Export contracts can require performance, advance-payment or other bonds, and banks often ask the exporter to provide cash collateral or use part of an existing facility to support them. UKEF's Bond Support Scheme can guarantee up to 80 percent of the bank's risk, helping release working capital for the exporter.
UKEF can guarantee up to 80 percent of the bond value
Current UKEF guidance says the Bond Support Scheme can provide a guarantee covering up to 80 percent of the value of an eligible bond issued or supported by the exporter’s bank.
The bank remains the bond provider and the exporter remains liable to reimburse the bank if the buyer calls the bond under the agreed terms.
The scheme can support several export-related bonds
Export contracts can require bid, performance, advance-payment, retention or warranty bonds depending on the buyer and project.
Check with the bank and UKEF whether the specific instrument is eligible. The scheme is designed around export obligations rather than general domestic guarantee needs.
The main benefit is releasing cash collateral and bank headroom
A bank can otherwise require the exporter to place substantial cash on deposit to secure a bond. UKEF's guarantee can reduce the bank's net exposure and may allow it to require less collateral.
That cash can then fund labour, inventory and delivery of the export contract instead of sitting blocked at the bank.
There is no general maximum bond value or minimum term in the scheme guidance
GOV.UK says the scheme has no maximum value for each bond and no maximum or minimum term for the UKEF guarantee, subject to eligibility and underwriting.
The absence of a scheme cap does not mean the exporter has unlimited bank capacity. The bank still decides its facility and credit terms.
Model bank fees, UKEF premium and bond utilisation
The exporter can face bank issuance fees, facility charges and UKEF-related pricing through the supported transaction. Compare the cost with the working capital released.
A bond using little collateral may not need public support, while a large advance-payment bond can tie up enough cash to justify the scheme.
Approach the bank and UKEF before the bond deadline
Bond support needs eligibility review and lender participation. Exporters should discuss the requirement during bid or contract negotiation rather than after the buyer's bond deadline arrives.
Prepare the export contract, bond wording, amount, expiry and evidence of UK export activity for the application.
Worked example: a buyer requires a £5 million performance bond and the bank would normally ask the exporter to secure the full exposure against cash or facility headroom. An 80 percent UKEF guarantee can materially reduce the bank's uncovered risk, potentially freeing several million pounds for project delivery depending on the bank's credit decision.
Keep every supported bond in the treasury register with issue date, beneficiary, amount, expiry and released collateral. A bond that expires but remains shown as outstanding can make the exporter appear to have less banking capacity than it really does.
Review bond wording carefully before issue. UKEF support protects the bank against exporter default on reimbursement; it does not make an unfair or overly broad buyer demand harmless to the exporter.
Use the scheme when collateral pressure is the real constraint. If the exporter already has ample unused guarantee lines and no cash collateral requirement, UKEF support may add cost without solving a bottleneck. Treasury should quantify the working capital released by the guarantee.
Track called bonds separately from ordinary debt. If a buyer makes a valid call and the bank pays, the exporter can owe reimbursement to the bank under the facility. The exposure then moves from contingent to funded debt and can create an immediate liquidity event.
Include bond expiry in bid pricing. Long warranty or retention periods can keep banking capacity tied up for years after the main contract is complete. The commercial team should understand that a "small" bond percentage can still have a long treasury cost.
Review each bond's beneficiary wording and governing law before bank issuance. A bond can be payable on first demand with limited documentary conditions, creating a different risk from a performance instrument requiring evidence of default. UKEF support does not change the commercial call risk written into the bond itself.
Where several bonds support one export project, track aggregate exposure. Bid, advance-payment and performance bonds can overlap, using more facility capacity than the headline contract percentage suggests. Treasury should show the total contingent exposure by project.
Keep UKEF-supported and unsupported bond lines separate in the bank facility register. This helps management see how much ordinary guarantee capacity remains available for domestic projects or export bonds that do not qualify.
Editorial Verdict
The Bond Support Scheme can turn export-bond requirements from a working-capital drain into a more manageable bank exposure by guaranteeing up to 80 percent of eligible bond value.
Use it early in contract planning, compare total cost with cash collateral and keep bond expiry under control. The exporter still carries the commercial obligation if a bond is called.
Sources
- GOV.UK, Bond Support Scheme: https://www.gov.uk/guidance/bond-support-scheme-overview-and-how-to-apply
- UK Export Finance, Bond Support Scheme: https://www.ukexportfinance.gov.uk/products-and-services/bond-support-scheme/
- Business.gov.uk, UK Export Finance: https://www.business.gov.uk/get-finance/