ECGD Revamp is Good News for Small Exporters, but Education is Key to its Success Says Cashflow UK

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Extension of the state-owned Export Credits Guarantee Department’s (ECGD) product portfolio is a positive step, but promotion will be key for exporters to really benefit.

Cashflow UK factoring brokers

Cashflow UK is a leading invoice finance brokerage offering impartial advice and access to over 50 invoice discounting and factoring providers.

With access to finance remaining a major challenge to small exporting businesses looking to raise capital, the level of understanding regarding the support that the ECGD can provide is highly important.

The news that the state-owned Export Credits Guarantee Department (ECGD) is adding four new products to its portfolio, and in particular the extension of its existing short-term insurance product, the Export Insurance Policy (EXIP), to a wider group of exporters, has been welcomed by businesses and intermediaries alike.

These plans, announced by business secretary Vince Cable this month, reveal the scope of the EXIP, which had previously only been available for capital and semi-capital goods, will be extended to provide support to finished manufactures and intermediate goods. Although the ECGD will not usually cover clothes, consumables, foods and other perishable goods, if exporters cannot get cover from the private sector it will consider offering support on a case-by-case basis.

Under the new procedures, the ECGD will be empowered to provide credit insurance to cover small deals involving the export of goods worth as little as £100,000. This addresses an apparent gap in the provision of cover against the risk of non-payment by creditworthy buyers on single transactions in emerging markets meaning SME exporters in particular could benefit.

The move, which marks the reversal of a 20-year drive to remove state-owned bodies from providing short-term credit insurance to small exporters, will ensure that more transactions are underwritten which in turn will give funders comfort that the debt is insured and agree funding accordingly. Generally speaking, the EXIP will bring more liquidity to the export finance market while giving small businesses more choice in terms of the range of funding options available to them.

However, it is clear the Government could be doing a lot more to promote this, according to a recent poll by the British Chamber of Commerce (BCC). Of 8,000 small companies surveyed, only one third had ever heard of the ECGD, while only one in 10 export companies had ever applied for or used its services.

Andrew Bullard, head of business at leading invoice discounting and factoring broker Cashflow UK, highlights the importance of bridging the knowledge gap when it comes to funding options for small exporters: “With access to finance remaining a major challenge to small exporting businesses looking to raise capital, the level of understanding regarding the support that the ECGD can provide is highly important. I would urge the Government and intermediaries to ensure those small businesses looking for funding are made aware of the changes to the ECGD alongside every possible benefit of the EXIP.

“The fact that so many businesses appear to have a very limited understanding of how EXIP can help them get funding highlights the challenging environment in which intermediaries are operating. There is no doubt that independent advisors play a key role in bridging this knowledge gap and educating today’s business leaders.

“Small businesses are the engine room of this country’s economy and the fact that so many owners and managers are now using their own initiative to set up their business and help kick-start the economy again goes to show that sometimes, hard times can be turned into an opportunity. What is important now is that these budding firms are fully supported and in a position to seize new opportunities and grow.

“We hope that small exporters and intermediaries alike embrace the changes to the ECGD, which in turn will help to lift the UK’s export efforts and ultimately deliver an overall boost to the economy during a potentially difficult period.”

Cashflow UK is a leading invoice finance brokerage specialising in factoring and invoice discounting. Its specialist team of financial experts are able to offer impartial advice and find the finance solutions from over 50 providers.

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