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Commercial Banking
What is Trade Finance?
This specialised area of banking involves a unique set of financing options used by businesses to facilitate the movement of goods and services. While not limited to international trade, the products are commonly associated with the movement of goods between countries.
We offer specialised trade finance products and services for our local and international customers. These products are extended through lines of credit denominated in US$ or Euro currencies and include the following:
When you can use it
When foreign suppliers insist on a guarantee of payment before processing orders or shipping goods.
What it is and how it works
These are used as conditional guarantees of payment made by the bank (the issuing bank) to the supplier. They are conditional in that they only guarantee payment if specified conditions are met.
These conditions or “terms of credit” are usually agreed upon by both the supplier (exporter) and the importer and involve documents which must be provided with the shipment. These include bills of exchange, bills of lading or air waybills, commercial or CARICOM invoices, insurance certificates, packing lists, inspection certificates etc.
Once the exporter ships the goods, it presents documents to the paying bank for settlement according to the terms of the credit.
Letters of credit are usually irrevocable which means that the terms cannot be changed without agreement by the importer and the exporter. This assures the importer that the goods shipped will correspond with what was ordered and it assures the exporter that payment will be received once it has complied with the terms of the credit.
Where a confirmed letter of credit is requested, the issuing bank requests its correspondent bank in the exporter's country to guarantee the credit.
It should be noted that banks deal only with documents. If the importer is not satisfied with the goods shipped, recourse is only through the exporter or the insurers.
When you can use it
Importers who must pay in advance of shipping or on sight of shipping documents and do not want the burden of cash flow and working capital arrangements, can access funds by having suppliers discount bills of exchange drawn on them.
What is it?
It allows importers to benefit from credit terms by giving them time to turn the goods purchased into cash before having to pay. Exporters are also assured of early settlement. It is available with or without recourse to the exporter.
How it works
1. The exporter/supplier submits a bill of exchange (drawn on the importer or buyer) and shipping documents to the bank. The bill would normally be made payable to the bank and reflect a specific time for repayment (as agreed between importer and bank).
2. The bill is presented to the importer for acceptance of payment.
3. On acceptance, the bill is discounted and the exporter is paid.
Documents you need to access this service
If the importer requests the service, it has to provide up-to-date financial information. If the supplier or exporter requests the facility and financial information is not available to the bank, recourse to the exporter is retained and the exporter must furnish financial information on its company to confirm its ability to settle the bill if the importer refuses to do so.
The person requesting the facility usually pays discounting charges.
When you use it
It's usually for medium to large-scale manufacturers who import large quantities of raw materials. Inventory financing eliminates the upfront costs.
What it is and how it works
Prerequisites for this service include:
- raw materials of a generic, non-perishable nature
- relevant Customs approvals
- storage facility
Suppliers may be paid by documentary letters of credit with the raw materials consigned to the bank or via a revolving line of credit. The respective drawing will be repaid according to loan arrangements. These are usually linked to the manufacturers' production and collection cycles so that payments are linked to cash flows created by the raw materials.
When you use it
It's for importers who prefer to purchase plant and equipment from annual business earnings and who have good net cash flows.
What it is and how it works
This form of financing allows importers to confirm payment to foreign suppliers for equipment and machinery and to structure repayment to suit the specific cash flows of their businesses. It is particularly beneficial to importers who have cyclical experiences in their annual trade patterns and need to match payment obligations to the timing of receipts from sales.
Once capital goods' purchases are identified, the equipment manufacturer is provided with a guarantee of payment if the particular piece of equipment is standard in nature. The bank then makes payment against shipment and establishes a specific facility to be repaid under the prearranged terms.
Capital goods trade financing is particularly beneficial as it avoids the congestion of overdraft facilities with equipment purchases. This leads to over-limit situations which introduce administrative burdens and unnecessary penalty interest charges.
What it is and when you use it
It's for exporters who want to remain competitive and grow their business by offering importers credit terms and stay liquid by discounting their accounts receivable.
How it works:
- Once the shipment is dispatched, the exporter presents the shipping documents including the bill of exchange to the bank.
- The bank then forwards these documents to the importer's bank which is instructed to release the documents only on acceptance of the bill of exchange.
- The accepted bill of exchange is then returned to the exporter's bank for discounting and the exporter is paid the face value of the bill minus the associated finance charges.
- If the exporter does not want to retain the credit risk on the importer, non-recourse discounting can be accommodated i.e. the exporter will not be liable for non-payment by the importer. This is dependent on the availability of financial information of the importer and other satisfactory credit references. If the importer is found to be sound and likely to service credit obligations on time, the bank may discount the bill without recourse to the exporter.
When you use it
It's for exporters who want to improve cash flow.
What it is and when you use it
The bank can discount the exporter's foreign invoice and advance all or part of the value of that invoice, once the goods have been shipped and an acknowledged invoice is presented.
This service allows the exporter to extend favourable credit terms to buyers at rates of interest which may be far cheaper than those available in the importers' countries.
For foreign suppliers who need assurance of payment from importers, we provide stand-by letters of credit and bank guarantees/payment confirmations. Additionally, we offer performance bonds to exporters who must meet buyer specifications.
In cases like non-recourse discounting of foreign payables and receivables, we often extend trade financing facilities without additional security by placing reliance mainly on the financial standing and creditworthiness of the importer or buyer.
If you need any additional information, please contact the Trade Finance Department at (868) 625-4411 or email us at tradefinance@republictt.com
When you use it
It's suitable for foreign buyers who want some form of assurance that local exporters of goods or services can perform the supply contract for which they have tendered.
What it is and how it works
If suppliers or exporters have to provide a bid bond with tender documents or performance bonds, we will guarantee the payment of a fixed amount of the supply contract.
For bid bonds, this is usually 5% of the value of the contract. For performance bonds, it is usually 10%.
Bonds can confirm that the supplier is in good financial standing and has the means to complete the contract. They also offer security for the recovery of damages or costs incurred in awarding a contract which may not be completed according to specification. As a result, bonds can enhance an exporter's chances of winning lucrative supply contracts.
Bills for collection
We process and present shipping documents for export orders directly to the foreign bank / importer on behalf of the local client (the exporter). This is done on a same-day basis to facilitate prompt payment/collection of proceeds.
Foreign Currency Accounts
Accounts are available in all major currencies. The types of accounts offered are Money Market (with or without chequing facilities) or Certificates of Deposit.
Electronic Funds Transfer
International payments can be made or received via the S.W.I.F.T. network which gives the advantage of rapid, secure and reliable transmission of funds.
