Structured Trade Finance

We offer different forms of financing for the successful execution
of your commercial transactions.

Pre-export Finance

Pre-export finance is a service from Erste Group. It provides secured working capital finance to exporters. Exporters must show they can produce and deliver goods or commodities.

Each transaction is unique. It is customized to meet your needs and legal requirements. Erste Group will do detailed checks before offering the finance.

You can use the loan for:

  • Buying raw materials
  • Storing raw materials
  • Processing raw materials
  • Delivering finished products

You will repay the loan with money from selling the finished products. These sales must follow contracts that the lender accepts.

The sales proceeds will go into a designated bank account. This money will pay the loan interest and repay the loan. Erste Group will secure the loan by taking rights to the sales contracts and the special bank account.
 

The benefits to you:

  • Committed financing, the structure of which is customised to the needs of the client
  • Provides you with access to funding outside of normal bank lines provided by local banks
  • Offers the possibility of medium term funding at a lower cost of funding compared to other available sources of debt
  • You are able to use unencumbered export sales as security for loan
  • Establishes for you a track-record of borrowing from international banks

Prepayment Finance

We offer prepayment finance to clients, usually trading companies. This helps them pay producers in advance for future commodity deliveries.

This finance lets you negotiate long-term supply contracts with producers. We provide the funding for these contracts. Producers can get financing they might not get otherwise. Erste Group often uses this method in countries with strict currency rules. These rules can make direct cross-border loans hard.

Prepayment finance is secured by assigning two contracts to Erste Group. These are the sale and purchase agreement between you and the producer, and the agreements and cash flows between you and your buyers. These cash flows repay the finance.

Borrowing Base Finance

Borrowing Base Finance helps producers get money to run their business. It is similar to Pre-export Finance and Prepayment Finance. The goal is to give producers working capital.

The primary difference is how much money the producer can get. This depends on the value of cash, inventory, and receivables. These are called the Borrowing Base. The producer gives these to the lender as a promise. The lender uses a set percentage, called the advance rate. This percentage protects against price changes. The percentage depends on the type of asset.

Inventory Finance

Inventory Finance is a financing solution offered by the Structured Trade Finance Department in Erste’s London Branch. It helps improve your working capital by reducing inventory on your balance sheet.

Each deal is customized to your needs. A third party will purchase materials, usually raw materials, from your suppliers. This third party is often a special company created for this purpose. They will store the materials and deliver them to you when needed for production.

We provide the money for the transaction through a revolving loan. The loan is used to buy the materials. You repay the loan with payments for the delivered materials.
 

The benefits to you:

  • Cash-flow timing
    Your working capital will be only impacted upon payment of the invoice issued by the third party in respect of material delivered.
  • Extended payment terms
    Payment terms for the supply of material could be extended to match more closely the payment terms which you offer to your customers for the sale of finished products.
  • Cost saving
    Savings achieved through the bundling of volumes of material or from the prompt payment to suppliers could lead to better pricing conditions for you.
  • Security of Supply
    Could be used to secure supply of critical raw material.
  • Cash impact
    The transaction could extend to the purchase of existing inventories of material owned by you which would generate a positive impact on your working capital.

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