OVERSEAS TRADE FINANCE ( OTF )

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1 OVERSEAS TRADE FINANCE ( OTF ) Port to Port Trade Finance Trade Finance Equity Trade Finance Report 3

2 Port to Port Trade Finance Trade Finance Equity

3 Overseas Trade Finance specialise in sourcing trade finance, and arrange funding for export transactions on behalf of exporters, and international trade finance professionals world wide. We arrange the finance for Trade related business and forfeiting. OTF specialise in arranging non-recourse discounting of domestic and export receivables,based on the purchase of Bills of Exchange, Promissory Notes and invoices. We also have particular expertise in arranging Letters of Credit finance, including refinancing, confirmation and discounting. Overseas Trade Finance is dealing with Trade Finance related business and Forfaiting. In terms of countries, our primary areas of specialisation are EU,USA,Turkey,NZ China however we are improving our specialty over Middle East, Asian and European countries as well. Our Trade Finance team assists businesses engaged in domestic and international trade. We can arrange finance through carefully selected institutions and help put in place financial structures which enable you to carry out your business more effectively. At OTF, we have a wide knowledge of the players in th e market, and know who is hungry for business and who specialists in certain industries are. Our company philosophy is simple. We believe in building strong relationships through understanding your needs and aspirations. This is supported with a flexible and adaptable approach. And because OTF are independent, it means you have direct access to the decision makers. Our Services Overseas Trade Finance Ltd facilitates companies efforts to finance international and domestic transactions, better manage risks globally, and develop their business.

4 Trade Finance services Importers: L/C Issuance Back to Back LC Import Bills for Collection Import Loan Shipping Guarantee Trust Receipt Facilities Import Invoice Financing Other Trade Finance Services Forfaiting Purchase ( Stock) Finance Export VAT finance Invoice finance/ factoring Gurantee or Bond Standby Letter of Credit Foreign Exchange Risk Management Manage your Business Accounts Receivables Unpaid Invoice Solutions Receivable Financing Fiduciary and Lock-Box Services Letter of Credit (LC) Letters of credit have been a cornerstone of international trade activity for many years. They provide one of the safest mechanisms to trade internationally and they often add the essential ingredient for confidence about payment. Letters of credit are used between the importer and the exporter whereby the letter of credit guarantees that the exporter will be paid by a major bank providing that the exporter can provide documents required under the letter of credit. The importer will not have to pay until the documents have been presented. It is a considerably secure method of payment as it replaces the unknown credit of the buyer with the unimpeachable credit of the Bank. The letter of credit can be clean or documentary. A clean letter of credit makes cash available on demand. Letters of credit used by traders are always documentary. This means that the exporter is required to produce documents stated in the letter of credit evidencing current shipment of the goods ordered before the money is released.

5 Overseas Trade Finance Ltd facilitates companies efforts to finance international and domestic transactions,better manage risks globally, and develop their business. Port to Port Trade Finance Trade Finance Equity

6 Trade Finance services Arranging the following Trade Finance Services for Importers: L/C Issuance Back to Back LC Import Bills for Collection Import Loan Shipping Guarantee Trust Receipt Facilities Import Invoice Financing Arranging the following Trade Finance Services for Exporters: L/C Advising & Confirmation L/C Transfer Export Bills for collection Export Bills Advance Export Bills under LC for Collection Negotiation/ Discount of Export Bills under LC Packing Loan Pre shipment Financing Export Invoice Discounting Sourcing trade finance, and arrange funding for export transactions on behalf of exporters Arranging discounting of time drafts arising from letters of credit Arranging discounting of Letter of credits

