Trade finance
primer
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Trade finance can be considered as an umbrella to many financial tools including forfaiting, trade bundling, government agency guaranteed transactions, and secured export loans.
- Trade obligations for the import of commodities or capital goods from a large OECD manufacturing or trading company to an importer in a developing country. Where the importer's credit standing is marginal or not well known in the market, enhancement will be obtained in the form of an L/C from an acceptable bank. The transactions may be originated directly, or purchased from a third party exporter. On an exception basis, they may be purchased from a third party financial institution.
- Standard documentation will include a Promissory Note indicating that payment is "unconditional and irrevocable" supported by a Corporate Resolution, Incumbency Certificate, Opinion of Councel and certified copies of the Obligor's organizational documents. Where we provide the initial funding, payment will only be made to the exporter under written instructions from the importer. In instances where we are not named payee on the note, signature verification from a local bank and an Acknowledgement of Assignment from the Obligor will be obtained.
- Copies of the purchase order, bill of sale and/or commercial contract will be obtained in all instances in order to verify that the transaction is financing the sale of goods.
- Direct Obligations of credit worthy, well-recognized local banks in developing countries used to finance the import of goods by local companies.
- Standard documentation will include a Promissory Note naming us as payee, supported by a Corporate Resolution, Incumbency Certificate, Opinion of Counsel and certified copies of the Obligor's organizational documents.
- The Bank Obligor will furnish a statement certifying that the financing is being used to fund individual Promissory Notes from local companies used for the purpose of financing the import of goods. The tenor of the Promissory Note to Rosemount will not exceed the tenor of the underlying Promissory Notes from the importing companies.
- The transaction is not secured by the underlying Import Promissory Notes and the credit is based upon the strength of the local bank.
- Transactions for the import or export of goods guaranteed or insured under approved OECD programs such as Eximbank, COFACE, HERMES, etc. A portion of the transaction may not be covered by the guarantee/insurance and therefore must meet Rosemount's credit criteria to be supported by acceptable third party guarantees or an L/C.
- Documentation requirements will be unique under each government program. In all circumstances, all conditions and documentation requirements necessary for filing claims under the respective programs must be met in advance.
- Represent pre-export financings available to exporters in developing countries. Funds are provided to the exporter to finance the purchase of raw materials and/or the production of goods for export. The financing may be "revolving" for a specified period.
- Export receivable receipts funneled through a blocked "offshore" account in the name of a third party secure the financing. The Creditor has a security interest in this account. The amount of export receivables will exceed the amount of the financing by a predetermined amount. An Agent monitors the receivables and receipts to ensure the proper level of collateral is maintained.
- Syndicated loans are credits granted by a group of banks to a borrower. They are hybrid instruments combining features of relationship lending and publicly traded debt. They allow the sharing of credit risk between various financial institutions without the disclosure and marketing burden that bond issuers face. Syndicated credits are a significant source of international trade financing.
- The syndicated loan market allows an efficient geographical and institutional sharing of risk. Loans are syndicated with one or more financial institutions and are frequently used to finance pre-export, import transactions.
- Structured commodity finance (SCF) is a commodity-based financing technique designed for commodity producers and trading companies doing business in the emerging markets. SCF plays an important role, providing liquidity management and risk mitigation for the production, purchase and sale of raw, semi-refined or semi-processed materials.
- SCF funding solutions include a variety of pre-export finance, toll finance, countertrade finance, and others. SCF can be applied across part or all of the commodity product cycle: from producer to distributor to processor, and the physical traders who buy and deliver commodities in the international and domestic markets. SCF financing is primarily based on performance risk and as such is particularly well suited for companies doing business in the emerging markets.