How can I offer my buyer a credit deal without killing my cash flow?
The hard pressed Director finds it difficult these days to find sympathetic practitioners and bankers that can “think out of the box” when it comes to sales finance.
Being a highly respected independent sales and export consultancy firm, Keith Johnson Consulting takes an innovative approach to the task of offering deliverable financing solutions, being staffed with advisers that can find the best bespoke solution for your challenge rather than trying to fit your situation into a “fit all” product.
How often do you hear that the buyer has a budget constraint or could really do with up to 180 days to pay for the goods and services you wish to supply to him? It might be he even requires rolling finance or perhaps a fixed term 3 year facility.
A particular strength of Keith Johnson Consulting is export finance. We can arrange non-recourse funding for your buyer with say up to 3 years re-payment that allows you the exporter to get paid when the delivery is made. Concurrently the customer has time to re-pay once the system is installed or the product “on sold” by the buyer, to his particular market place..
Keith Johnson Consulting will work with you the client to come up with the most effective financial structure that suits you the seller and your buyer which can quite often lead to an increased order value or an accelerated sale.
There are a number of forms of buyer financing and Keith Johnson Consulting prides itself in being able to establish facilities that you the seller are able to understand, as well being on hand to support you in negotiations with your buyer, if required.
The types of facilities that are available are:
- Use of Letters of Credit [L/C] to give the buyer up to say180 days to pay whist allowing you the exporter to be paid when documents are submitted. This is called “discounting a Usance L/C.
- Non-recourse “forfaiting”, where the banks discount “Bills of Exchange” [B/E] issued by a bank. This is where the buyer’s bank issues “bank issued post dated cheques” with repayment to be made in the future”. The buyer’s bank takes the buyer’s payment risk and these “post dated cheques” can be traded and “discounted” to give you the seller cash when the goods are delivered.
- “Supplier Credit” , financing facilities where the seller arranges for the buyer’s bank to issue the above Bills of Exchange. These B/E are then insured by a Government owned “insurance type” organisation called an Export Credit Agency [ECA]. The ECA issues a guarantee to a bank that in the event of non-payment, the bank is reimbursed by the ECA and then the Government negotiates a re-scheduling of the debts.
- “Buyer Credit”, type financing where the banks gives a direct loan to the buyer. The bank receives a guarantee from an ECA [as described above] that in the event of non-payment the banks are reimbursed by the ECA and then the Government negotiates a re-scheduling of its debts.
- “Standby Letters of Credit”, this is where there are a series of sales to one customer made on “open account”. The Letter of Credit purely “stands by” as a support and in the event of non-payment of one of the transactions by the buyer the seller then claims from the L/C.
- “Bank based Collections”, this is where the UK bank sends the sellers invoice and shipping documents direct to the buyer’s bank, who only releases the documents once payment or a commitment to pay has been made to the bank. This at least gives security that documents do not get “lost in the post” whilst trading on open account terms.
- “Credit and Political Risk Insurance” is available to cover against non payment by the buyer when trading on open account terms or just an Irrevocable L/C [not Confirmed] is issued, as well as offering cover against political events that frustrate the contract performance.
Please contact us for a no obligation chat.