Get paid for your exports

Getting paid is one of the biggest challenges when exporting. The right payment method and finance options reduce your risk and help win contracts.

Payment methods for exports

Choose your payment method based on how well you know the buyer and the level of risk you can accept.

Export payment methods comparison

Risk comparison of payment methods for UK exporters, from most secure to least secure.

Payment in advance: Lowest risk - Payment before shipping. Best for new/high-risk buyers
Letter of credit (L/C): Low risk - Bank guarantees payment. UCP 600 rules apply globally
Documentary collection: Medium risk - Bank collects payment, no guarantee. D/P or D/A terms
Open account: Highest risk - Goods delivered before payment. Net 30/60/90 days

Choosing the right method:

Payment in advance - Use for new customers, high-risk countries, or where buyer understands risk
Letters of credit - Standard for high-value exports and new relationships
Documentary collection - Cheaper than L/C for established relationships in stable markets
Open account - Only for trusted customers with good payment history (consider credit insurance)

Contact a UKEF Export Finance Manager for free advice on payment methods.

Find an Export Finance Manager

Letters of credit

The most secure method after payment in advance. A bank guarantees payment if you meet the documentary requirements.

Letters of credit and UCP 600 rules

How letters of credit work under ICC UCP 600 international rules.

Governing rules: ICC Uniform Customs and Practice (UCP 600)
Global coverage: 175+ countries
Effective since: 1 July 2007
Document examination: 5 banking days under UCP 600
Typical bank fees: 0.5% to 2% of L/C value (varies by bank)

Types of letter of credit:

Irrevocable - Cannot be cancelled without all parties' agreement (most common)
Confirmed - Second bank adds its guarantee (for unstable countries)
Standby - Backup payment if buyer defaults
Transferable - Can be transferred to another beneficiary

Required documents typically include:

Commercial invoice
Bill of lading or transport document
Packing list
Certificate of origin (if required)
Insurance certificate (for CIF/CIP terms)

Critical: Documents must match L/C terms exactly. Minor errors can delay payment.

International Chamber of Commerce

Documentary collections

A cheaper alternative to letters of credit for lower-risk situations.

Documentary collections (D/P and D/A)

How documentary collections work for export payments under URC 522 rules.

Governing rules: ICC Uniform Rules for Collections (URC 522)
D/P (Documents against Payment): Documents released only when buyer pays (sight draft)
D/A (Documents against Acceptance): Documents released when buyer accepts bill of exchange (30/60/90 days)
Bank role: Collects payment - does NOT guarantee payment
Cost vs L/C: Cheaper and faster than letters of credit

How documentary collection works:

Exporter ships goods
Exporter sends documents to their bank (remitting bank)
Remitting bank forwards documents to buyer's bank (collecting bank)
Collecting bank notifies buyer documents are available
Buyer pays (D/P) or accepts draft (D/A) to receive documents
Payment remitted to exporter

D/P vs D/A risk: D/P is safer (payment before documents). D/A gives buyer goods before payment - higher risk but may win more business.

Best for: Established relationships in stable markets where L/C is too expensive or buyer refuses L/C.

Protecting against non-payment

Trade credit insurance protects you if a buyer cannot or will not pay.

UKEF Export Insurance Policy

Government-backed insurance protecting exporters against buyer non-payment.

Coverage level: Up to 95% of contract value
Minimum UK content: 20% (including profit margin)
Small Export Builder initial limit: GBP 25,000
Small Export Builder maximum: GBP 100,000 (grows with track record)
Application cost: Free to apply

What's covered:

Buyer insolvency or bankruptcy
Buyer payment failure
Early contract termination before shipment
Political events preventing export (war, import restrictions)

What's not covered:

Losses from unresolved disputes
Cargo/shipping damage (separate insurance required)

Eligibility: UK-based business, buyer in UKEF-covered country, 20% minimum UK content, unable to obtain private sector insurance.

UKEF Export Insurance Policy

Trade credit insurance providers

Private and government options for insuring export payments.

Allianz Trade (Euler Hermes): 31% global market share - largest provider
Atradius: 22% global market share
Coface: 14% global market share
Big three combined: 65%+ of global market
UKEF (government): Up to 95% coverage when private market unavailable

Typical coverage levels:

Commercial risks: 80-90% of loss
Political risks: 90-95% of loss

The 5-20% not covered (the 'first loss') incentivises good credit management.

