Import & Export Finance

A loan for imports and exports (also known as a trade finance loan) is a form of short-term working capital finance that allows both importers and exporters to finance their trade commitments on a transactional basis. Each trade transaction must be evidenced by appropriate trade documentation.

A trade finance loan can be used to support both domestic and cross-border trade transactions and is an advance of funds in either the domestic or foreign currency of the payment obligation.

Loans for import and export can be provided on a pre-shipment or post-shipment basis in order to match the importer’s or exporter’s financing requirements at the different stages of the trade transaction.

Benefits for Importers:

• Access to funding/liquidity to match the exporter’s sales terms, or as required where an exporter’s sales terms are not sufficient
• Potential to negotiate better commercial terms with exporters (e.g. reduced costs) and benefit from any early payment discounts offered by exporters

Benefits for Exporters

• Access to funding based on proven orders for the production and supply of the goods to importers
• No missed business opportunities where importers require longer credit periods

This method requires a payment to be made to the exporter before goods are shipped. Usually telegraphic transfers are used by the importer (buyer) to deposit money into the account of the exporter (seller) prior to shipment date. The risk is with the importer under this type of open account transaction.

Documents relating to an export of goods are forwarded through the banking system to the overseas buyer in exchange for payment. The payment collection may occur either at ‘sight’ (when the customer sees the documents – known as a Documentary Payment) or at ‘term” (at a time agreed in the future where a Bill of Exchange is crucial – known as a Documentary Acceptance).

Letters of Credit essentially substitute the credit of a bank for that of a customer, for the purpose of facilitating trade. A documentary letter of credit is a contractual agreement between a bank (known as the issuing bank), on behalf of one of its customers, authorising another bank (known as the advising or confirming bank), to make payment to the beneficiary.

• Step 1: The issuing bank, on the request of its customer (the buyer/importer), opens the letter of credit and makes a commitment to honour drawings made under the credit.
• Step 2: The confirming bank confirms with the issuing bank that the letter is valid and then the seller/exporter can ship the goods with the knowledge they will receive payment.
• Step 3: When all of the terms of the deal have been met, the confirming bank collects on the letter of credit and passes the money on to the seller/exporter.

J Trust Royal can act as both an issuing and confirming bank, depending on your importing or exporting needs.

J Trust Royal can also offer exporters an advance on your Letter of Credit payment before you have completed the steps needed to present your sales and shipping documents. The benefit for exporters is you won’t have to wait until your goods have been shipped to their destination before receiving payment. Fees and charges apply.

BNNUC is a financing product, whereby an export customer may request J Trust Royal to finance/discount a bill* (provide liquidity) and dispatch the export documents (along with the bill*) to a correspondent bank in the buyer’s country for collection and return of proceeds in terms of the customer’s and J Trust Royal’s instructions. Documents will be released to the buyer against payment or acceptance of the bill.