Structured Trade Finance
We offer different forms of financing for the successful execution of your commercial transactions.
Pre-export Finance
Pre-export Finance is an established structure offered by Erste Group to provide secured working capital finance to exporters which have a demonstrated capacity to produce and deliver goods/commodities.
Each transaction is unique given that it is customised to meet your needs and the requirements of the jurisdiction(s) involved in the transaction and will reflect the results of the extensive due diligence that will be undertaken by us. The loan proceeds would be used by you for the purchase, warehousing and processing of raw material and the delivery of finished product. The source of repayment of the finance would be the proceeds generated by the sale of the finished product to buyers under commercial sales contracts the terms of which will have to be acceptable to the lender.
The sales proceeds would be channelled through a designated bank account and used to make payment of interest and repayment of the facility. The finance would be provided by us against the security of an assignment of the rights of the producer under the main commercial contracts which underpin the transaction, including the sales contracts with end buyers, and a pledge over the designated bank account.
The benefits to you:
- Committed financing, the structure of which is customised to the needs of the client
- Provides you with access to funding outside of normal bank lines provided by local banks
- Offers the possibility of medium term funding at a lower cost of funding compared to other available sources of debt
- You are able to use unencumbered export sales as security for loan
- Establishes for you a track-record of borrowing from international banks
Prepayment Finance
Prepayment Finance is offered by us to clients (typically trading companies) to finance advance payments to be made to a commodity producer for commodities to be delivered in the future.
This allows you the possibility to negotiate long term supply contracts with producers in exchange for the provision of finance which is funded by us. For the producer, it offers the possibility to access financing which might not otherwise be available to them. It is also a financing structure often employed by Erste Group when dealing with jurisdictions which have exchange control regulations which may not be conducive to direct cross border lending.
Prepayment finance facilities are secured by assignment in favour of Erste Group of the two contractual elements in each transaction: The sale and purchase agreement between the client and the producer, and the contractual arrangements and cash-flows (which form the source of repayment of the finance) between you and your buyers.
Borrowing Base Finance
Borrowing Base Finance is similar to a Pre-export Finance and Prepayment Finance in that its main purpose it to provide working capital to a producer.
The primary difference is that the amount available for disbursement to the producer is based on an agreed percentage of the value of cash, inventory and receivables (the Borrowing Base) pledged in favour of the lender. The agreed percentage (advance rate) is intended to provide a buffer against adverse price movements and will depend on the asset category.
Inventory Finance
Inventory Finance is a financing solution offered by the Structured Trade Finance Department in Erste’s London Branch designed to assist you to improve your working capital structure by the reduction of inventories in your balance sheet.
Each transaction will be unique given that it is customised to meet your needs. We will arrange for a third party to purchase material (typically raw material used in the production of your products) from your suppliers. The third party (typically a special purpose company established specifically for the purposes of the transaction) will purchase, warehouse and deliver just-in-time to you material as and when it is required for production purposes.
The financing for the transaction would be provided by us by way of a committed revolving loan facility, the disbursement proceeds of which will be used to fund the purchase of the material. The loan facility will be repaid from the payments made by the client in respect of material delivered.
The benefits to you:
- Cash-flow timing
Your working capital will be only impacted upon payment of the invoice issued by the third party in respect of material delivered. - Extended payment terms
Payment terms for the supply of material could be extended to match more closely the payment terms which you offer to your customers for the sale of finished products. - Cost saving
Savings achieved through the bundling of volumes of material or from the prompt payment to suppliers could lead to better pricing conditions for you. - Security of Supply
Could be used to secure supply of critical raw material. - Cash impact
The transaction could extend to the purchase of existing inventories of material owned by you which would generate a positive impact on your working capital.