Capital Business Credit helps extend terms for Importers

You are a non investment grade importer that has a long term trading relationship with suppliers in China and Hong Kong and few issues with performance, quality or delivery risk.  Yet you would like to extend your non letter of credit terms, but don’t necessarily have the leverage to do so.  What do you do?

Capital Business Credit, a national commercial finance company that serves small to middle market clients, has developed a product they call Supplier Early Payment or SEP, which allows importers to extend credit for up to 90 days on open account credit terms.  Exporters in China and Hong Kong receive customer credit protection and immediate cash for receivables upon shipment and importers receive extended open account terms and payment flexibility.  CBC Trade Finance will purchase from exporters, without recourse, for up to100%, less discounts, accounts receivable due from small to medium importers.

For importers, the SEP funding method does not create bank debt and increases liquidity to grow the business.  For exporters in Asia that have material concentration risk with one buyer, this enables a way to receive early payment.  Typically programs will work with one major buyer who has multiple vendors in Asia.  The solution provides another layer of assurance to Asia-based manufacturers around the creditworthiness , of their customer.  Many factories and suppliers in Asia know very little about the true credit worthiness of their U.S. customers and in today’s high risk and fast changing retail world, having immediate access on a non recourse basis to funding can be attractive.

How CBC controls Risk

The importer must be willing to confirm its obligation to pay for the goods without offset, counterclaim or deduction based upon prior supplier performance.  CBC Trade Finance receives the title documents from the exporter, and can release to the importer against receipt of the trade acceptance or no offset letter. CBC Trade Finance will than immediately discount the trade acceptance for up to 100% minus discounts and pay the exporter or its supplier.

Prequalifying Buyers is pretty easy -  the question is do they need longer payment terms or do their suppliers need money fast.   Qualifying leads are generated by their US and Asian office in China and Hong Kong. The challenge in these models is that origination and underwriting costs are very high – finding the right combination of credit worthy US buyers able to extend terms and willing to provide a comfort letter is not an easy exercise.

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