A Reference Guide to Trade Finance TechniquesCase study
Using the UK Export Finance Bond Support Scheme and a
letter of credit to fulfil an export contract
Cambridge Glasshouse is a UK producer of commercial glasshouses, retail
structures and associated equipment. As a medium-sized business, it needed
both financial backing and guidance when it won its largest-ever contract, a
USD 13 million project in Qatar.
Steve Hinch, Cambridge Glasshouse’s
Financial Director, wanted to obtain
working capital finance from a
USD 2.6 million advance payment. (An
advance payment is sometimes held by
a bank as security.) He worked with his
bank, NatWest (part of RBS Group), to
access an advance payment guarantee
under the UK Export Finance’s (UKEF)
Bond Support Scheme. Under the
terms of this guarantee, UKEF provided
security to Cambridge Glasshouse’s
bank for 80% of the value of the advance
payment. The bank guided Hinch and
his team through UKEF’s application
process, and then approached the
buyer’s bank in Qatar to negotiate
the terms of the bond. As a result, the
bank was able to provide Cambridge
Glasshouse with USD 1.8 million of
working capital finance.
Cambridge Glasshouse also used its
bank to maximise the benefits from the
approximately USD 10 million letter
of credit the buyer’s Qatari bank had
opened in the company’s favour. First,
NatWest confirmed the letter of credit in
the UK, removing the risk of non-payment.
Second, the bank provided additional
working capital finance by accelerating
the release of funds to Cambridge
Glasshouse. Instead of having to wait the
full 45-day credit period from the date of
shipment, the bank advanced the funds,
less a discount and without recourse, from
the date of shipment. Finally, the bank’s
specialist document preparation team
worked with Hinch and his team to ensure
there were no discrepancies when they
had to present documents under the terms
of the letter of credit.
‘Working with our bank was crucial to
the success of this project,’ says Steve
Hinch. ‘They both helped us to navigate
the complex process to access UKEF
support and provided additional working
capital. Their support was also vital when
it came to preparing the documents
required under the letter of credit. As a
medium-sized business, we did not have
the expertise in-house. Using the bank’s
specialists saved us time and eliminated
the very real risk of non-payment under
the letter of credit.’