ABC is an Eastern European food producer that exports to USA Retail Group, a supermarket chain on East Coast. ABC found it difficult to meet order demand and manage cashflow. ABC's country of origin is a small, land-locked country and SMEs often look outside the country and region for expansion.
But access to financing for growth is limited because banks normally do not offer cross-border trade finance for SMEs.
Trafin worked directly with ABC by providing financing for ABC's exports through an Export Invoice Finance agreement - financing all exports for chosen customers/buyers.
Trafin conducted its due diligence on ABC, at the same time as making a full appraisal of their Buyer in the USA (and other Buyers) and approved a facility to finance $2m of goods to those buyers on a Non-Recourse basis - Trafin took all buyer risk of non-payment.
ABC is now able to offer their Buyer in USA (and other buyers) up to 90 days open account credit which has improved their sales and enabled them to produce the goods they make through having a positive cash flow and much improved liquidity;
The buyers are very happy because they do not have to pay Cash or raise an LC which ties up their liquidity and they can order more and are much more loyal to ABC.
XYZ is a large Buyer in Germany that has a respectable balance sheet, good level of net assets, well established and profitable.
They buy metal frames from a large Chinese factory. The Chinese factory requires Cash Against Documents (CAD) or Sight Letter Credit (Sight LC) before they ship the frames. XYZ sells the frames to their customers and, to compete, they have to offer 90 days payment terms to their customers in Germany.
Although XYZ has been trading for three years with the Chinese factory, the factory is not able to offer trade credit to XYZ as it simply cannot afford it and, in any case, its culture and practices demand every customers' pay before deliver.
XYZ approached our office in Frankfurt for a Supply Chain Finance (SCF) facility to finance their purchases. We made a full appraisal of the business. We felt very comfortable about working with XYZ as it is growing, profitable, well managed.
offered XYZ a facility whereby we pay for the goods at shipment from
the Chinese factory and they can pay us back after 120 days.
This 120 days financing enables them to pay for the goods at shipment, cover some of the shipping/transit time from China to Germany and almost fully finance the credit period they have to offer their German customers.