Quick guide for exporters to the Bond Support Scheme
This page is about UK Export Finance's Bond Support Scheme and it explains what it is, how it works, its benefits, its key features and how to apply for the facility.
What is the Bond Support Scheme?
Under the scheme we provide partial guarantees to banks under a master bond support agreement in respect of UK exports. Where a bank issues a contract bond (or procures its issue by an overseas bank) in respect of a UK export contract, we can typically guarantee 50 per cent of the value of the bond and up to 80 per cent for advance payment and progress payment bonds.
How does it work?
How does it work if a local bank is required to issue bonds?
What are the benefits of the Scheme?
The benefits are:
- the guaranteed bank is able to issue the bond (or procure its issue by an overseas bank) even if it doesn’t have sufficient risk appetite on the exporter for the full amount;
- the bank receives a guarantee from us to cover the percentage of the amount due to it if the exporter fails to reimburse the bank following a call being made on the bond by the buyer;
- the bank can, for the duration of our guarantee, increase its risk appetite for the exporter;
- for advance payment and progress payment bonds, the bank can increase the amount of working capital available to the exporter.
Risks covered
The guaranteed bank is protected against the failure of the exporter to reimburse it under its counter-indemnity if a bond is called and the bank is obliged to pay the beneficiary (buyer).
Eligibility
The following criteria must be met:
- the guaranteed bank should normally be incorporated in an EU or OECD country and be regulated by a regulator acceptable to us;
- the exporter must be carrying on business in the UK;
- the bonds required should normally have a value of more than £1m but under no circumstances may it be less than £25,000; and
- the export contract must have a minimum of 20% UK content.
(Note: for bonding requirements under £1m, the Department for Business Innovation and Skills (BIS) Export Enterprise Finance Guarantee (ExEFG) Scheme may be more appropriate. However, UK Export Finance will consider any applications that cannot benefit from support under the ExEFG.)
Maximum amount
There is no maximum value for each bond, although the total value of bonds to be issued under each export contract should usually be greater than £1m. Under no circumstances may it be less than £25,000. We will typically guarantee 50 per cent of the full value of a bond, but for advance payment, progress payment or other cash-related bonds, we may guarantee up to 80 per cent of their value.
Guarantee period
There is no maximum or minimum term for a guarantee. We will look at each case on its merits.
Cost
The guaranteed bank pays us a guarantee fee, which is typically a proportion of the fee which the bank receives from the exporter for issuing (or procuring the issue of) the bond in question.
How to apply
Exporters should not contact us directly. The scheme can only be accessed through banks that have signed up to participate in the scheme. You can find a full list of UK participating banks via the link on the right hand side of the page.
Disclaimer
The information available in this brochure is not intended to be a comprehensive description of our bond support scheme and many details which are relevant to particular circumstances may have been omitted. When considering applications from participating banks, UK Export Finance will look at each case on its merits. The brochure was last updated in September 2011.
