Finaam Corporation provides services of agent on clearance and loan under the guarantee of ECA. The Corporation concludes contract for management a project, to which it is an Exporter of equipment and services, also helps Importer to resolve the issue of funds at the request of ECA.
Financing under the cover of national export agencies is the most appropriate tool for enterprises whose activities are related with the acquisition of machinery and equipment of foreign manufacture. This type of financing is suitable for any enterprise that can prove its own creditworthiness.
Export-credit agency is a public or private institution that provides support for national exports. ECA provides a wide range of services, which include lending of foreign operations, the provision of government guarantees for export credits, export credit insurance and deals from political and other risks. In addition, the export credit agencies have organizational, informational and analytical support.
The main tasks of the ECA include the following:
1. Promoting export of equipment and technologies, software manufacturers.
2. The provision of insurance coverage of their own producers and exporters on new and risky foreign markets.
3. Establishment and implementation of a modern system of financial support for exports.
4. Increasing transparency of export operations and international investments.
In practice, crediting under guarantees, by ECA can be carried in two main schemes:
– In the first variant the Borrower is the Bank that has accreditation by ECA (ECA has agreed to work with this bank), i.e., credit is given to the Bank to finance the target contract of the Importer;
– In the second – the Borrower itself Company-Importer, i.e. foreign Bank-Creditor provides direct loan under the guarantee-surety of the Bank of Borrower.
The specific choice of scheme depends mainly from the one who – the Bank or the Company-Importer will cause more trust from the financing Bank and Export Credit Agency.
For the Bank Creditor the main condition for obtaining guarantees of ECA is the availability from the Importer a contract for the import of equipment, goods and services. Of course, for Banks, with which Export Credit Agency already had positive experience, the formalities reduced to a minimum and our Corporation will provide such Bank to the Importer.
Standard requirements for the bank, applying for lending:
– Reporting according to European standards, audit;
– Credit history;
– Ratings of international rating agencies;
– By the rules of ECA must serve the export of industrial technological equipment and services;
– By another rule the amount of guarantees of export agency shall not exceed 50% of the bank’s equity capital. But even here there are exceptions.
Building a workable system of export financing, ECA provides only the target (so called related) financing of business – projects with fixed interest rate. In addition, referring to the terms of financing, it is necessary to take into account the ratio of Agencies of different countries to the Bank. Also, there are additional fees and financial commitment.
Credits under guarantee of ECA a very attractive type of financing because they may be granted for a period up to 10 years.
Terms financing the projects under guarantees of ECA:
– Financing term up to 10 years;
– The payment terms according to the contract of supply of goods / services (15% down payment + 85% letter of credit);
– The borrower’s own funds from 15%;
– The maximum loan amount 85% from the sum of the contract;
– The beginning of the repayment period depends on the terms of the contract (the average weighted delivery date, the date of the last delivery, the date of putting the equipment into operation);
– Loan rate: floating based on rate of LIBOR / EURIBOR / fixed (similar to the structure of rates for Letter of Credit with post-financing), does not exceed 7% of the total;
– The presence of related expenditures: ECA insurance premium, the fee for the organization of financing, commitment fee to provide credit, legal expenses;
– The standard commission through the estimated instruments (Commission letter of credit for advice notes and for checking documents, brokerage services for the organization and execution of the loan).
Long-term import financing including ECA is practically the only tool for medium-term and long-term financing of import of equipment and resolves the following questions:
– Long-term of financing – 5 – 12 years;
– Possibility of financing VAT, customs duties and other costs for preparation of the project on the part of the Borrower;
– The cost of financing is much lower than bank services (despite the requirement of payment of commissions to foreign banks for financing organization, maintaining a line of credit, as well as covering the costs of juridical registration documentation of broker).
Problematic aspect of transactions is the need to pay 15% of the contract at the expense of the importer.
Finaam represents the scheme of the process of financing under ECA guarantee
Company – initiator of the project enters into a contract with Finaam, which assumes the full range of activities associated with the creation and launch of the planned complex (commercial, industrial and others.) – the subject of the project. The Parties (the company, further – Importer and Finaam – Exporter) conclude a preliminary contract for the supply of equipment and for performance of full range of works associated with the installation and commissioning of the equipment. In the composition of the contract must also be included a complex of works on preparation of the project, including the preparation of the construction area. Finaam will provide the Bank creditor and professionally will prepare a full package of documents for registration of the loan.
During the negotiations, besides the technical components of the project there will be determined the participants of the process of financing: Bank of Importer, Suppliers of equipment, General contractor, Transport company. After determining, the project participants Importer and Exporter get agreement in principle from Banks and ECA for the project.
The advantages of this type of financing
First of all, it is the presence of grace period up to six months and installment of loan repayment up to 10 years; lower cost of resources than when lending “own” funds of the bank; no need for diversion of you own circulating assets; the ability to obtain the related financing on advance payment to the counterparty by the presence of short-term documentary credit; the ability to optimize financial flows by the presence of pre-agreed payment schedule. In addition, structured in this way the deals by using qualified professionals of Finaam allow to minimize the delays in obtaining the loan and investment of own funds of Importer.
CESCE SA (Spain)
EGAP (Czech Republic)
Ex-lm Bank of the Slovak Republic (Slovakia)
SAGE S.p.A. (Italy)
US Ex-lm Bank (USA)
АКА AUSFUHRKREDIT-GESELLSCHAFT МВН (Germany)
CZECH EXPORT BANK (Czech Republic)
ECGD (Great Britain)
The goal of trade finance:
• Minimize external trade, political, commercial and financial risks;
• Increase the credit terms and / or deferrals of payment for the purchased products;
• Obtain financial savings;
• Improve efficiency of the use of own funds, without diverting resources from your own circulating capital;
• Expand the range of counterparties;
• Increase the volume of purchased products and business development.
Customers of trade finance:
• Companies that plan to upgrade fixed assets, or opening the new production through the purchase of imported equipment;
• Companies who are doing regular imports of various types of goods and equipment;
• Companies who are doing regular export of various types of goods, raw materials and equipment.