Tarde credit - Made easy

Jeo PTY  LTD wants to sell timber from his mill to Matt  pTY    Ltd.So Matt can build a house for his client Matt tells  joe  that he need a supply of timber worth around $ 50,000 per mount on 30 days credit Jeo has a trade credit policy.so he calls his trade credit broker to run a dredit check on Matt to see if the trade is insurable acquire trade credit dose the background checks and approves the trade. the trade takes place and Matt starts work on the house and promises to pay Jeo cash in 30 days. Meanuhile Matt has purchased tiles .concrete and bricks from other suppliers all on credit .Day 30 rollls by and Jeo calls Matt for payment.Matt explains that he will have the money in a week but he,s just short of funds....

2 days later Jeo recieves a distressing call from  his trade credit broker a supplier of Matt,s has reported a late payment .He is told to stop trading with Matt and try to collect his debt urgently. Jeo goes to visit Matt only to find that his office has closed it,s doors and a sign saying left the country ;Days later Jeo,s trade credit broker notifies Jeo that Matt is indeed out of business and he owes his suppliers millions of dollars.

Fortunately Jeo had insured his debts\debtors and called his broker to make a claim.Joes business can continue to grow with the help and comfort his  trade credit insurance policy .

Benefits of using trade credit insurance.

  • Increase sales without RISK.
  • Protecion from large exposures with key customers.
  • Faster and better credit decisions.
  • Access to better and more working capital.
  • Easy  -  application
  • Nature of your business.
  • Loss history on insolvency and past due amounts.
  • Buyer profile summaries.
  • Collection and credit management procedurn .
  • Helpful credit information.
  • Credit experience avaibble on prospective buyers.
  • Responsive claims service.
  • Agusted by in -house claims specialists.

Trade credit insurance.

Facilitates purchase of supplies and raw materials w\o immediate payment.
Tarde credit given would depend on :-

  • Good will \reputation
  • Amount of purchases made
  • Past record & financial position.

Merits:-

  • Convenient & continous soarce.
  • Readily availble.
  • Helps to maintain  desired levels of inventory.
  • NO charge on assets required.

Demerits:-

  • Might lead to over trade.
  • Limited funds can be raised.
  • Costly source of funds.

The spectrum of export credit/ payment terms.

  • EXtended terms, installment notes
  • OPen account, clean drafts
  • TIme drafts (D/A)
  • CONSIGNMENT /retention of  title
  • Sight draft ( D/P,C.A.D.)
  • Advised letter of credit: sight& time.
  • Cash in advance
  • Confirmed letter of credit

Why foreign customers want to finance from their U.S. supplies?

  • Looks better on the balance sheet them bank debt.
  • May be tapped out with their bankers
  • Lower rates than available from their bankers
  • May not be alllowed to borrow locally in dollars
  • Arbitrage opprotunity
  • Expot financing does not have to be fee .Foreign companies will often pay than rates pravalling in the U.S. IN order to borrow frome their suppliers ,in dollars.