international trade 37


Knowledge – the key for exporters


Export markets are under the spotlight at the moment with Britain needing an international trade boost to offset difficult and sluggish domestic conditions. According to Lloyds TSB’s Business in Britain survey earlier this year almost half of UK firms expected to boost exports over the coming six months. David Squibb, regional trade director, Lloyds Bank Corporate Markets, discusses the key issues corporates need to consider when looking to export


In the south east, exporting is more common with many companies already exporting their expertise, skills and market leading products around the world. For those companies who haven’t yet dipped their toes into international waters, exporting will be the most likely route to growth as new markets open up.


Understanding your market


Venturing into new markets does, of course, bring additional challenges and understanding the way business operates in your target markets is key. Being aware of licensing and regulatory requirements between markets is equally important.


Exporting can bring additional logistical, contractual and resource challenges, not to mention increased strain on working capital. However, the government’s desire to have an export-led recovery means there are a number of new schemes available to help banks provide the additional support exporters need. The ‘Export Working Capital Scheme’ and the ‘Bond Support Scheme’ are two new schemes that see banks working alongside the Export Credits Guarantee Department (ECGD) to offer support for specific export contracts in excess of £1million, or bond requirements in excess of £1m.


The bond scheme has particular relevance for the supply of capital goods as increasingly companies in places like India, Brazil and the Middle East are requesting Bid Bonds and/ or Performance Bonds as standard. The ECGD application process is fairly prescriptive so speaking to your bank’s Trade Finance specialist at the earliest possible opportunity and making sure they are ready to support your strategy is critical.


Tracking costs


It is essential to make sure that you have factored in all associated costs when striking an export deal, such


THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2011 www.businessmag.co.uk


as the costs of the chosen payment instruments, bond or guarantee issuance costs and not forgetting interest costs from extending credit terms. Transport costs have risen sharply as oil prices increase and it is quite possible to see profit margins eroded by these additional costs if not managed from the outset. Adverse currency exchange movements can also erode profit margins so it’s also wise to discuss the best ways to protect margins with your bank early in the process.


Mitigating risks


In the current global economic climate both parties are looking more and more at ways of mitigating the additional risks inherent in trading cross-border, hence the rise being seen in requests for bonds and other similar risk management tools.


Documentary credits, for example, are one tool which can help deliver both certainty of payment and improve working capital management for the exporter. Documentary credits are internationally-recognised undertakings from banks that guarantee payment to the exporter upon presentation of documentary evidence that the terms and certain conditions have been met. An exporter insisting on receipt of a documentary credit addresses payment risk at the outset and in addition opens up the possibility of pre-shipment and post-shipment finance to assist working capital.


Despite the additional challenges of exporting, south east companies can make good use of all the knowledge and support available to take advantage of the potential growth opportunities that export markets offer.


David Squibb


Steve Clarke


To discuss your trade finance or general funding requirements see details below.


Details: David Squibb 0118-9196562, david.squibb@lloydsbanking.com or Steve Clarke, area director 07920-207685 steve.clarke@lloydsbanking.com


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