trade finance
Trade financing is a mechanism for attracting long-term credit equity when used as a pledge of expected cash flows and of non-cash liquid assets of businesses: accounts receivable, goods in turnover, export contracts, etc..
Many enterprises Finance the capital costs of profits, that is, gradually invest excess cash in the modernization of production. This practice of "patching holes" is a slow and inefficient: in a few years the technology can greatly to get ahead, and many of the preparatory work will be in vain.
If the company has long-term contracts or can show a stable customer base, which from year to year prolongs the contracts, the expected proceeds can be used as a collateral for long-term lending business. Such pre-export financing is provided Western creditors at a low interest rate and a longer (5-7 years) period of time. In addition, under the optimal structuring of the financing sources, you can avoid import duties, which reduces the cost of purchased equipment on 5-7%. With regard to receivables, in addition to use as collateral, it can be directly sold at a discount from face value (factoring).
Organization of the trade financing
The optimal organization of the schemes of trade Finance, when the export is sold to a foreign subsidiary or affiliated companies (SPV), which then sells the products to the final customers. In this imported from abroad equipment appropriate to make as a contribution to the authorized capital: in this case, according to Russian laws, the cost of the equipment is not subject to import duties and the value of its cheaper by 5-7%. In addition, it allows to make the foreign shareholder of the Russian and the transfer of a part of property abroad, which gives the possibility to eventually capitalize on the SPV in the West. Fundamentally the scheme of financing of the enterprise is as follows: Western the financial institution issuing the credit, the provision of which is export earnings of the enterprise, and in return receives a bill of exchange issued by the SPV then SPV buys equipment from a foreign supplier and passes it to the enterprise-the exporter as a contribution to the authorized capital, instead of receiving shares of the enterprise. The payments are structured so that the SPV retains a certain Delta - the difference between the purchase price of the product from the exporter and sales price to final customers, from which it pays interest and returns the loan.
