• Sort out distribution channels
• Conduct due diligence to wheedle out poorly written contracts
• Demand security of payment such as with credit insurance or letters of credit

 The ECGD (Export Credits Guarantee Department), the UK's official Export Credit Agency, is to provide £1bn of short term export support for SMEs. This is working capital to fund the manufacturing for export – in other words, the period between receipt of the order and despatch.

Risk adviser and insurance broker Aon welcomes this government move that will enable exporters to take advantage of the weak pound. Aon is urging the government to distribute the £1bn to exporters as soon as possible and also to ensure that these financed contracts will not end up as bad debts, i.e. that there should be a secure payment mechanism such as through using credit insurance or letters of credit. This also needs to be coupled with due diligence to prevent this valuable facility being used for speculative exporting or worse.

Susan Ross, director at Aon Trade Credit, said: “We embrace the initiative to tackle the biggest problems facing business today – the fall in demand and the scarcity of reasonably priced finance. But to make UK business a success, any government support must be delivered quickly and the end of Q1 2009 will be too late. The ECGD isn't going to employ new salespeople so it needs to distribute through existing channels. To do this efficiently, the network – be it insurance companies, brokers or banks – needs to be incentivised, potentially through commissions. The government will also have to address concerns by banks over how the financing will meet the FSA’s call to improve capital:risk ratios and Basel II rules.

 “The taxpayer is also going to require reassurance that the funding will be paid back. This is where letters of credit and credit insurance come into play – covering payment in the event of a manufacturer’s buyer going bust. Exporters will need to work credit insurers or brokers to gather financial information on their customers and either take out insurance cover or refuse to trade with unhealthy companies in the first place.”