Premium factors: Country of buyer, buyer credit rating, industry sector, payment terms, annual turnover insured, and claims history.

If private insurers decline: UKEF Export Insurance Policy may be available as a government-backed alternative.

UKEF Export Insurance Policy

Check your buyer's creditworthiness

Before offering credit terms, assess whether your overseas buyer is likely to pay.

Assessing overseas buyer creditworthiness

How to check if an overseas buyer is likely to pay.

Credit check methods:

Credit reference agencies - Experian, Creditsafe, CoCredo provide international reports with credit scores and recommended limits
Trade references - Ask buyer for 2-3 supplier references about payment history
Bank reference - With buyer's authorisation, contact their bank for financial standing
AEO status - Authorised Economic Operator certification indicates customs compliance and financial viability

Country risk factors:

Political - Stability, corruption, sanctions risk
Economic - GDP, currency stability, inflation
Commercial - Payment culture, legal system, contract enforcement

Creditsafe coverage: 200+ countries and territories
CoCredo coverage: 240 countries/territories
UKEF country cover: Country risk assessments at gov.uk/guidance/country-cover-policy-and-indicators

UKEF Country Cover Policy

Manage currency risk

Exchange rate movements can turn a profitable sale into a loss. Hedging protects your margins.

Currency hedging for exporters

Methods to manage exchange rate risk when exporting.

Forward contract: Lock in exchange rate for future date - most common method
Currency option: Right (not obligation) to exchange at set rate - premium cost 1-5%
Natural hedging: Match foreign currency income with costs - no transaction fees
Invoice in sterling: Transfers currency risk to buyer - may lose competitiveness

Forward contracts are most common. You agree today's rate for a transaction in 3, 6, or 12 months. No upfront cost (built into spread). You must complete the transaction even if rates move in your favour.

Currency options cost a premium (1-5% of value) but let you benefit if rates move favourably. Best for uncertain exposures like competitive bids.

Invoice currency choice:

Sterling - No risk for you, buyer bears risk. May be less competitive.
Buyer's currency - More attractive to buyer. You need hedging strategy.
USD/EUR - Both parties share some risk. Highly liquid for hedging.

Retention of title

A legal clause that keeps ownership of goods with you until the buyer pays.

Retention of title in export contracts

Legal clause retaining ownership of goods until buyer pays.

Retention of title (Romalpa clause) keeps ownership of goods with you until the buyer pays. Without this clause, ownership passes on delivery under UK law.

Types:

Simple - Title retained until those specific goods paid for
All monies - Title retained until ALL debts to you paid (most common)

Requirements:

Must be in contract BEFORE delivery (not just on invoice)
Buyer must agree to terms
Both legal and beneficial title must be retained

Limitations:

Ineffective if goods processed or incorporated into other products
Enforceability depends on buyer's country law
May need registration in some countries

Best for: Non-perishable, identifiable goods in credit sales to new customers.

Get free advice

UKEF Export Finance Managers provide free advice on payment methods and export finance.

UKEF Export Finance Managers

Free regional advisors helping UK exporters access finance.

Cost: Free consultation (fees only if UKEF product obtained)
Coverage: Regional advisors across England, Scotland, Wales, Northern Ireland
Northern Ireland contact: elizabeth.mccrory@ukexportfinance.gov.uk

What Export Finance Managers help with:

Payment methods and risks
Types of export financing available
Trade finance (pre and post-export)
Credit insurance options
Foreign exchange risk management
UKEF product guidance and application preparation

What to bring:

Trading relationship details
Export needs assessment
Financial information (audited and management accounts)
Contract terms and conditions

They do not recommend specific transactions, products, or providers - maintain your own professional advisers.

Find an Export Finance Manager

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Get paid for your exports

Payment methods for exports

Letters of credit

Documentary collections

Protecting against non-payment

Check your buyer's creditworthiness

Manage currency risk

Retention of title

Get free advice

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🧪 Business Context Testing

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Payment methods for exports

Letters of credit

Documentary collections

Protecting against non-payment

Check your buyer's creditworthiness

Manage currency risk

Retention of title

Get free advice

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Business Context Testing

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