PRE SHIPMENT AND POST SHIPMENT TRADE FINANCE

Transcription

1 PRE SHIPMENT AND POST SHIPMENT TRADE FINANCE

2 . THE BRICKS AND MORTAR TRAP Source: Scottish Pacific Business Finance (Pty) Ltd. Sydney, 2005 PRESENTED BY Dr PADDY McDOWELL 2

3 ESTABLISHING A LETTER OF CREDIT THROUGH A ZAR BANK FACILTIY. MONTH Bank Facility 1,MIL 780, , , , , , ,000 Open L/C 200, , , , , , , ,000 Bank Balance 800, , , , , , , ,000 10% FEC ** 20,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Bank Balance 780, , , , , , , ,000 Expenses???????? Income 100, ,000 Available Facility 780, , , , , , , ,000 AUTHOR Dr PADDY McDOWELL 3

4 SOUTH AFRICAN IMPORTER USING ITS SOUTHAFRICAN BANK S ZAR 1 MILLION IRREVOCABLE LETTER OF CREDIT FACILITY TO FINANCE IMPORTS AUTHOR: Dr PADDY McDOWELL 4

5 PRE-SHIPMENT TRADE FINANCE FOR ZAR 1 MILLION TO FINANCE IMPORTED AND/OR SOUTH AFRICAN PURCHASES MONTH ORDERS BOOKED 200K 100K 100K 100K 100K 100K 100K 100K FACILITY AVAILABLE R1m R1m R1m 800K 700K 600K 700K 700K SUPPLIER PAID BY K 100K 100K 100K 100K 100K TRADE FINANCE HOUSE FACILITY AVAILABLE BEFORE TRADE FINANCE R1m R1m 800K 700K 600K 500K 600K 600k HOUSE PAID FINANCE HOUSE PAID K 100K 100K FACILITY AVAILABLE R1m R1m 800K 700K 600K 700K 700K 700K NOTES: 1.0 This model is illustrated on the following basis: 1.1 Supplier grants 60 days open account credit from date of bill of lading for imports 1.2 The pre-shipment Finance House grants 90 days credit from date supplier is paid. 1.3 Total credit period is 150 days. COMMENTS: Each facility is designed to suit client s requirements. There is no one size fits all. There are numerous possible credit terms granted by suppliers For example: 30 days open account from Bill of Lading date 20% deposit/30% deposit based on value of order Cash against document DEASIGNED BY : Dr PADDY McDOWELL 5

6 POST SHIPMENT TRADE FINANCE BY WAY OF INVOICE DISCOUNTING FUNDING FAIR APRIL 2014: Presented by Dr. Paddy McDowell

7 HOW DOES INVOICE DISCOUNTING WORK? The facility is structured to suit clients requirements and consequently it is not "one size fits all. Availability of funds is directly linked to sales: No bricks and mortar trap. Credit granted to your customers is at your discretion. The bad debt risk remains with the client as it is currently. It is recommended that you consider credit insuring your debtors. Up to 80% of the value of the debtors book is available. When your customers pay, the remaining 20% is available less charges. The cost of the facility varies from one service provider to another. There are two basic costs being, the cost of finance and a monthly service fee. PRESENTED BY ; Dr PADDY McDOWELL 7

8 CLIENT / POST SHIPMENT TRADE FINANCIER RELATIONSHIP. Monthly contact is maintained with a dedicated trade financier manager visiting the client ; not a call centre. Discussions during the visit will cover a range of matters related to the debtors ledger, for example: Establishing that customers are not exceeding the credit limits and arranging for any excesses that may have arisen to be granted--- usually because of seasonal trading. Discussing requests from customers who may required to exceed their credit limits. Matching delivery notes received with invoices produced good housekeeping. Obtain copies of clients monthly accounts, and if relevant discuss the cash flow. Jointly review the debtors book,which has been purchased by the finance house. As the trade finance house has an overview of the South African market, consequently, they are familiar with companies who are experiencing difficulties and advise clients accordingly. Assist in the assessment of applications from new customers. The finance house and the client work closely together in maintaining a well-managed debtors book. AUTHOR: Dr PADDY McDOWELL 8

9 WHAT PERCENTAGE OF YOUR BANK FACILITY IS USED TO FINANCE YOUR CUSTOMERS BUSINESSES?!! BANK OVERDRAFT FACILITY AUTHOR Dr PADDY McDOWELL

10 CASH AVAILABLE TO PAY TRADE CREDITORS AFTER MONTHLY STATUTOARY CREDITORS HAVE BEEN PAID. LEDGEND : CASH AVILABLE AFTER STATUTARY CLIENTS PAID SUPPLIERS TO BE PAID MARCH APRIL MAY JUNE JULY AUGUST SEPT OCT NOV DEC JAN 2014 FEB 2014 TOTAL CASH IN TOTAL CASH OUT AUTHOR Dr PADDY McDOWELL

11 P I I G S---COUNTRIES ARE : PORTUGAL, IRELAND,ITALY, GREECE AND SPAIN SALES ARE STATED IN EUROS AUTHOR : Dr PADDY McDOWELL

12 . AFRICAN COUNTRIES USING INVOICE DISCOUNTING SALES ARE STATED IN EUROS 14/04/2014 AUTHOR :DR PADDY Mc DOWELL APRIL 2014

13 COMPARISON BETWEEN THE VALUE OF THE ASSET SECURED VIZ. THE BOOK DEBTS AND THE ACTUAL AMOUNTS DRAWN DOWN SOURCE : SOUTH AFRICAN BANKING ASSOCIATION PRESENTED BY: Dr PADDY McDOWELL