Document evidencing the debt owed by the Buyer to the Exporter. This debt can be evidenced by a wide range of documentation such as:
- Promissory Notes
- Bills of Exchange
- Letters of Credit/Standby Letters of Credit
- Payment guarantees
- Open Book Receivables, subject to certain conditions
In most instances, the debt will need to bear the unconditional, irrevocable and freely transferable guarantee or the aval of an acceptable bank in the Buyer's country. In some cases however the financier can consider top tier corporate or government debt without additional bank security.
This is the most vital part of the documentary package, as it is the proof that the Exporter is owed a specific sum of money on a specified date.
Wherever possible, Exporters should secure negotiable instruments, which are unconditional, irrevocable and freely transferable, such as promissory notes or bills of exchange, as evidence of the debt. Also, because these instruments are sold without recourse, the Exporter who sells them can effectively remove himself from any further involvement with the financial aspects of the transaction, including the risk as well as the administration and collection.
The instruments should include certain key elements, such as the words "for value received", place and date of Issue, amount due in both words and figures, the specific maturity date, an effective payment clause, a without deduction clause, and a domicile for payment.
Q1. How can we be certain that financing is in place before we sign the contract?
A1. If you are reasonably confident of being awarded the contract, and you want to fix the discounting costs, then you might want to considering applying for an option to discount.. The option is a commitment given for a determined period of time. It fixes all the discounting conditions and allows you to sign the commercial contract with the certainty that you will be able to sell the debt instruments, without recourse, to the financier after you have completed delivery of the goods or service. If the contract is awarded to you before the expiration of the option, the option automatically turns into a firm discounting commitment.
Q2. Why does my client need to obtain a bank guarantee, why don't they just borrow the money locally?
A2. In many emerging markets, companies and banks alike may have significant difficulty in borrowing medium term fixed rate money. As a result, even if the Importer could obtain a fixed rate medium term loan, the interest rate is likely to be prohibitively high. The local bank, because of its relationship with the Importer plays a key role by issuing a guarantee, thereby allowing its customer to access foreign sources of funding.
Q3. What information is needed to provide an accurate quotation for our potential international sale?
A3. To provide you with an indicative quotation, will require the following information: Amount, Currency, Tenor, Country, Obligor, Guarantor, Underlying transaction, Shipment schedule. It goes without saying the quotation will only be as detailed and precise as the information that you provide.
Q4. Our type of business is such that we cannot afford to wait two or three months for a quotation on a specific transaction! How long does it generally take to indicate interest in a transaction?
A4. It is understood that your commercial negotiations are often very fast moving, and as such, we can usually provide an immediate indication for markets where we are active.
Currently, there is the ability to provide financing in over 100 countries world-wide. However, because market conditions can be highly volatile, the list of countries where we are active will change in accordance with economic and political developments world-wide.
Q5 . A significant portion of our finished product is manufactured in other countries. Does this affect the ability of the discounter to finance the transaction?
A6. No. As long as the transaction does not violate any government export or import regulations, 100% of the transaction could qualify for financing. In most countries, local costs may also be financed.
Q7. What happens if the Importer does not pay it's debt at maturity?
A7. Financier purchases the debt without recourse, and as such, you are not responsible for repayment at maturity.
Q8. Our company has a relatively long manufacturing period. How long prior to the availability of the documents can there be a commitment to purchase the receivables? Is our company covered for fluctuations in interest rates during this period?
A8. Depending on the specific transaction, financier may be in a position to commit to purchase receivables up to 18 months prior to delivery. If interest rate risk is of concern to your company, financier may be able to commit to discount the debt at a fixed rate, which will protect you from adverse movements in interest rates during the manufacturing and delivery periods.
Q09. Our sales force has informed us that our competitors are offering medium term financing at below market rates. How is this possible?
A09. They are probably using discounting already. Unlike most government supported credits, discounting allows suppliers to subsidize the interest rate charged to their Buyers and therefore it is highly likely that your competitor is already using discounting to support the supplier credit they are offering the Buyer.
GRW ACTS AS A CONSULTANT IN THIS MATTER WHEREAS WE KNOW OF MANY FINANCIERS, PRIVATE GRW ACTS AS A CONSULTANT WITH PRIVATE AND PUBLIC FINANCIERS AVAILABLE THAT WILL STRUCTURE AND DISCOUNT ACCEPTABLE BANK ENDORSED OR ISSUED BILLS OF EXCHANGE AND OR DEFERRED LC'S.
CONSULTING RETAINER: 5000.00 usd..
You will need to talk to your bank about getting them to open the deferred instrument for you for your imports or project. They will ask you what collateral you will give your bank for doing this so be prepared for the answer prior to meeting your bank. They will want property or some other asset of value to hold as collateral for issuing the instrument for you. Keep in mind we will need to know the name of the bank first before you talk to them so we can tell you if we can handle the bank instrument (deferred) from them so you do not waste your time.