Banking and Finance Information for Exporters

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International TradeThe Export Process

• Banking and Finance Information for Exporters
• 16th April 2008
• Presented by Ray Buxton
• Senior Manager International Trade, Bendigo Bank
  Limited
• Tel [phone]
• Mob [phone]

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Exporting - Risk Management

• Methods of Payment.
• Financing.
• FX Risk Management.

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Major Export Risks

• Buyer risk
• -methods of payment/debtor insurance
• Bank Country risk
• -confirmation
• Foreign Currency risk
• -hedging strategies
• Transit risk
• -Marine insurance

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Methods of Payment

• Aim is to be paid.
• Timely manner.
• The amount of trust between buyer and seller,
  determines the method of payment.
• Do your homework, credit checks etc.(know your
  buyer)
• Agreeing to payment terms is part of the sales
  process.

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The Three Main Methods of payment

• (1) Open account.
• (2) Letter of Credit.
• (3) Documentary Collections.
• Talk to your banker about the most appropriate
  method.

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Open Account

• Payment risk is dependant on who pays when.
• As an exporter if payment is received up front,
  prior to shipment, payment risk has been
  mitigated.
• Great for exporter, poor for importer.
• May make your product offering less
  attractive in comparison to other payment terms.
• .

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Open Account contd

• In reverse, if goods are shipped on the basis of
  payment against receipt of goods at the port of
  despatch, then obviously the exporter maintains
  all payment risk.
• In either case insist on payment via telegraphic
  transfer direct to your bank account.

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Documentary Letters of Credit

• Guarantee issued by the importers bank
  authorising the payment of money to the exporter,
  against delivery by the exporter of specific
  documents.
• Mitigates risk of non payment.

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Document and payment flow under an Export Letter
of Credit
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Whats in a typical Letter of Credit

• Exporters details, currency, amount.
• Expiry date, latest shipment date.
• Shipping details, Insurance details.
• Incoterms, e.g FOB, CIF, CF
• Brief description of goods.
• Terms of payment, sight, 30 days sight,etc.

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Common Documents Required

• Invoice.
• Packing List.
• Bills of Lading.
• Airway Bills.
• Certificate of origin.
• Phytosanitary certificate.
• Insurance certificate.

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How can Bendigo Bank assist?

• Check to see if the L.C is workable.
• Will you be able to comply with it?
• Check the documents in readiness for dispatch.
• Negotiate documents, lodge claim with the
  reimbursing bank.
• Collect your funds.
• Assist in mitigation of your FX risk.
• Pre / Post-shipment finance.

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Documentary Collection

• Commonly known as DP or DA.
• A compromise between open account trading and
  documentary letters of credit.
• Payment not guaranteed.
• Documentation same as Letter of Credit

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Document and payment flow under an Export
Documentary Collection
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Financing Trade Transactions

• Pre - shipment finance.
• -to provide finance for the purchase of raw
  materials/finished goods to fulfil an export
  order.
• Post - shipment finance.
• -to provide finance for the period from shipment
  to receipt of funds from overseas buyer
• Finance available in all major currencies for a
  period no longer than 180 days.
• Under Documentary Credit with/without recourse
  (confirmed letter of credit).
• Documentary Collection with recourse.

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FX Risk Management

• Forward Exchange Contracts.
• -an agreement between two parties to exchange on
  a specific future date a fixed amount of one
  currency for an amount of another currency at a
  foreign exchange rate agreed on the day the
  agreement was entered into.
• FX deposits / FX loans.
• -term deposits and term loans denominated in a
  foreign currency.
• Foreign Currency Accounts
• -at call bank account denominated in a foreign
  currency.

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Questions?