How UKEF buyer credit facility works

A UKEF buyer credit facility is a guarantee provided by the United Kingdom's export credit agency to a bank or financial institution making a loan to an overseas buyer. The overseas buyer uses the loan to purchase capital goods or services from a UK exporter. The exporter receives payment upfront, whilst the buyer repays the bank over an agreed period of at least two years.

What the buyer credit facility guarantees

Under a buyer credit facility, UKEF does not lend directly to the overseas buyer. Instead, the agency guarantees a loan made by a commercial bank or other eligible lender. The guarantee covers the risk that the buyer may default on repayment. This guarantee allows lenders to extend credit to overseas buyers at terms they might not otherwise offer, permitting UK exporters to compete in markets where financing is a prerequisite to winning contracts.

The guarantee covers up to 85 per cent of the contract value. The overseas buyer must contribute a minimum down payment of 15 per cent of the contract value directly to the exporter, with the remaining 85 per cent financed through the guaranteed bank loan.

Minimum transaction size and repayment period

The buyer credit facility applies to export contracts with a minimum value of £5 million. The loan must have a repayment period of at least two years, though longer tenors are common depending on the asset being financed and the buyer's creditworthiness.

UKEF permits loans to be denominated in more than 60 currencies, removing foreign exchange risk to the buyer where required.

Interest rates and fixed versus floating terms

Borrowers may arrange loans at either fixed or floating interest rates. The choice depends on the lender's preference and the buyer's risk appetite. UKEF does not set interest rates; these are negotiated between the lender and the buyer and are influenced by market conditions, the buyer's creditworthiness and the OECD country risk classification.

Premium: the cost of UKEF guarantee

UKEF charges a premium for the guarantee, which is determined on a case-by-case basis and reflects factors such as the buyer's credit profile, the country risk classification of the buyer's nation, the tenor of the loan, and the sector in which the exporter operates. UKEF provides a premium indicator tool for transactions where the buyer is a sovereign entity. UKEF provides indicative premium rates on request for transactions with private or public non-sovereign buyers.

Eligibility and compliance requirements

To access the buyer credit facility, several conditions must be satisfied:

The exporter must be a UK-registered business. The contract must be for capital goods (plant, machinery, vehicles) or services (engineering, technical expertise, project management) sourced from the UK. The lending bank or financial institution must be acceptable to UKEF. The transaction must comply with UKEF's foreign content policy, generally requiring at least 20 per cent of contract value to represent UK goods or services.

The exporter and all parties to the transaction must comply with UK anti-bribery and anti-corruption legislation and pass UKEF's environmental and social due diligence assessments. The buyer's country must not be subject to trade sanctions or export restrictions imposed by the United Kingdom government.

How upfront payment to the exporter works

Under a buyer credit facility, the exporter receives payment once the financial arrangement is in place and the buyer's down payment is deposited. The exporter does not wait for the buyer to repay the bank loan. This structure removes the exporter's need to carry financing receivables, whilst transferring the credit risk to the lender (backed by UKEF's guarantee) and the buyer.

Relationship to other UKEF products

UKEF also offers a Standard Buyer Loan Guarantee, which operates on the same principle but serves smaller and simpler transactions. Additionally, UKEF provides a Direct Lending Facility through which the agency itself provides loans of up to £200 million per transaction, bypassing private sector intermediaries where commercial finance is unavailable at acceptable terms.

When to use buyer credit versus supplier credit

The buyer credit facility differs from a supplier credit structure. In supplier credit, the UK exporter (or a bank assigned the exporter's receivable) finances the buyer directly, with UKEF providing insurance against default. In buyer credit, a bank lends to the buyer on UKEF's guarantee. Buyer credit is typically preferred for larger transactions or where the exporter lacks appetite to carry financing risk, whilst supplier credit suits exporters who can manage the receivable or who operate with established lenders in particular markets.