Finance for exports into the EU

Your checklist

Set your export budget

While doing business in Europe shouldn't present the same risks that can be seen in markets further afield, it's important to be aware of the financial implications of operating overseas – from payment terms to currency considerations and tax.

The export budget within your export plan should set out all the costs you are likely to incur in entering and developing your selected EU markets.  

Your budget should also take into account when you are likely to receive payment for your goods and services from the EU markets. This will allow you to manage your company cash flow and identify any export finance needs. 

In the short term, your company will likely have a number of additional upfront costs, such as marketing and sales costs, delivery costs, and any product or service adaptation required for EU markets.

Understand the role of export finance

Export finance can support your company by helping you meet any upfront costs in developing sales to EU markets, helping improve cashflow and working capital available to you company, and helping you receive payment earlier for completed sales. 

Export finance can also help you to offer better payment terms to your EU customers and so make you more competitive in the market.

Alongside discussing your export finance options with your bank (which may offer tailored finance options for exporters), your company may qualify for government-backed finance through UK Export Finance (UKEF).

As the UK’s export credit agency, UKEF can issue loans, guarantees and insurance policies to help you offer competitive terms to your buyers in Europe while managing your cash flow and payment risks. 

Most of the companies UKEF supports are small or medium-sized, but it supports exports for any size of company and across all sectors. 

Support may also be available from Exporting is GREAT partner companies and organisations in terms of export finance options. 

Ensure payment for your goods and services

There are a range of payment options for selling your goods into European markets. You'll want to:

  • Ensure you are competitive in the market
  • Generate the required cash flow 
  • Minimise the risks of any non-payment for goods or service

But how do you decide the best approach for your company? 

  • You need to make sure your export buyer is creditworthy
  • Decide if you'll put in place credit terms for your EU customers, and
  • Which currencies you will accept payment in

Ideally most companies prefer advance payment in sterling, but this is not always possible or acceptable to your EU customers.

Many buyers will accept payment against a pro forma invoice from a small supplier, but if credit terms are required you may want to reflect this in your export price. Remember your final export price and payment terms will also be determined by the Incoterm applied within your export contract.

Get advice on export payment methods and credit insurance from your bank, and Insurance broker, UK Export Finance and the Scottish Chambers of Commerce.

Credit insurance protects you against the risk of not being paid, or of not being able to recover the costs of fulfilling an export sale. 

Merchant services specialists can also provide advice and systems, such as credit and debit card payment, or online and point of sale payment.

Letters of credit are not commonly used in Europe as they can be complex. They do, however, provide additional security for exporters in terms of security of payment, when a large export order is involved, and the company has not dealt with the export buyer previously.

Read through our finance tips for EU markets

1. Plan ahead and think about future trading in the market 

For example, do your business to consumer (B2C) price points contain sufficient margin to allow for a future trade discount without impacting adversely on your cash flow?

2. Set minimum order quantities

If you're selling business to business (B2B), and using price discounting, it's advisable to set minimum order quantities (or quantities at which further discount applies) for trade customers in relation to practical ‘break points’ e.g. in carton size / weight / shipping costs.

3. Manage exchange rate fluctuations 

If quoting/pricing in the local export market currency, you need to be aware of and manage exchange rate fluctuations and risk; and ideally establish a Euro bank account to manage European market payments.

4. Factor in payment/credit terms

For cash flow purposes, make sure you are aware of, and factor in the normal payment terms or credit periods for goods in each export market, which can differ significantly between EU markets.

5. Credit check your customers

Make sure that any export customer is creditworthy before offering any credit terms. A wide range of financial information is available from credit information agencies and major credit insurers, or through our free international market research service.

Are you eligible for financial support?

We can also offer support for different elements of your export activity to EU markets – including small grants to adapt your product or service for EU markets, support to attend exhibitions and visit markets, or support for an export resource for your company. 

Get the right support and advice

Discuss your technical and general market research needs for the EU with one of our export advisers or your Scottish Enterprise/SDI account manager (if you have one).

If you've explored these resources but still need answers, then get in touch, we'll be happy to help out.

Contact us

Got any questions about EU opportunities or expanding in new markets? Our export advisers are here to help.

Disclaimer

All information provided on this web page is for general guidance only. The contents of this guide have been provided by our training partners, Upper Quartile. Upper Quartile is not affiliated with any of the third parties or listings represented on our website. Third party listings are drawn from public domain and industry body data sources. Due diligence on a given third party or listing remains the exclusive responsibility of the end user. Whilst every effort is made to ensure the accuracy of the details represented, Upper Quartile and Scottish Enterprise cannot endorse, recommend or accept responsibility for any transactions conducted between the user and a given third party or listing provided on this web page.