Tailor-made solutions address importers’ needs

Importers face a very
specific set of risks in
the environment in which
they operate, according to
Menso Kwint, accounts
executive for Lombard
Trade Finance, and trade
finance can be seen as one
risk management control
element.
“Above all,” he told FTW,
“the biggest challenge is
often access to sufficient
capital required to run
and grow a business.
Trade finance may
alleviate this problem
for retail, wholesale and
manufacturing companies
by providing an extra layer
of funding geared towards
the purchase of inventories.”
Kwint listed some of the
other risks that may face an
importer.
“Up-and-down swings in
exchange rate can negatively
affect an importer if
these fluctuations are not
correctly handled,” he
said. “Competitively priced
imported goods become
more expensive and less
attractive on a weakening
rand.
“Similarly, a
strengthening rand
may leave an importer
with overpriced stock.
To address the latter, a
business may use flexible
financing facilities to
purchase stock only when
necessary, and so avoid
excessive stock holding.
The ability to book forward
cover locks in a future
cost and hedges against a
weakening rand.”
There is another specific
risk for South Africa.
“Often,” said Kwint,
“large international
suppliers can view this
country with uncertainty,
and so hesitate to offer
beneficial trading terms.
However, trade finance
swings power back into the
hands of a local buyer as
foreign suppliers are paid
upfront and better terms
may be negotiated.”
He also pointed out that
cash-flow and working
capital management would
always be difficult in the
instance of an importer’s
long cash-flow cycles.
“Trade finance provides
the funding to match these
cycles,” he said, “and create
a sustainable cash-flow
balance.”
Kwint also noted that
there was no such thing as a
‘one size fits all solution’.
“As each company is
different,” he said, “through
understanding each unique
position, Lombard Trade
Finance seeks to provide
alternative, yet viable,
tailor-made solutions to
enable business.”
Also, where bank funding
typically requires 100%
cash collateral in order to
establish a letter of credit,
the company securitises
through inventory and other
non-cash assets, so freeing
up vital working capital in a
business. Forward rates may
be booked as an add-on
feature and do not reduce
the facilities approved.
“This extra layer of
funding can be extremely
useful to fund specific deals
or help an existing company
through a demanding
growth phase,” said Kwint.