This unit offers non-funded solutions that allow businesses to be able to transact internationally with the necessary gurantees in place, to facilitate execution of a transaction securely, with minimum capital outlay and in a timely manner.
a) Bills Discounting: This is done when sales are on credit and secured by accepted bills of exchange where the seller may use these bills to improve their cash flow by discounting the same. ABC Bank provides funds to the customer and waits for reimbursement from the drawees (buyer) of the bill at maturity.
b) Invoice Discounting: This happens when sales are on credit. The seller uses these invoices to improve their cash flow by discounting the same. ABC Bank provides funds to the customer and waits for reimbursement from the buyer of the invoice at maturity.
c) Letter of Guarantee: Non-cancelable financial commitment by the bank, which is given towards the timely payment of a fixed amount upto a maturity date, subject to terms and conditions.
d) Bonds: The types of bonds include: Bid, Performance, Transit and Shipping bonds, which are issued by the bank on behalf of the customer. They allow for the specified non funded transaction to take place.
e) Avalization: This is when sales are on credit and secured by accepted bills of exchange. The seller still runs the risk of not being paid. To reduce the risk of default, the seller may ask the buyer that the bill of exchange must bear the guarantee of the bank, that on due date payment shall be made. The act of the bank adding its commitment to pay on the bill of exchange is called Avalization. It helps the buyer receive goods on credit and gives the seller the comfort of payment. It also allows the seller to discount the avalized bill to create cashflow.
f) Letter of Credit (L/C): This is an unconditional undertaking issued by the bank on behalf of the buyer(applicant), favouring the seller(beneficiary) that provided the stipulated documents. They are presented confirming that terms and conditions of the L/C have been complied with, then payment is done. The L/C assures the buyer that the seller will perform before being paid and the sellers are assured that payment will be received, provided that terms and conditions are complied with. ABC Bank offers International & Local L/C products.
g) Pre-Shipment Finance: This facility enables the exporter to access funds that will help in preparing the goods ready for export. It is normally supported by a confirmed export order.
h) Post Export Finance: This facility enables an exporter to access funds against proceeds expected from goods that have been exported.
i) Documentary Collections: The seller may develop a level of trust with the buyer to the extent where goods will be shipped to the buyer even before payment has been done. Documents (including transport documents) will then be sent through the banking system. The seller’s bank will instruct the buyer’s bank to release the documents on fulfillment of some conditions. Documentary collections help the seller to control documents and title to goods while assuring the buyer that the goods have been shipped.
j) Clean Collection: The presenting bank sends instructions to the collecting bank to collect proceeds and make payment on fulfillment of certain conditions. This allows for cost-effective trade finance transactions.
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