We also provide Trade Finance in form of Factoring, Buyer's Credit and LC Discounting.
A trade finance mechanism whereby an exporter sells its export receivables (bills of exchange or promissory notes, or simply issued invoices, which the exporter is selling on an open account basis) at a discount. The company purchasing the receivables is called a factor. Factors are normally specialized financial services companies, but many are owned by banks. Normally, after the factor has purchased a receivable, the importer or buyer pays the factor directly. Some factors actually issue the invoices to buyers and, in effect, operate the exporter's sale ledgers. Some factors operate on a non-recourse basis i.e. they assume the risk of nonpayment. Less frequently, the factor will take recourse to the exporter for all or part of the sums involved in the event of nonpayment or delayed payment by the buyer.
Buyer's credit is the credit availed by an Importer (Buyer) from overseas Lenders i.e. Banks and Financial Institutions for payment of his Imports on due date. The overseas Banks usually lend the Importer (Buyer) based on the letter of Credit (a Bank Guarantee) issued by the Importers (Buyer's) Bank. In fact the Importers Bank brokers between the Importer and the Overseas lender for arranging buyers credit by issuing its Letter of Comfort for a fee. Buyers credit helps local importers access to cheaper foreign funds close to LIBOR rates as against local sources of funding which are costly compared to LIBOR rates.
LC Discount is Letter of Credit Discount. The Letter of Credit from the prime banks or financial institutions is considered as a complete security. A Letter of Credit is a letter from Bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. Lets consider that the consignee wants to pay you after 90 days after it reaches him. But you want to be paid immediately after the documents are accepted. The banks will offer to pay you on a discount basis, meaning that they deduct a percentage from the value owing to you, which they keep as the cost of discounting; you get paid immediately the value less that the discount.