What is Trade Finance?

Look at how you intend to fund the purchase at an early stage and involve the Funder, your potential funder then to avoid problems later
We can work with companies to provide the working capital required to perform the contract and get paid!

There are a variety of descriptions:

Transaction finance allows the client to fund a committed order from their customer where current working capital resources (cash, bank finance and supplier credit) are insufficient
It is sometimes referred to as procurement finance, order finance, supply chain finance or reverse factoring
Trade finance sits alongside and complements traditional forms of bank finance

What it’s Not?

It’s not factoring, although assignment of debt makes it work
It’s not an overdraft as the financier buys the goods and sells them to the Client
It’s not based on the balance sheet strength of the client, it’s based on the strength of the buyer

What’s required?

Confirmed non cancellable order from Buyer (Customer)
Agreed terms with Supplier
Assignment of proceeds from Buyer, or if on LC, advising bank
Credit Insurance on Buyer or Confirmed LC from investment grade bank or Investment Grade Buyer or ECA supported contract

The Process

Set Up:
Client gets committed order from Customer
Client identifies Supplier who can provide the goods required under Customer order
Funder enters into Trade Finance Facility with Client

Pre-Shipment:
Funder places order on Supplier, providing Letter of Credit if necessary
Funder obtains Purchase Order Confirmation from Customer confirming Customer will pay Funder for the goods on delivery and that the order is valid and non-cancellable

Delivery:
Supplier delivers goods, invoicing Funder
Funder invoices Client for Goods

Payment:
Client invoices Customer on delivery
Customer pays Funder
Funder repays Client its profit after deducting cost of goods purchased and its fees

 

CASE STUDIES

Export projects
Client is a provider of engineering consultancy and procurement solutions predominantly major infrastructure projects in Africa.

Solution: A project specific facility to facilitate the procurement of goods under a £1.4m order covered by a confirmed letter of credit, where the client’s own bankers were unsupportive.

UKEF now provides a performance guarantee support to enable new business to be bid and executed.

The Funder working with client on medium term solutions for future projects

Floor Planning – Import Finance
The funder completed a trade finance facility for its client.

Client is a supplier of replacement windscreens throughout UK and Ireland. 

The Funder provided an initial £150,000 import loan facility backed by Credit Insurance, now been extended to £400k.

Finance is now being extended to new business lines.

Rag Trade
Client: a family business run by a husband and wife team with extensive experience in the clothing industry with good customers in EU and US.

Requirement: a purchase finance facility to provide security of payment to Turkish and Vietnamese suppliers. 

Solution: a £250,000 import loan facility backed by Credit Insurance, with an option to provide LCs to suppliers and a factoring facility to accelerate cashflow for debts where the purchase was not financed by the Funder.

Distressed Furniture
Client is a small business designing distressed furniture and accessories including table lamps for a UK high street furniture company

The Funder obtained an insured credit limit on the chain and offered a £150k facility of purchase of stock from India.

Client is developing new Customers and where credit limits are available for them, offer additional funding for those new orders.

Client is a trader who specialises in liquation stock with insufficient working capital to fund large orders.

Solution provided a trade finance facility to buy goods being repaid by the final customer on assigned debt basis

Products range from chocolate to diggers

Latest transaction for supply of £400k of jackets to a Sports company.

Import
Funder completed a trade finance facility for its client, a Swedish property group. Its subsidiary is involved in the importation, erection and operation of student accommodation modules.

The “pods,” manufactured in China, are constructed inside shipping containers and delivered to site in Sweden.

They are then assembled, connected to services and within a few weeks are fully operational student accommodation units.

TFP have provided an initial facility of $720,000, rising to $1.5m

This revolved five times.

Raw Material Finance
Funder provides a stock facility for its client to finance raw materials – the card required to make bottle sleeves. 

Funder has provided a £500,000 import loan facility backed by Credit Insurance.

Funder is assisting the client restructure its procurement process to access more cost effective supply from China utilising the guaranteed payment it can provide

Manufacturer support
The client has won orders for apple crisps for the US market from strong retail outlets including a well known brand with the support of another well known brand.

The client had insufficient working capital to provide the factory with the secured payment it required

Funder provided a $2m solution to procure apples and pay the factory

Funder is repaid by the US buyer

The client enjoys substantial growth secure in the knowledge it has the cash to fund the supply.