Banks and their subsidiaries offer a wide
range of pre and post shipment financing options to their exporting clients
including the following:
Pre-shipment options:
Overdrafts:
Used to support short term working capital needs. Repayable on demand.
Security may be required.
Term Loan:
Used to fund specific project, investment or fixed asset acquisition. Fixed
repayment schedule over agreed period. Security may be required.
Leasing/Hire
Purchase: Used to fund asset acquisition. Agreed repayment schedule.
Security may be required.
Post-shipment options:
International Invoice Discounting: Source of
short term funding. Combination of repayment on demand/agreed schedule.
Company’s debtor book provides the main security. The bank’s
discounting arm may arrange export credit insurance or may use an
exporter’s own policy as security. Possible to access finance on a
non-recourse basis.
Factoring: Source of short term
funding. Similar to invoice discounting but the factoring company will fully
manage the exporter’s debtor book. In effect the factor purchases the
rights to the exporter’s debtors and is responsible for managing the
collection of all outstanding sales. Possible to access finance on a
non-recourse basis.
Bill Discounting: Source of short
term funding. Exporter discounts trade receivables evidenced by Bills of
Exchange or Promissory Notes. Possible to access finance on a non-recourse
basis, particularly for Bills accepted under LCs in favour of the exporter.
Security may be required.
Forfaiting: Similar to Bill
Discounting but used mainly for medium to long term transactions involving
exports of capital goods e.g. machinery. A stream of receivables due over a
period are discounted on a non-recourse basis. Bills of Exchange or Promissory
Notes evidence the receivables and if the obligor on the Bills/Notes is not a
prime name then the Bills/Notes may need to be guaranteed by a bank.
Structured Finance: Usually used to
finance complex deals or projects. Banks will develop structures utilising the
benefits of their own products e.g LCs, Guarantees etc., those of export credit
insurers and knowledge of commodity markets to structure transactions. Finance
is usually medium term and can be provided on a recourse or non-recourse
basis.
