Import Finance Facility
Get financed to import your goods. Loan granted to finance importation of raw materials or finished goods. An Advance facility offered specifically to facilitate the importation of current/working assets.
Import Finance Facility may be availed via Bas (Banker Acceptance), CPs (Commercial Paper) or ODF (Overdraft Facility) in non-checking accounts Associated risk includes new or unforeseen regulatory policy, supply, demand, unpredictable fluctuations in FX rates, improper (over/under) invoicing
Modes of Payment In International Trade
- Open account – seller dispatches goods to the buyer (without payment) with an agreement to make payment within a specified period
- Bills for collection – seller dispatches goods to the buyer with an agreement that the buyer makes payment within a specified period but underlying document delivered to its banker
- Advance payment – buyer pays the seller before goods are dispatched
- Letter of credit – debt instrument issued by a bank on behalf of its customer to make payment to third party against certain stipulated documents
Modes of LC Payment
- Sight payment
- Deferred payment
- Acceptance Negotiation
Features and Benefits
- Company’s trade cycle
- Experience/track record
- Terms of payment (Confirmed or Unconfirmed LC/Sight or deferred payment)
- Nature of goods (Prohibited or not/Perishable or not) Customer’s contribution
- Demand deficiency/Marketability
- FX fluctuation
- Equity contribution by customer
- Documents required for establishment of LC submitted
- Independent verification of price & marketability to avoid over/under invoicing
- Consignment of goods to the order of the bank/ warehousing arrangement, integrity/capacity of company to pay on arrival of shipping documents
- Independent security etc.
- Proforma invoice from supplier/Form ‘M’ Customer’s stock level
- Contribution (minimum of 30% of Landing Cost – CIF+ Custom duty+ Clearing Charges)
- Documentary evidence of previous importation
- Profitability Analysis
Finance Lease Facility
Get a loan to finance the acquisition of that Asset. Loan granted to finance the acquisition of an asset e.g., motor vehicles, generating sets etc. Leasing refers to a mode of financing which allows the use of equipment in return for agreed lease payments. This is a financing option for the acquisition or use of an asset. Two major types of leasing exist namely: Finance and Operating Lease.
Long-term financing of fixed assets. Typically assets financed should be generic assets that can be easily realized in the event of default.
An agreement between the lessor and the lessee by which the former permits the latter the use of the equipment (asset) for an agreed period of time, in return for lease rentals which the lessee pays to the lessor.
Associated risks include technology, factory defect, competition, and diversion.
TYPES OF LEASE
- Finance lease – the lessor (Wema Bank) transfers to the lessee (customer) substantially all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred (purchase option at/residual value).
- Operating lease – the lessor does not necessarily transfer all the risks and benefits of asset ownership to the lessee. This is done by asset manufacturers or dealers. Ordinarily, banks do not engage in operating lease or lessor activities.
- Determine source/mode of payment
- Cash flow capacity over the useful life of the asset
- Moratorium period (where applicable)
- Pro-forma Invoice of asset being financed
- Minimum of 30% contribution (security deposit)
- Regular and verifiable cash flow
- Projected cash flow (where applicable)