7 How it Works 1. The importer and exporter conclude a sales contract which provides for payment through a letter of credit. 2. On the instructions of the importer, his bank known as the issuing bank), prepares the credit in favour of the exporter. In doing so, the issuing bank must be satisfied as to the credit-worthiness of the importer. 3. The issuing bank asks a bank in the exporter s country to advise the credit to the exporter. 4. The advising bank informs the exporter that the credit has been issued and sends him the credit. 5. The exporter checks closely all the requirements of the letter of credit to see that they match the terms of agreement in the sales contract. If there are any discrepancies, they should be clarified immediately with the importer, and either the contract or the letter of credit should be amended so that they conform with each other. 6. Exporter despatches goods as specified in the credit to the importer. 7. The exporter presents the documents, together with a bill of exchange if called for, to the bank which has been nominated in the letter of credit as the aying/accepting/ negotiating bank, (this is usually, although not necessarily,the advising bank). 8. The paying/accepting/negotiating bank checks the documents and, if they are in order, either pays the exporter (under a sight credit), accepts the bill of exchange for payment at a later date (under an insurance credit) or undertakes to pay at a later date (under a deferred payment credit). 9. The paying bank sends the documents to the issuing bank. 10. The issuing bank checks the documents and if they are in order reimburses the paying/accepting/negotiating bank, as arranged previously. 11. The importer pays the issuing bank the amount due or in terms, which have been agreed. 12. The issuing bank releases the documents to the importer. 13. The importer uses the documents to take delivery of the goods. For more information and issuing Letter of Credit contact us.

8 Back to Back Letter of Credit Back-to-Back Letters of Credit are used in international and domestic trade. The parties to a Backto-Back Letter of Credit are: 1. the buyer and his bank as the issuer of the original letter of credit, 2. the seller/manufacturer and his bank, 3. the manufacturer s subcontractor and his bank. This type of credit transaction is used when a seller/manufacturer has to purchase a component or farm out part of the manufacture of a product, but may not have the cash flow to do so. In this case, the seller/manufacturer applies to his bank for a letter of credit, identical to the original Letter of Credit he received from the Buyer, except that it is for a lesser value. This second letter of credit, called a Back-to-Back, is sent to the subcontractor s bank and therefore the subcontractor knows that he will be paid and can proceed.with his part of the transaction - supplying components or service to the manufacturer. A Back-to-back L/C safeguards your interests as a middleman by refraining from the disclosure of the identity/details of your supplier to your customers and vice versa. You simply provide us with the original L/C (called master L/C ) and we will issue another L/C involving the same lot of goods (called baby L/C ) to the supplier.

9 Import Bills for Collection Import collection is a simpler alternative to L/Cs. When your suppliers send the documents to your bank through their bankers, your bank will inform you immediately. Documents are released to you when your supplier s payment terms are fulfilled. How it works: The exporter despatches their goods to you (the importer), and instructs their bank to send the shipping documents to your (the importer s) bank, along with instructions about collecting payment. The bank acts on behalf of the exporters bank to collect payment from you, or a promise that you will pay at a later date if you have agreed this with the exporter. This promise normally involves you (the importer) accepting a Bill of Exchange. Under the agreement, the bank will not release the shipping documents until payment or acceptance has been made. Key advantages You, the importer, pay for goods only when you are happy that the shipping documents such as invoices, insurance certificate and bills of lading are as stipulated in the underlying commercial contract. Provides you with a degree of security that, if the paperwork is correct, the corresponding shipment should be in order too. Useful for trading situations that require more security than Open Account but which do not warrant the expense of a Documentary Credit. Easy and speedy to set up, making them particularly suitable for transactions that need to take place quickly. Often used to bridge the gap between trading on Documentary Credits and open account, where a relationship is building up between buyer and supplier that indicates mutual trust.

10 Arranging the following Trade Finance Services for Exporters L/C Advising & Confirmation LC Advising Advising Letters of Credit (LC) is part of the trade operation process. The bank requested to advise the LC would do so without any engagement on its part. But the bank shall take reasonable care to check the apparent authenticity of the Credit and to advise out the LC without delay. Banks usually advise LC received from their own Branches overseas or LC of their correspondent Banks. If the Bank chooses not to advise the LC or unable to establish the authenticity the LC, it must inform the Issuing Bank without delay. LC may be advised directly to the importer/beneficiary or through their bankers, depending on the instruction contained in the LC. We can arrange advising bank for your LC that provide you LC advising services with Speed and reliability. Simply ask your buyer to choose the Bank which we introduce to you as the L/C advising bank to benefit from the quality and professional service. L/C Transfer A Transfer L/C is an ideal solution. You can wholly or partially transfer the L/C to your suppliers at your request, provided the L/C is transferable. Under such circumstances, the name of the buyer and that of the supplier must be disclosed.

