Business growth is increasingly fueling the demand for trade financing. Trade financing involves the sourcing and financing of trade inputs for business whether large-scale or small-scale businesses. At Family Bank, we have a strong retail and corporate customer base that we support and whose business we pride ourselves in propelling through trade financing.
There are various opportunities that business people can access trade financing options at Family Bank in order to facilitate ease of business. These include;
- Credit or payment guarantees– This is usually an undertaking given by Family Bank on behalf of a client in favour of a seller guaranteeing payment of goods supplied on credit to our client for a stated amount and period. A customer is able to access credit of goods and pay for it at a later date as per the agreement with the supplier. For most manufacturers, in order to have their products moving in the market with their local and abroad distributors, they usually offer credit terms to their distributors who in turn do the same to their stockists. To guarantee payment on expiry of the credit period, manufacturers require a bank guarantee as an expression of the distributor’s state of credit and in case the distributor fails, then the bank will be liable to adhere to the payment terms. This product is of value to SMEs and corporates who are particularly in chain of distribution.
- With a bank guarantee its permitting the distributor to bridge the liquidity gap between the purchase of stocks and payments received from its customers.
- Increased credit for distributors which allows them to extend the same to their stockiest thus able to increase market Niche.
- Credit for distributors at a lower cost than what would be available from traditional banking sources.
- Invoice Discounting – This is a form of short-term borrowing, for a maximum of 180 days or less, that is often used to improve a company’s working capital and cash flow position. It entails the purchasing by Family Bank of invoices or promissory notes from a supplier’s selected customers allowing a business to obtain funds against its sales invoices issued to their buyers. Small to medium sized enterprises can benefit from this form of financing since the borrowing is limited to the invoice amount thus making it a form of intentional borrowing.
- Its helps the business owner to manage the cash flow efficiently especially when a supplier/Contractor need working capital or have timely opportunities to reinvest in his business.
- Advance payment guarantee– Advance payment guarantee assures the procurement entity that upon advancing some money to the employee/tenderer, then, they will commence the contract execution and in case of any diversion of funds then the Bank becomes liable. This type of facility is particularly of value to the construction industry.
- Additional liquidity is received to finance activities/Orders.
- The buyer is secure with the guarantee his advance payment will be returned if the contract is not fulfilled.
- Local Purchase Order (LPO) Financing– This is a facility tailor-made by Family Bank for its clients (contractors/suppliers) of reputable organizations to enable them to execute work and Local Purchase Orders from their respective employers. Local purchase Order (LPO) financing is usually given for 180 days or less with a renewable repayment period of up to 12 months. With the growing entrepreneurial market, this form of financing facilitates business for firms who need capital for purchase and supply or firms that require working capital against confirmed invoices.
- Provides the ability to buy inventory and grow sales when capital is limited.
- Enables your company to grow without increased bank debt or diluting ownership.
- Facilitates cash flow for timely deliveries to customers.
- Increases sales opportunities.
- Empowers you to capitalize on opportunity which produces more profit.
- Performance bonds– This is an undertaking issued by the bank when a company wins a tender and they need to confirm to the procuring entity that they are able to meet their obligation as per the contract. It enables the contractor to sign the contract as it’s a requirement in the contract award process. In the event a supplier is unable to perform a certain responsibility or delivers, the project owner has the power to invoke the performance bond through the Surety by up to the value of the unfinished / unsupplied items or to the cost of re-doing the subpar work.
- Bid bond/ Tender bonds– This is an undertaking issued as part of a bidding process by the suppliers to the procurement entity as a guarantee that the bidder will undertake the contract in the event that they are awarded the contract in the terms in which they bid. This product suits any contractor. The bid bonds effectively protect the project owner in the event the supplier/Contractor awarded the job fails to sign the contract as per the terms submitted in the bid.
- Letters of Credit- It’s a commitment by a bank (Family Bank) on behalf of the importer (Family Bank customer) that payment will be made to the beneficiary (exporter/Supplier) provided that the terms and conditions stated in the Letter of Credit have been met, as evidenced by the presentation of specified documents.
- Provides secure method of payment in international trade/Local Trade and that the buyer (Family Bank Customer) is able to get a period of credit before having to pay for the imports
- A seller is reassured that they will receive their money in full and on time. A letter of credit is one of the most secure methods of payment for exporters as long as they meet all the terms and conditions. The risk of non-payment is transferred from the seller to the bank (or banks).
- When a buyer uses a letter of credit they get a guarantee that the seller will honor their side of the deal and provide documentary proof of this.
Family Bank offers this irrevocable undertakings solution to its customers under quick and flexible terms. The solutions range from Back to back Letters of credit, Sight Letters of credits, Deffered Letters of credit, Stand By Letters of Credit among others depending on the nature of transaction and terms and conditions agreeable by the Supplier and the Buyer.
- Import Duty Financing- Import Duty Finance is a short term Trade Finance facility offered by Family Bank to importers of goods and services and usually with duration of 180 days or less .The purpose is to enable importers of authorized goods and services in Kenya pay the required duties and taxes at the port
- To avoid Port, Storage and Demurrage charges the longer the stay, the higher the charges and they are expensive.
- To avoid Auction; To avoid usual auctioning of unclaimed cargo at the port of Mombasa by KRA as well as Container Freight Stations
Trade finance is an important external source of working capital for any business to be able to create wealth for its continuity, especially for small to medium-sized enterprises. The benefit of trade finance is that it is a relatively easy way to arrange short-term finance and it helps businesses focus on growth activities as they seek to grow their businesses. Like any other form of credit, business owners need to have the diligence of paying back the credit extended to them.
Family Bank Ltd offers a variety of Trade Finance products that empower any form of business. We strive in making them grow from small enterprises to formidable and stable businesses that contribute the growth of our economies. We believe in tailor making solutions that best suits your business for both short and long term gains. Talk to us today for all your Trade Finance needs.
For trade financing inquiries, you can reach us through TradeFinanceFO@familybank.co.ke or 0703 095 585, 0703 095 586.