As an exporter at any level, the need for financial partners with the ability to ease trade by financing deals cannot be understated. With unrewarding transactions as buyer defaults, market expansion or other needs in the course of running a business or financial trade.

If you are seeking working capital to finance your trade, any commercial bank in position to provide international banking services related to documentary collection is an excellent choice.

Steps to take

Approach a local commercial bank. Preferably, a bank familiar with your financial standing and credit history which also provides international banking services related to discounting of drafts, letter of credit and documentary collections. Contingencies would be contemplated upon before an export working capital line of credit, expected to be in favour of both parties would be reached.

Types of assistance rendered by commercial banks

Export funding commercial banks render both financial and non financial services. The financial services could be pre-shipment or post-shipment finance.

Pre-shipment financing:

This is a loan granted to an exporter prior to the shipment of the goods, either for sourcing or manufacturing of products for the purpose of successful execution of the shipment. The pre shipment financing comes in different forms such as 

Pro forma invoice

Letter of credit

Export contract

Packing credit, e.t.c

Post-shipment financing:

This is a short term finance granted to an exporter after the shipment of goods, to meet other working capital requirements. Post shipment financing comes in various forms such as,

-Advances against bill of collection

-Advances against undrawn balance

-Export bills purchased, discounted or   negotiated.

Non-financial assistance of commercial banks

These are other services rendered to an exporter, and do not require funding. Major non-fund commercial bank assistance are

Bank guarantees or bonds

This provides guarantees of any type, to protect the benefits, consideration and goods of the parties Involved. Examples of bank guarantees are:

Advance Payment Guarantees : this ensures a buyer recovers any payment made, on account of the seller’s failure to comply with the contractual agreement.

Performance Guarantees : this is undertaken to ensure that an importer receives an agreed compensation if the exporter defaults in obligations. Defaults as may arise can be in delivery or satisfactory quality of the goods paid for.

Letter of credit 

There are several types of  letters of credit. Revocable LC, confirmed and unconfirmed LC, standby LC, payment on sight and others closely related. This is a contractual trade finance instrument, committing the importer’s bank to pay the exporter once the exporter meets the satisfactory agreement, and presents the requisite documentations to the exporter’s bank as proof of fulfilling the agreement.

Letter of guarantee

This is an endorsement agreement by the importer’s bank who shall be a guarantor, to pay a stipulated amount of money to the exporter if the importer defaults in such obligation to the exporter.

Forward exchange contract

Whether fixed date  forward contract or option forward contract,  a forward exchange mandates a bank to bear an uncertain risk of foreign currency fluctuations in advance of the trade deal. Such rates are forward exchange rates.

Other notable non fund devices are 

Issuance of bank drafts

Currency invoicing, e.t.c

Some Intra Africa, and local banks that provides export financing

Nigeria export import bank (Nexim) – Nexim bank is an export credit agency established to offer export finance and non financial assistance to exporters.

Ecobank Benin – serves as a local corresponding bank to the United States of America’s Exim bank. Ecobank provides medium and long term loans for export businesses and various other businesses in fulfillment of the Master Guarantee Agreement with Exim bank in francophone Africa.

Standard bank – 

Standard bank operates in 20 countries across Africa, with vehement ties in the global market. And is known to facilitate international trade and investment between African countries and the global markets.

Africa export import bank (Afrexim bank) –

Afrexim bank offers a wide range of business financing and advisory services to notable individuals and corporate businesses across Africa.

Other local banks with international service departments also offers trade financing, and other export related services.

Leave a Reply