The UK's export credit agency says its support for businesses reliant on letters of credit (L/Cs) to finance their operations has helped firms meet the challenges of the Covid-19 pandemic.

One firm that benefited from such support from UK Export Finance (UKEF) is London-based jewellery distributor TLKE. It works with brands such as Ralph Lauren and DKNY, distributing jewellery across Europe to markets including Germany and Poland

Cornerstone L/Cs

A cornerstone of TLKE's business model is L/Cs with its supplier in the US that allow the UK-based distributor to bring in and sell stock before they need to submit payment.

But as the pandemic hit, TLKE almost lost the ability to underwrite these L/Cs, meaning it was at risk of either losing its stock or taking on significant amounts of debt without more flexible financing.

Protecting supplier relationships

The jewellery distributor managed to access the financing it needed under UKEF's General Export Facility (GEF), allowing the business to protect its relationship with its supplier.

The GEF provides partial guarantees to banks to help UK exporters gain access to trade finance facilities.

UKEF support

Through GEF, the government can support contingent obligation facilities such as L/C lines and cash facilities such as trade loans valued up to around £25 million (US$34 million) with maximum repayment terms of up to 5 years.

For TLKE, the GEF provided an 80 per cent loan guarantee that backed £300,000 in finance from HSBC .

Additionally, TLKE received short-term financing support through the UK government's Coronavirus Business Interruption Loan Scheme during the pandemic.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.