WHY TRADE FINANCING?
Trade Financing is a product that allows companies that are short on capital to finance the importation of goods that are backed by a PO. The financing can be in the form of cash or a “Standby Letter of Credit”. The receiver of the goods can thereby delay payment to the supplier until they receive payment from the issuer of the PO allowing them to accept orders they otherwise could not.
STANDBY LETTER OF CREDIT
A Standby Letter of Credit guarantees payment to the supplier upon receipt of the goods into the country of delivery or a pre-determined date.
The Trade Financier will review the financial’ s of the client to determine strength of the company to deliver on the order.
There will be a site visit of the client to determine capacity for acceptance of order.
Client’s eligibility for receivable insurance and “Goods-in-Transit”.
A credit report will be pulled on client.
Insurance on client’s premises will be reviewed for sufficiency.
Client qualified as above.
PO will be confirmed with issuer.
Receivable insurance will be obtained at client’s cost.
Goods-In-Transit insurance will be obtained at client’s cost.
Product must be approved by Trade Finance.
Customer will be qualified as to the ability and willingness to pay upon receipt of goods.
Security for transaction:
a. First charge on goods purchased
b. Corporate pledge
c. Guarantee(s) of principal(s) of client company
PO issued by customer to client
Application to Trade Finance
Client provides PO and Sales Contract to Finance
Trade Finance(Funder) issues Letter of Credit to supplier of goods
Funder obtains receivables insurance
Funder obtains “Goods-In-Transit” insurance
Funder obtains product from supplier
Client obtains product from Funder
Client delivers product to customer
Customer pays invoice or invoice is factored
Client pays Trade Finance
Trade Finance pays supplier