Trade Finance

1. Payment guarantee

Payment guarantees mitigate credit or country risk when selling on an open account basis. They are often used to cover the non-payment of debts arising under a transaction or over a period of time.

Payment guarantees provide financial security to the beneficiary should the applicant fail to make payment for the goods or services supplied. Such guarantees generally run up to the final scheduled date of payment, plus a grace period to allow the beneficiary to make demand in the event of non-payment.

For certain buyer credit risks, SMBC group can provide payment guarantee services. These are generally well suited to large spot deals or annual contracts without L/C.
We will negotiate the details of the guarantee - what kind of risks are to be hedged, the definition of country risks etc - with our client and those details will be included in the documentation. The guarantee fee will vary depending on importer, documentation etc.

2. Account Receivables Purchase

The purchase of accounts receivable involves the Bank buying accounts receivable possessed by the seller (creditor) against the buyer (debtor) under the commercial contract. SMBC can purchase your account receivables. We will discount your receivables and pay to you on a with or without recourse basis. The interest is usually quoted as "Base Rate + Risk Premium". The Risk Premium will vary depending on the importers, countries and documentation etc.

Benefits of Account Receivables Purchase

  • Stronger balance sheet structure
  • Better management of assets
  • Alternative way of raising funds
  • Can enhance earnings by enabling proceeds to be reinvested into productive assets
  • May assist with problems of capitalisation
  • Differs from factoring in that the relationship between the corporate and debtor is maintained
  • Relatively simple to administer and operate

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