Government Launches £5 Billion Export Financing Scheme

ERF Unveiled To Support Small Businesses

01.05.2014

Fergal Dowling, Partner | +44 (0)121 214 5476

SMEs can now apply for loans from the government's £5 billion Export Refinancing Facility (ERF), which is designed to provide exporters with help by enabling overseas buyers to purchase capital goods and services.

The fund will mean firms which can identify the best opportunities in emerging markets can secure loans worth up to £50 million, enabling overseas buyers to access debt capital markets, so they can refinance the export finance loans initially provided by banks.

It is intended to help major projects like infrastructure building to take place and put projects on a long-term financial footing.

The initial loans will be funded by the issue of new bonds by UK Export Finance, which will also act as the lender in instances where SMEs cannot secure refinancing for the loans, a role it will perform until alternative finance can be accessed.

Among the pioneering elements of the scheme will be the fact this is the first time civil project finance has been supplied by an export credit agency.

Commenting on the launch, trade minister Lord Livingston said: "Increasing UK exports and giving UK exporters the support they need is key to our long-term economic plan to promote sustainable growth.

"The Export Refinancing Facility will help British firms succeed overseas by lowering the cost of finance for buyers who choose UK companies for their major projects."

ERF, which was announced in the Budget in March, is one of several new measures introduced by the government in a bid to bolster British exporters. Other announcements in chancellor of the Exchequer George Osborne's speech included the creation of the £3 billion Direct Lending Facility. Designed to back up the ERF scheme, this will become operational at the end of June 2014. 

The ERF scheme has been developed with the help of professional services body KPMG, whose director of corporate finance Jeremy Barker said it "will put the UK in the frame for major overseas projects" when used in conjunction with the other Budget measures.

Expert Opinion
So many UK businesses, regardless of their size, are aware of the huge benefits which could emerge if they look to export goods and services abroad. This new Government initiative could prove to be a useful tool for those with their eyes set further afield than the UK and provide welcome finance at a time when research suggests it remains difficult for SMEs to access it.

"Considering finance to export is a complex issue and it is vital that small businesses seek legal advice at the earliest opportunity to ensure they not only benefit from such funds but also meet all of their responsibilities from a compliance point of view."
Fergal Dowling, Partner