Buyer Credit facilities

Description:

Why foreign companies need trade finance Facing limited access to capital in their own countries, and unable or unwilling to borrow from local banks or other lenders, companies in emerging foreign markets now more than ever before are seeking working capital in the form of trade finance. The most expeditious and economical way to implement revolving trade finance for a foreign buyer is for each supplier selling to that buyer to extend open-account credit terms using their own export credit insurance policies. When a company in another country needs trade finance for its purchases from multiple suppliers, however, it may not be practical or even possible for every supplier to obtain insurance coverage or offer open-account export credit terms. An alternative solution is to arrange a trade finance facility for the buyer under which a third-party lender (a) pays the suppliers when the goods are exported and then (b) extends more favorable cross-border payment terms to the buyer. Meridian Finance Group has over fifteen years of experience in middle-market trade finance, successfully arranging buyer credit facilities for manufacturers, distributors, government agencies, and other importers located in emerging foreign markets. What types of purchases can be financed? International sales of all kinds of products and services are eligible for trade finance, as long as the buyer is a well-established creditworthy company located in one of the many emerging foreign markets where Meridian does business. The products can be manufactured in the USA or in another country. Likewise, the goods may ship from the USA or elsewhere, although in order to be eligible some trade finance transactions may need to be invoiced by vendors located in the USA. Most of the foreign buyer credit facilities arranged by Meridian provide between $1,000,000 and $10,000,000 of trade finance. The buyer can utilize the credit for a single order or on a revolving basis for multiple purchases from a single vendor or from multiple suppliers. We have the capacity to support larger international trade finance lines, but most of the demand we encounter is for credit facilities in the seven-figure range. Suppliers with smaller export sales volumes may be able to use export credit insurance to extend payment terms to the buyer themselves, in some cases with no minimum line or individual transaction size. How foreign buyer credit facilities are structured Meridian arranges trade finance for creditworthy buyers in emerging foreign markets with interest rates and payment terms more favorable than those available from lenders in their own countries or from their suppliers in the USA or other countries. Each credit facility finances export sales made to a single foreign buyer by one or more suppliers during a one-year period. Trade finance lines can be renewed annually upon review of the buyer’s current financial statements and other updated information. Payment terms extended to the buyer are typically between 90 and 180 days for each export sale. Export credit terms up to 360 days may be feasible for capital equipment, some agricultural commodities, and other products with longer economic life cycles. The first step is to provide Meridian with the foreign buyer’s audited financial statements, a list of suppliers, and a description of the underlying transactions. In most cases this information enables us to gauge the feasibility of arranging trade finance for the buyer, at which point we issue an initial credit proposal or terms sheet. After the buyer accepts Meridian’s terms sheet and pays our commitment fee, we visit the buyer, perform our due diligence, get the credit underwritten, and place the line with one of our lenders. Once the trade finance facility is activated, each time the buyer submits a purchase order to one of its suppliers it simultaneously sends a signed promissory note to Meridian. We notify all parties that credit for the order is in place, the exporter ships the goods and gets paid by the lender, and then the buyer pays the debt obligation at a later time in accordance with the terms of the promissory note. Instead of the “buyer credit” structure described above, in some cases for cultural, logistic, or relationship reasons, trade finance may be extended to the buyer directly by the exporters rather than by a third-party lender. In these “supplier credit” scenarios, Meridian arranges note purchase agreements between the lender and the suppliers under which the suppliers can sell the lender their trade receivables from the foreign buyer, as above upon shipment and presentation of export documents. In yet other cases it may be more practical to finance the foreign buyer’s trade payables rather than the suppliers’ receivables. The exporters may already be extending credit terms to the buyer but their export credit lines may not be large enough for the buyer to place additional orders while current invoices are still open. In such circumstances Meridian can arrange a trade finance facility under which the buyer selects payables for the lender to settle early with its suppliers, freeing up supplier credit lines so the buyer can place new orders. What kinds of information are required? Meridian evaluates the creditworthiness of foreign buyers for trade finance based on information including, but not limited to, three years of annual reports or audited financial statements, interim financials, credit reports, bank and trade references, searches of public records, market research, and other due diligence. We also need a list of the suppliers and information about the underlying trade transactions. Please note that when arranging trade finance facilities we have a preference for situations in which the buyer and the suppliers already have a history of doing business together, whether on open-account credit terms or otherwise. Personnel from Meridian may travel to the buyer’s country to meet with the buyer, visit its facilities, assess local market conditions, etc. In order to keep the due diligence process moving and expedite turnaround times, we fly as soon as possible after receiving the buyer's acceptance of our terms sheet and payment of our commitment fee (which is refundable, minus travel expenses, if the financing is not approved). Why you should work with Meridian Over the past fifteen years, Meridian Finance Group has helped hundreds of exporters increase their international sales using foreign buyer credit facilities, cross-border equipment financing, export credit insurance, and other trade finance tools. While we’re proficient at using Ex-Im Bank programs and other conventional trade finance techniques, many of our transactions are structured using proprietary methods we’ve formulated ourselves by working with a wide range of countries, buyers, exporters, lenders, and underwriters. We understand your business. Our staff is multicultural and multilingual, with experience not only in trade finance and credit insurance but also exporting, manufacturing, operations, logistics, and international distribution.