What does it take to trade overseas? An interview with Counterline

‘We’re a small SME manufacturer on a business park in Merseyside trading with some massive blue-chip organisations around the world. It just gives tremendous satisfaction to know we’ve been able to develop customers like that.’

‘Initially the challenge was building a reputation overseas by spending time on the ground, building relationships. Beyond that, the challenges are financial. As an owner-managed SME, we rely solely on our own re-investment and the support of our bank. Our UK work is credit-insured, but trading abroad brings very different problems around credit exposure and working capital. 

‘I think a lot of businesses would say – ‘we know there’s potential customers out there for us’, but when you look to trade overseas the initial fear is – am I going to get paid? And, depending on the nature of the project, is the cash flow there? This could be due to long shipment periods and extended payment terms requested by our overseas customers. If we’re trading in the Middle East, the product is on the water for 4-5 weeks. They don’t consider that you’ve delivered the product until it arrives in the port. And then there’s customs procedures and potential delays. So, the customer needs some credit as well.  These two issues – the working capital demand and the credit risk itself – are massive factors in businesses choosing to export. 

‘Our customers in the Middle East are often large retailers who are carrying out a store refresh or a new site-build. Individual projects can be significant in size for us, with a much longer manufacturing period compared to the contracts we complete in the UK. The challenge for us is to make sure we get paid and to fund our suppliers and labour force during the longer manufacturing period.’

‘We did have some experience of Letters of Credit, but initially we weren’t aware of the wider support our bank can provide to exporters. It was talking to our relationship manager, Angela, and then to Rhys in the Trade Finance team that made the difference. 

‘About two and half years ago we started to get offered larger contracts abroad, with manufacturing times that could span up to eight weeks. So, we picked up the phone and together with Rhys we started exploring the finance options that could help. 

‘Once we understood the scope and flexibility of the financial support available, it gave us the confidence to believe we can explore different markets and make these contracts work.’

‘Angela and Rhys supported us to receive Export Letters of Credit from our international customers’ banks. This meant we had certainty of payment from these banks, pre-shipment, providing we met the agreed terms. It also gave us cash flow support, as we could discount the letters of credit if we needed to. But on our large contracts, that still left us with a working capital gap, so Rhys helped us arrange for a Trade Loan. In fact, we’re just in the middle of our second trade loan.

‘These loans allow us to fund the manufacturing period – so if it takes us 8 weeks to build a £300k counter product, we get funding for our supply chain and direct labour during that process. And that cashflow support sits with us until the point of time that we can get paid under the letters of credit. ‘

We were very happy with the flexibility given to us in our recent Trade Loans. Merging several large projects under one loan backed by individual letters of credit with different foreign banks was a challenge. 

Rhys was able to come up with a solution to make this work. So, I would just say that all businesses are different and to continue with a flexible approach to Trade Finance. 

There’s no doubt that our major export customers now have confidence in our ability to deliver quality products on time and to fit in to their wider programme. We’ve built up a relationship that allows us to draw up documentary credits quite easily with their teams.  

And knowing the finance options available makes things easier when we’re talking with customers. It gives us the confidence that we can match their aspirations from a financial perspective and pay our own people and suppliers – and that’s a massive help. 

“Our plan is to continue to expand our product range and develop more energy efficient products. We’re using different refrigerant gasses, and we’re trying to use sustainable materials, so the energy usage of some of our products, compared to a few years ago, is much better.

We’re driven by the desire to stay ahead of consumer trends and use the new technology available to us. New export markets will remain at the heart of what we do.”

“There are great opportunities for UK companies to export, and most overseas buyers are keen to talk. We’ve found there’s a lot of respect for UK manufacturers in other countries. 

There is, of course, a learning curve and progress can be slow at times as relationships are built. But it’s very rewarding and new markets allow us to spread risk and reduce reliance on domestic trade. 

Understanding the support available from your bank should remove many of the traditional worries about getting paid. If you believe there’s potential for you to start exporting, I’d say pick up the phone to your relationship manager or reach out to the Trade Finance team and find out more about the support they could offer.”