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 FAQs
 
What is Purchase Order Financing?
Is there an application fee?
What is the minimum/maximum transaction?
Is there a term commitment?
Does International Trade Finance require personal guarantees?
Are the Letters of Credit bank-issued?
Are the Letters of Credit confirmed?
What is the difference between a Sight Letter of Credit and a Usance Letter of Credit?
Who qualifies?
What is Accounts Receivable Factoring?
What is a UCC-1 Financing Statement?



Q What is Purchase Order Financing?
A Purchase Order Financing is a solution for companies who have purchase orders from strong customers, but lack the cash flow to complete the sales.
Q Is there an application fee?
A No, there are no upfront costs to our clients. All fees are collected by International Trade Finance from the buyer’s invoice payments at the close of each transaction.
Q What is the minimum/maximum transaction?
A Technically, there is no minimum Letter of Credit amount, but there is a minimum flat fee of $500 per transaction. At an 8% rate, the Letter of Credit would need to be at least $6,250 to meet this minimum. However, keep in mind that because of the costs of issuing a Letter of Credit (bank charges, document transport, etc.), it is usually beneficial for our clients to use Letter of Credits for shipments greater than $10,000.

The maximum for any transaction depends on the buyer’s credit, because this buyer will become the account debtor once you have completed shipment and fulfilled the buyer’s purchase order. The maximum on a sight Letter of Credit is $250,000. The maximum on a usuance Letter of Credit depends again on the buyer’s credit, as well as the terms of payment.

Q Is there a term commitment?
A No. If your company’s obligations are met, you may choose to terminate the agreement at any time. Furthermore, your company is not obligated to finance a minimum volume, nor is your company obligated to finance every purchase order.
Q Does International Trade Finance require personal guarantees?
A Yes. International Trade Finance will always look at the merit of the transaction first, but we will then look to the strength of your company and its principals to cover any risk we see in the transaction.
Q Are the Letters of Credit bank-issued?
A No. International Trade Finance issues it’s own Letters of Credit, but the Letters of Credit are advised through a bank so the beneficiary and beneficiary’s bank know the Letter of Credit is authentic. Regardless of the issuing entity, an authentic Letter of Credit is subject to the all the rules and regulations stipulated by the Uniform Customs and Practice for Documentary Credit ICC (International Chamber of Commerce), Publication No. 500.
Q Are the Letters of Credit confirmed?
A No. Confirming Letters of Credit would require the client to cash secure the transactions and most clients are not in the position to do this.
Q What is the difference between a Sight Letter of Credit and a Usance Letter of Credit?
A Sight Letters of Credit indicate that the drafts drawn are due upon presentation of the shipping documents. ICC rules allow International Trade Finance and your company 7 business days to review the documents for discrepancies before accepting or rejecting the documents. Upon acceptance, International Trade Finance makes payment to the Letter of Credit beneficiary according to the instructions on the draft. If the documents are rejected, International Trade Finance advises the beneficiary’s bank of the rejection and waits for instructions on how to dispose of the documents. The goods cannot be released if the documents are rejected.

Usance Letters of Credit allow a specified number of days from the Bill of Lading date or from the presentation of the documents, before the draft matures. Again, ICC rules allow International Trade Finance and your company 7 business days to review the documents for discrepancies before accepting or rejecting the documents. Upon acceptance, International Trade Finance advises the beneficiary’s bank of the maturity date and makes payment to the Letter of Credit beneficiary accordingly. If rejected, International Trade Finance advises the beneficiary’s bank of the rejection and waits for instructions on how to dispose of the documents. The goods cannot be released if the documents are rejected.

Q Who qualifies?
A If you have purchase orders from a credit-worthy buyer, and your gross margins are greater than 20%, you can qualify for Purchase Order Financing. Letters of Credit work for suppliers who do not need prepayment to ship the goods. Suppliers demanding deposits or T/T payments are often will to negotiate better terms with Letter of Credit.
Q What is Accounts Receivable Factoring?
A Accounts Receivable Factoring is a facility many of our clients use to avoid waiting 30-45-60 days for buyers on account to pay. A Factor essentially buys your invoices at a discounted rate as soon as it can verify the completed shipment with the account debtor (your company’s buyer). For a small percentage of the invoice, your company can take advantage of immediate cash. It is not necessary to Purchase Order Finance a transaction to qualify it for factoring.
Q What is a UCC-1 Financing Statement?
A A UCC-1 Financing Statement is a type of lien that secures a creditor. Many equipment lease companies use a UCC-1 that specifies a machine as collateral. If the debtor defaults on payment, the UCC-1 allows the equipment lease company to repossess the machine. It is typical for banks to use blanket UCC-1s to secure lines of credit, designating the debtor’s assets as collateral, and International Trade Finance utilizes the same. UCC-1s are public records and are indicative of a debtor-creditor relationship. By itself, a UCC-1 is in no way an indication of a delinquent account.
   
 
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