Trade-Finance

If you regularly import or export goods, a good way of freeing up funds is a letter of credit or documentary letter of credit. These are open lines of credit agreed up to a specific amount by both parties. They guarantee that the exporter will be paid by the importer within a specified timeframe on satisfactory presentation of documentation agreed in the terms of the letter of credit. The transaction, itself, is usually the primary security although sometimes, additional security may be required.

In order assess your international trade transaction and make an initial approach to a forfaiting lender on your behalf, we will need to know basic details about the deal. The more details you can give the more accurate a quote we can obtain, we always recommend early contact (especially for complex transactions!) so we can confirm finance availability, documentation required, likely credit periods and cost of finance.

The VAT Problem

Your company has secured a profitable export order but has to pay for goods at a price inclusive of VAT. However when it comes to exporting those same goods, the sales price is exclusive of VAT leaving your company without access to that VAT element for up to 3 months, cash that could be used elsewhere within your business!

If you import or export goods on a regular basis, selling or buying in other currencies you will know how factors beyond your control such as currency and interest rate movements can eat into your profit margins. However, there is a solution. In certain situations you can protect yourself against these factors using forfaiting. Here is how it works.