A 90 per cent gurantee given directly by the export credits guarantee department to an exporter's bank against the non-repayment of advances (or discount facilities given) by the bank to the exporter, against goods shipped and accepted by the buyer. These guarantees are given as an alternative to direct export credit insurance with the Department, where the exporter wishes to obtain immediate finance from his bank. This finance takes the form of, say, 10 per cent on shipment and 80 per cent spread over the credit period. The guarantees only apply to amounts over £100,000, or for credit periods of over three years. In other circumstances, the Department's cover against credit risks is limited to 85 per cent. and finance provided would probably not be guaranteed. For this reason, exporters may. in these instances, find difficulty in obtaining funds. The gap has been filled by institutions such as Exports Re-finance Corporation. The Department's cover is still required, but the institution assumes financial responsibility. It hands over down payments received from the buyer, and may make advances to the exporter, within fifteen days of shipment, of 85 per cent of :he balance due. Obviously it makes a charge in addition to the Department's charge.
|Reference: The Penguin Business Dictionary, 3rd edt.|