Difference between banks and ITF’s trade finance line of credit

Difference between banks and ITF’s trade finance line of credit

Understanding Trade Finance

Hola Folks,

Have you ever wonder how the supply chain works? or else how project contractors execute their construction or building a new bridges!

Even if companies work together for more than a decade still they don’t rely on payment terms. In this stage, trade finance term knocks the door and helps the seller or beneficiary to take a breath. Any seller needs proof of payment from their buyers, vice versa seller also needs to pay their vendors. So personal touch between the buyer and seller is very important, but payment terms are far more important than personal connection, So the whole world works under trade finance terms to supply the goods or services without hassle.

Method of supply chain arrangement

Buyer and Seller agree to sign a contract, Assume the seller is from China and the buyer is from Canada, Every small or large enterprises has cash flow concerns so the buyers ask for a credit period of minimum 30days or upto 6 months to pay the seller. Initially, a buyer asks for open account terms to cut down certain costs but the seller denies eventually due to cross border threat, So they both agree to handle payment terms as per Letter of Credit, Bank Guarantee or Standby Letter of Credit terms. These days SWIFT is the common messaging tool used by all financial institutions to create, amend or follow the terms and conditions and it is regulated by the International chamber of commerce, Uniform custom practice and other regulatory governed authority to control the cross border menace.

How to get a trade finance line of credit?

To attain a trade finance line from the banks, a buyer must submit the collateral or deposit the cash or equivalent to the bank to fund their trade finance requirements. Even after submitting the collateral or cash deposit to the bank, the bank charges interest rates to open an LC or a BG.

Consider now the trade finance line limit is open for a particular supply but what about the other or next purchase? Do the buyers have to arrange another collateral or cash to attach an asset to fund his purchase? Most of them are not in this position. Plus banks don’t approve an unsecured line of credit when purchase value is higher than collateral or transaction limits.

Where ITF Stands?

So, In this scenario, we at ITF, have our own banking line limits and partnership with global institutions to fund your trade finance requirements. The cool part is we do not ask for any collateral nor cash deposit to open an LC or a BG. ITF has own SWIFT based messaging service, buyers or contractors can utilize our line limit to fund their trade transactions. We do not work under interest rates, Our fees to open an LC or BG are reasonable.

We are not the bridge between buyers and the banks. We are the destination to get all sorts of trade finance products directly.

Case study: Bid Bond for Water Treatment plant manufacturer

Case study: Bid Bond for Water Treatment plant manufacturer

An Engineering, Procurement and Construction company in short (EPC) specialized in developing Water treatment equipment approached us to secure a bid bond (tender guarantee) to participate in the middle eastern government tender, where our applicant is the participant and competing against few huge and mid-level corporations but with a decisive mindset. The applicant requested us a hard copy of the bid bond through one of our banks, earlier it seems a bit odd for us though we are in a digital world and we consider Telegraphic Transfer mode is an old school procedure, Though we use SWIFT mode these days. So we took a chance and read the client’s proposal and tender demands. 

While drafting the bid bond (Tender guarantee) we were curious about the wording  a.ka. content verbiage of the guarantee draft, and it was so specific which cannot be altered nor our compliance team will authorize. It took roughly 3 days to review the tender document which was governed by the middle eastern law. And we were patience to review only the bid bond contents in a tender document to alter and prepare the specific wording for the (Applicant). Due to a good credit rating maintained by the applicant and legible beneficiary (UAE Government), our compliance team approved the draft and validated to prepare a hard copy bid bond. 

The value of the bid bond is approximately $250,000.00 (Two hundred and fifty thousand US Dollars), Valid for 120 days from the date of issuance and dispatched the hard copy of the instrument to the applicant’s regional office. Fortunately, our applicant granted as an L1 which means Lowest 1 to secure the tender and awarded to initiate the project. Now we are in a process to issue a Performance guarantee and advance payment guarantee via SWIFT mode after the negotiation between the client and the beneficiary.  

Our Views: 

Usually, Participants either Small, Medium or large businesses routinely required the line of credit not only as working capital or loan, most importantly to fulfill the trade bargains. We support and work along with the clients who need a credit line for letters of credit or bank guarantees. 

To get or to renew a consistent line of credit you must acquire an asset nor securities to pledge with the banks or financial institutions, but many businesses suffer to stay afloat with the per diem basis of profit cash flow or borrowed debt which increases their liability and threaten the growth stage, So we started our trade financial service to help the companies by learning the peoples situation and support them expand their ambitions. 

 

Welcome to International Trade Finance

Welcome to International Trade Finance

Hello World,

Greetings!!  We are happy to announce that we have initiated to write a blog on our ITF website which shows commitment towards the trade finance industry.

Our upcoming posts would be consist of news and information related to global trade, fintech, import, and export finance.

We will keep you updated about the information which we possess and share with you every week or a month.

Thanks!

Team – ITF