11 Other Trade Finance Services Forfaiting The term a forfait in French means, relinquish a right. Here, it refers to the exporter relinquishing his right to a receivable due at a future date in exchange for immediate cash payment, at an agreed discount, passing all risks and responsibilities for collecting the debt to the forfaiter. Historical Development of Forfaiting The origins of the forfaiting market lie in changes in the world economic structure during the early sixties, when trade between Western and Eastern Europe was re-established. The growing importance of trade with developing countries in Africa, Asia and Latin America boosted the forfaiting market to an international level. Forfaiting vs. Factoring The terms factoring and forfaiting have been mixed up frequently. Factoring is suitable for financing several and different smaller claims for consumer goods with credit terms between 90 and 180 days, whereas forfaiting is used to finance capital goods exports with credit terms between a few months and seven years. Factoring only covers the commercial risk, whereas forfaiting additionally covers the political and transfer risk. Letter of Credit - (L/C) A document, issued by a bank pursuant to instructions of a buyer of goods, authorising the seller to draw a specified sum of money under specified terms, usually the receipt by the bank of certain documents within a given time. In effect, the bank substitutes its credit for that of its customer (the buyer). Bill of Lading A document that establishes the terms of a contract between a shipper and a transportation company under which freight is to be moved between specified points for a specified charge. Usually prepared by the shipper on forms issued by the carrier, it serves as a document of title, a contract of carriage, and a receipt for goods

12 Factoring also provides the following benefits: Credit Risk Protection We provide you with 100% credit risk protection for sales covered by an agreed credit line, when the buyer goes bankrupt, closes business or fails to effect payment. Collection Services Our correspondent will remind your buyers to pay on time, thus reducing your burden of debt collection. Flexible Financing In addition to your existing banking facilities, we provide you with another source of financing to facilitate your cash flows.if your customers are concerned about the credit risks (such as non-payment, non-delivery of goods, warranty,etc.), what can you do? We can arrange different types of Guarantees or Bonds to suit your needs. A guarantee or bond states that you will comply with the terms of the contract/agreement with your customers, otherwise your customers will be compensated. Four types of Guarantee or Bond: Bid Bond Performance Bond Advance Payment Guarantee or Down Payment Guarantee Payment Guarantee Standby Letter of Credit Whether for yourself or your business, a Standby Letter of Credit can be used to secure a variety of transactions where a third-party guarantee of payment may replace a cash or bond deposit. It s a strategically smart way to leverage the credit power of your portfolio. A Standby L/C is a guarantee to the beneficiary against defaults by the applicant in the performance of his commitment. It is often used in lieu of a performance guarantee; for example, to help another company obtain credit. For more information contact us.

13 Escrow Account Lock-Box Services You want to be entirely sure that you will be paid for your services? You want payment in advance, but your client wants a counter guarantee? Your credit insurance limit is insufficient to cover the risk of non-payment? Your client can only pay you once they have been paid? The solution is Escrow account. An Escrow Account is a special bank account for the deposit of funds, to which the beneficiary s access is a subject of the fulfillment of certain conditions. An escrow agreement setting out these conditions is usually drawn up. Escrow is your trusted third party, ensuring a problem-free transaction between buyer and seller thanks to an effective procedure.

14 OVERSEAS TRADE FINANCE ( OTF ) Port to Port finance Trade Finance Equity Trade Finance Report 3

15 OVERSEAS TRADE FINANCE LIMITED ADRESS : 1 GLENALMOND ROAD MT. EDEN AUCKLAND 1024 NEW ZEALAND TEL : +64 (0) FAX : +64 (0) , TELEX : OTIGNZ, Website :

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