Guidance

Letter of Credit Guarantee Scheme

The Letter of Credit Guarantee Scheme - how it works, its benefits, eligibility and how to apply.

Overview

Where a UK bank adds its confirmation to a Letter of Credit issued by an overseas bank to finance an export from the UK, we can typically guarantee between 50% and 90% of the value of the Letter of Credit.

Eligibility

The following criteria must be met:

  • the exporter must be carrying on business in the UK

  • the exports must be produced in and shipped from the UK, or imported into the UK before being re-exported

  • the foreign issuing bank must not be based in a country belonging to the European Union or certain other high income countries

  • the period for presentation of documents under the Letter of Credit must not be longer than one year

  • any deferred payment period under the Letter of Credit must be less than one year

For longer presentation or deferred payment periods we may be able to consider support outside the terms of the scheme on a case-by-case basis. Ask your bank to enquire with us.

How the scheme works

How the Letter of Credit Guarantee Scheme works

How to apply

Contact your local export finance manager to discuss how UKEF can support your business.

Benefits of the scheme

The benefits are:

  • the UK bank is able to confirm a Letter of Credit for the full amount where it doesn’t have risk appetite on the foreign issuing bank

  • the UK bank receives a guarantee from us to cover the percentage of the amount due to it if the foreign issuing bank fails to reimburse payments

  • the exporter is protected against a default of the foreign buyer and the foreign bank

Risks covered

The UK confirming bank is protected against the failure of the issuing bank to reimburse it for payments properly made by the confirming bank under the Letter of Credit.

Maximum credit amount

There is no minimum or maximum value of a Letter of Credit.

Cost

The UK confirming bank pays us a guarantee fee, which is typically a proportion of the fee it receives for confirming the Letter of Credit.

Disclaimer

The information available in this brochure is not intended to be a comprehensive description of our Letter of Credit guarantee scheme and many details which are relevant to particular circumstances may have been omitted.

When considering applications from UK confirming banks, we will look at each case on its merits.

This information was last updated in March 2017.

Published 23 April 2013