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Export Finance FAQ
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Supplier's credit and frame credit
Question: What is the difference between a supplier's credit and a frame credit?
Answer: Under a supplier's credit, the supplier also acts as banker to the client. He sets the terms of payment, the duration of the loan and the interest rate (by arrangement with the bank/the SERB). On signature of the cotract or sale of the claim to the supplier's bank, the latter represents these terms and conditions to any third parties and to the borrower/buyer.
Under a frame credit, the interest rate is agreed by the buyer's bank and the buyer. As such, the supplier has no influence over the interest rate vis-à-vis the buyer.
TopSERV cover
Question: Can an export transaction be 100% financed with SERV cover?
Answer: The SERV requires the payment of at least 15% of the delivery value on or prior to delivery. The same applies for Hermes, Coface, Sace, etc. under OECD regulations. Down and interim payments may not be financed from the export credit. As such, a maximum of 85% of the delivery value can be financed with SERV cover.
When to contact UBS Export Finance
Question: As a supplier, at what stage should I contact UBS Export Finance?
Answer: The earlier the better. UBS will be only too happy to advise you on drawing up the terms of payment.
Financing costs
Question: Can UBS help me calculate the financing costs?
Answer: No problem. All we need to calculate the applicable SERV or financing costs and present them in the form of an indicative repayment schedule are a few basic details.
Forfaiting basis
Question: Does UBS also provide and undertake transactions on a forfaiting basis?
Answer: Yes, UBS offers the entire range of forfaiting services in the form of purchase without recourse of suppliers' receivables. These services are provided by the Bank's Export Finance Department in Zurich.
Benefits of forfaiting
Question: What are the benefits to the supplier of forfaiting?
Answer: As the name suggests, forfaiting is the refinancing of receivables without recourse to the exporter/seller. The main advantages are as follows:
Export finance credit
Question: What is the purpose of an export finance credit?
Answer: Export finance credit is generally used to finance down and interim payments, and in some cases local costs. The export finance credit is granted on top of the 85% SERV-backed export credit, thus allowing 100% financing of the project in question.
Export credits in foreign currencies
Questions: Does UBS also grant export credits in foreign currencies?
Answer: Yes, an export credit can be granted in the usual currencies, for instance dollars or euros. As a rule, this will be in connection with an export credit where the SERV assumes the contingent risk in respect of the relevant foreign currency. The transaction is then refinanced on the basis of LIBOR, usually with six months' rollover. Alternatively, a fixed rate of interest above the Bank's refinancing costs can be arranged.
Report of losses
Question: Who should report any losses to the SERV?
Answer: Any losses should be reported by the supplier. However, the Bank is responsible for notifying the exporter in good time.
Share of risk
Question: In the event of losses, when must the exporter pay his share of the risk?
Answer: Any applicable excess from the supplier becomes due immediately on receipt of the SERV indemnity payment or, in the case of debt rescheduling, as soon as the SERV makes the guarantee payment.
Service-sector companies
Question: We are a service-sector (engineering) company. Can such services also be financed?
Answer: Yes, such services (performed in Switzerland) are essentially insurable under the SERV scheme and, as such, are eligible for an SERV-backed export credit.
Financing SERV premium
Question: Our clients/buyers are not generally willing to pay the SERV premium in cash. Can this premium also be financed?
Answer: The SERV essentially allows for 85% financing of the SERV premium. However, 15% must still be paid in cash by your clients/buyers.
Annual instalments
Question: Can an SERV-backed export credit be repaid in annual instalments?
Answer: No, the SERV and OECD require equal twice-yearly instalments.
Maximum insurable interest rates
Question: Is there a maximum insurable interest rate under the SERV scheme?
Answer: No, the SERV will insure any interest rate, no matter how high.
Early repayment
Question: Can an export credit with a duration of five years be repaid early, e.g. after just two years?
Answer: Yes, provided the credit agreement allows for early repayment.
Extra costs in case of early repayment
Question: In the event of early repayment of an export credit, will the borrower incur extra costs?
Answer: Yes, a handling fee will be charged and so-called breakage costs (loss-of-interest penalties under a fixed refinancing arrangement) will be incurred. The level of these costs may vary, depending on the interest implications.
Calculation of interests
Question: How is interest usually calculated on an export credit?
Answer: As a general rule, interest is calculated in accordance with standard international practice, i.e. on the basis of the exact number of calendar days and a year of 360 days (e.g. 365/360).
Payment of compensation
Question: If neither the borrower nor the guarantor foreign bank pays the instalment on the due date, when will the SERV compensation be paid out?
Answer: Claims for losses cannot be lodged with the SERV until three months from the applicable due date. Thereafter, it will take approximately three to four weeks for the SERV to settle the claim.
Insurance for foreign services
Question: Does the SERV cover foreign goods and services as well as Swiss products?
Answer: Yes, as a rule of thumb the SERV allows for supplies of goods and services with a foreign content of up to 50%.
Supply contracts in USD or EUR
Question: Can supply contracts in US dollars or euros also be insured under the SERV?
Answer: Yes, there are no restrictions on these currencies under the SERV scheme.
Currency risk
Question: In the case of an export credit in USD, can the currency risk also be insured under the SERV?
Answer: No.
Mixed financing
Question: What is meant by "mixed financing"?
Answer: The term "mixed financing" (also known as mixed credit) refers to a credit agreement between a Swiss banking consortium and the Swiss federal government on the one hand and a foreign government or central bank on the other hand. The Swiss federal government contributes between 35 and 50% of the total credit line. This so-called federal tranche is loaned at preferential terms and conditions, the aim being to reduce the cost of borrowing for the debtor nation to below the prevailing market rate by combining public and private funds. Mixed financing is a means of financing Swiss capital goods and services and acts as a form of development aid.
Duration of a traditional export credit
Question: What is the duration of a traditional export credit?
Answer: Depending on the delivery value, loans can range from two to five years. In the light of international competition for major contracts, however, durations of five years are increasingly being exceeded and, in the case of large projects, now represent the norm within the parameters agreed by the OECD.
SEBR
Question: What does the abbreviation "SEBR" stand for?
Answer: SEBR = Swiss Export Base Rate.
Calculation of SEBR
Question: How is the SEBR calculated?
Answer: The Swiss banks fix the SEBR each Monday on the basis of the corresponding Swiss franc swap rates for maturities of two to ten years. The resultant rates are valid from the Tuesday through to the following Monday.
SEBR rates
Question: Where can I find the SEBR rates?
Answer: Details of the prevailing rates can be found in the Wednesday edition of the financial journal Finanz und Wirtschaft or on the Internet at Swiss Export Base Rate.
Important legal information - please read the disclaimer before proceeding.
Products and services in these webpages are not available for US persons, for the exclusion of residents of other nations see the disclaimers relating to the actual services.
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