Trade finance can be
described as an imprecise
science, according to Menso
Kwint, accounts executive for
Lombard Trade Finance.
The imprecision, Kwint
added, stems from the fact
that a wide range of tools may
all be incorporated under the
banner of trade finance – such
as direct payments; letters of
credit; factoring; forfaiting;
structured commodity
finance; export and agency
finance and trade credit
insurance.
“However, in its simplest
form,” he said, “an exporter
often requires an importer
to prepay for goods shipped,
or provide security for the
shipment of goods. Trade
finance provides the capital
to make the prepayment or
securitise the debt for shipped
goods.”
Specifically designed
to fund the purchase of
inventory and/or raw
materials, trade finance
can be seen as a short- to
medium-term working capital
facility, he said.
“It is used in much the
same way as a revolving bank
overdraft, with the product
providing an extra layer of
funding that is often crucial
to a growing business.”
The terms of repayment
are structured to match an
importer’s extended cash flow
cycle – typically at 120 days
– to allow the prepayment,
shipment and sale of goods to
take place before settlement.
“Where bank finance does
not often consider inventory
as security on lending
facilities, trade finance does,”
said Kwint. “Therefore,
often higher facilities may be
approved and these funds can
be used in ‘conjunction’ or as
a ‘substitute’ to a traditional
bank overdraft.
He also pointed out that his
company offered “necessary
and innovative trade funding
solutions” to SA companies.
“In today’s uncertain
world of conservative credit
lending,” Kwint added,
“often a business may lack
the financial resources to
seize the opportunities
they create for themselves.
Lombard Trade Finance looks
to understand a company’s
people, their offering and
financial needs and thereby
partner with a client through
a long-term relationship that
makes sense for
both parties.”
‘Finding innovative trade funding options’
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