Major order from South Korea opens the way to Optima’s future growth.
Optima is a specialist engineering company based in Lancashire, providing hi-tech systems for manufacturing production lines. When the firm won a major order from South Korea the directors were delighted, but the £2m value of the contract presented a challenge for their working capital.
In order to fulfil the contract, Optima had to purchase production line equipment from UK and European suppliers and export it by sea to South Korea. The length of delivery time meant that Optima would have to pay suppliers well before it received full payment from its own customer.
Michael Hill, Optima’s managing director, approached his NatWest relationship director Ian Harrison, and Ian enlisted his trade director colleague, Simon Watson, and Steve Cowles of UK Export Finance (UKEF) to help find a solution.
Working in Optima’s favour was a 20% cash advance from the customer, which did not require a guarantee, and a letter of credit issued by the customer’s Korean bank. “The contracts, letter of credit and cash advance meant we and UKEF had a clear picture of the cash flows throughout the pre-shipment, delivery, installation and commissioning process,” explained Simon.
“I was delighted with the support provided by NatWest. Without it, we may not have been able to complete this major export order”. Michael Hill, managing director, Optima.
The team advised Optima that the most effective way to secure the cash they needed to fulfil the contract would be a trade-controlled, UKEF-supported working capital facility of just over £250,000. The UKEF Export Working Capital Scheme assists UK exporters by providing guarantees to lenders to partially cover the credit risks associated with export working capital facilities. The scheme is particularly useful where a UK exporter wins more, or larger, overseas contracts than they usually handle.
NatWest’s Trade Advisory team liaised directly with UKEF to ensure all their requirements were met, and the bank’s Transaction Control team oversaw the release of funds, making sure suppliers got paid on time. With the contract completed, Optima’s management and staff are now confident that they can take on further large export contracts in future.
I was delighted with the support provided by NatWest. Without it, we may not have been able to complete this major export order