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