK exporters and their suppliers. It also offers finance to overseas buyers of UK goods and services.

This option may be suitable if you’re exporting to an emerging market with a high-risk profile.

Pros

  • Loan is guaranteed by UK government – reassuring for you and your buyers
  • Covers high-risk markets which others will not

Cons

  • Generally only suitable for larger businesses and larger orders
  • Restricted to certain markets - UKEF doesn’t cover the US and Europe

Get expert advice

You might want to Contact UKEF to find out more about their services and talk to an adviser.

Whatever funding route you choose, talk to your financial adviser or accountant before you apply. They may have valuable experience and tips which can help you get the best result out of any applications, pitches or funding conversations.

Get the details right. Funding organisations receive many applications daily, and you might be rejected straight away if you don’t provide what’s asked for. Check out potential funding partners thoroughly – lack of due diligence can cost.

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