Financing without SERV cover
If the buyer bank security is of a high quality, it might be worth considering a credit without SERV cover. Both direct loans from the bank to the buyer (export finance credit) and the purchase of supplier credit without recourse (forfeiting) are possible options.
For you as a supplier, forfeiting is a simple and attractive form of export finance. Forfeiting refers to the non-recourse sale of receivables from exports of goods and services on the part of the exporter.
The starting point is the granting of a supplier's credit by the exporter to buyers of capital and consumer goods, raw materials and services.
The benefits of forfeiting:
- Turns a supplier credit into a cash transaction.
- No credit risk.
- No political or transfer risk.
- In the case of invoicing in a foreign currency, the currency risk only applies from signature of the delivery contract to payment of the proceeds of the forfeiting.
- The country of origin of the goods is irrelevant.
- No Export Risk Guarantee cover is necessary.
For the purposes of insuring export business, the OECD harmonised conditions for state-supported export credit transactions require that the buyer pay 15% of the delivery value on or prior to delivery from their own funds. It is not possible for the supplier to provide a loan for this amount. However, often the order depends on whether the exporter is able to offer full financing of the export transactions to the buyer. In such cases the only remaining financing option is the granting of an accompanying loan by a third party, e.g. the exporter's bank (export finance credit).
Criteria for export finance credits:
Whether or not UBS is willing to grant an export finance credit depends largely on the creditworthiness of the borrower and the borrower's country, the scope within the relevant country's credit ceiling and the availability of alternative instruments to minimise and transfer the finance-related risks.
The terms of an export finance credit (duration, interest rate and commission) are essentially determined by the applicable conditions on the international credit and capital markets for comparable debt instruments for the borrower in question.
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