Trade finance solutions

Factoring

Being able to offer credit terms to prospective clients can be an important competitive advantage, while securing the future repayment is one of the most difficult tasks in today’s business world. Factoring is a package of financial services which is built especially to suit the particular needs of each client, improving the cash-flow and securing the debt collection both in domestic and in international markets. The main benefits of factoring are:

  • Invoice financing ( Up to 90% of the assigned receivables )
  • Credit insurance ( Up to 100% of the invoice value )
  • Risk Analysis and Sales ledger management
  • Debt collection

 

Through factoring, a company can immediately cash up to 90% of the invoices which have arisen from a performing transaction or contract, while the remaining 10% is reimbursed at the moment of collection. In this manner the sales of the company can be rapidly developed, having the management focused only on new prospects and markets, while benefiting from outsourcing the management of the trade receivables. Moreover, the Credit Insurance part of the package provides risk-free credit terms for the seller, meaning that from the moment of the assignment he is completely protected against non-payment.

The typical characteristics of a factoring client are:

  • Selling on open account terms, and having credit terms up to 180 days;
  • Developing a continous relationship with the buyers;
  • Having a clean and clear performance record;
  • Not having high concentration on the debtor portfolio

 

In order to facilitate the development of each commercial relationship, the factor will grant a financing limit for each debtor in the portfolio, taking into account the following influencing factors:
  • Financial status of the debtor
  • Estimated yearly turnover with the respective debtor
  • Credit terms
  • Number of issued invoices per year

 

The usual path to applying for and using the factoring service includes the following steps:
  • Having a commercial relationship entered into with a buyer.
  • Requesting a quote to the factor including the information mentioned above
  • Receiving the granted limit level from the factor
  • Signing the factoring contract
  • Delivering the goods and performing the commercial contract
  • Invoicing the debtor
  • Assigning the issued invoices to the factor
  • Cashing up to 90% of the invoice value
  • Cashing the rest 10% less the factoring costs at the payment date of the invoice

 

One other important advantage of factoring regards the pricing structure, as the client only occurs costs in relation to the goods already sold and implicitly the invoices assigned to the factor. There are 3 elements which make up the price of the factoring service:

  • Set-up Fee: One-off cost for setting up the facility
  • Factoring Commission: Flat fee on the invoice value (e.g. 0,5%)
  • Interest rate: Applicable on the financed value (e.g. 90% of the invoice value )

 

Forfaiting

Forfaiting is a trade finance product which can be used by large corporates to finance a wide range of goods and services, in industries such as Commodities Trading, Construction, Technology and IT, Capital Equipment and Turn Key Plants. The usual tenors for this type of product can be of minimum 6 moths, while the maximum financing period can reach 7 years. However, according to the type of industry, the financing tenors may vary:

  • Commodities Trading: Financed from 90 days to 180 days
  • Services: Financed from 180 days to 3 years
  • Technology: Financed from 180 days to 5 years
  • Projects: Financed from 3 years to 7 years
  • Turn Key Plants: Financed from 3 years to 7 years

In order for such a product to be applicable, the debt that the buyer bears towards the seller/exporter has to be evidenced by one or several documents. In addition, the respective debt has to bear the unconditional, irrevocable and freely transferable guarantee or the aval of an acceptable bank in the Buyer’s country. There are different types of documents which can be acceptable in a forfaiting deal:

  • Bills of Exchange
  • Promissory Notes
  • Payment Guarantees
  • Letters of Credit
  • Open Letters of Credit

 

The usual flow of such a transaction is determined firstly by the existance of a commercial contract between the seller/exporter and the buyer/importer, and also by the acceptance of the forfaiter to purchase the deal. In a very clear and simple way, the necessary steps during a forfaiting contract are the following:
  • Existence of a commercial contract between the supplier/exporter and the buyer/importer
  • The forfaiter commits to purchasing the deal from the exporter
  • The supplier/exporter delivers the goods to the buyer/importer
  • An acceptable bank from the buyer’s country gives a bank guarantee for the transaction
  • The buyer/importer provides the documentation to the supplier/exporter
  • The supplier/exporter provides the documentation to the forfaiter
  • The forfaiter pays the supplier/exporter on a “Non-Recourse” basis
  • The forfaiter, at maturity, provides the Bank with the documentation
  • The buyer/importer repays the Bank at maturity
  • The Bank repays the forfaiter at maturity

 

Structured Trade Finance

We can provide transactional financing and structured short term self-liquidating facilities to businsses that trade, creating a benefit from a wealth of experience by specialist personnel in handling transactions dealing with a number of basic soft and hard commodities. While our solutions range from day to day commodity trading up to complex structured transactions, the client portfolio consists of companies ranging from mid-sized specialized producers and traders to global companies trading on a worldwide basis.

The financed transactions usually include one of the following:

  • Pre-shipment or pre-export finance
  • Processing facilities
  • Consolidation finance
  • FCR financing

 

Our warehouse financing products provide the flexibility to take a period of extended credit undisclosed to the supplier of goods, in this way obtaining optimum payment terms and the capability of merchandise consolidation emanating from different suppliers. The payment for the purchased goods is made via a documentary credit and/or a documentary collection and/or a confirmed purchase order.

Usually, the underlying transaction is settled on a ‘sight’ basis with the supplier, the goods being consigned to the order or in the name of the financing party. Thus, the company is able to negotiate better conditions with its suppliers, allowing also more time to sell the goods. In addition, when the goods are consigned to the order or in the name of the financier, they can be warehoused in the financing party’s name for an agreed period, and may be released partially or fully.

We areĀ also recognised for our unique specialised expertise in the maritime sector and are able to offer a wide range of banking and finance services to its customers involved in the shipping industry. Being dedicated to the finance of international trade, we understand the global shipping markets and tailor our approach to suit the individual needs of customers using our in-depth knowledge of the industry. We have the possibility and the necessary expertise to offer structured financing packages to vessel owners in both the dry and wet cargo sectors with a particular emphasis on older tonnage.

 

Supply Chain Finance

The traditional supply chain finance products which we propose help buyers and suppliers finance their working capital, mitigate their risks and achieve their cash-flow objectives. Our open account financing facilities include supplier finance, receivables purchase, post-import finance and pre-export finance which can be delivered to companies ranging from mid-level traders to worldwide exporters. In all these ways, businesses can secure their supply of key materials and strengthen the relationships with their suppliers, while mitigating the financial risk by on/off balance sheet financing solutions.

Supply chain finance grows or falls along the financing needs, being strictly tailored on the transactional volumes carried out at any moment in time.

 

Credit Insurance

The wide range of credit insurance products that RomFactor can provide in cooperation with LCI, the Group’s credit insurance company, is designed to protect any company’s balance sheet from the risk of financial loss inherent in domestic and foreign trade. This includes insolvency or protracted payment default of its customers, as well as war, legal constraints and political events that can prevent the completion of international contracts of sale.

Between the benefits of credit protection, the most important are:

  • Risk protection
  • Credit Management Support
  • Better financing
  • Domestic and export market expansion
  • Safely growing existing accounts
  • Access to creditworthiness information on existing and potential clients
  • Business stability and uninterrupted cash flow