Case Study 2
Trade Finance Intelligence
This case study describes our experience in helping a CNC machinery dealer to obtain funding and navigate various operational challenges related to a sale to a client in Nigeria.
The company, our client, had secured the sale of a Heidelberg printing press to a Nigerian client for c£850k. Payment terms were via a Letter of Credit issued by a Nigerian bank.
Introduction
The client had a weak balance sheet which meant that there was no appetite from their bank to provide working capital facilities to support the transaction. Equivalent funding of c£700k was required. Lack of bank support also meant that the client was unable to obtain support from UK Export Finance, the UK’s export credit agency.
The client had no experience of being paid for export transactions via Letters of Credit. Payment terms to the French supplier were in EUR, with a different Incoterm. This meant that a UK bank would not consider a ‘back-to-back’ Letter of Credit structure.
Challenges
Utilising our detailed knowledge of the ‘trade finance’ sector, we reviewed the terms of the Letter of Credit and once satisficed that the transaction was bona-fide, proposed a ‘back-to-back’ Letter of Credit structure. We introduced the client to a specialist trade finance funder who reviewed the terms of the Letter of Credit and took control of negotiations with the French supplier which resulted in the funder issuing their own Letter of Credit.
The funder also controlled the logistics and preparation of the required Letter of Credit documentation, which ensured that the client was paid in a timely manner and generated a level of profit which strengthened their balance sheet. The facility provided by the funder was a 12-month facility and the client has already utilised the facility to support additional sales.
