ECA-backed finance (buyer and supplier credit)
ECA-backed finance lets an overseas buyer pay for capital goods over several years. A government-backed export credit agency guarantees the bank, the buyer pays at least 15% down, and under buyer credit the exporter is paid as for a cash sale.
Tolling
Tolling finance funds raw material while a processor turns it into a finished product for a fee. The owner keeps the goods, the finance provider holds a claim over them, and the sale of the product repays the finance.
Structured commodity finance
Structured commodity finance is short-term funding for commodity stocks or sales, repaid from the sale of the goods. The provider lends part of the goods' value, holds security over them and watches them until the buyer pays.
Trade loan
A trade loan is a short-term bank loan for one import or export, repaid from the money that deal brings in. The exporter gets cash to fill the order, and the importer gets time to sell before repaying.
Purchase order finance
Purchase order finance gives a seller funds to make and ship a buyer's order, often in stages, and the buyer's payment repays the provider. See who does what, the steps, a worked example and when it fits.
Prepayment finance
In prepayment finance, a buyer pays the producer in advance, with a bank's money or its own, and the producer pays it back with future deliveries. The bank's security is the buyer's rights under the prepaid contract.
Pre-export finance
Pre-export finance pays an exporter before the goods ship. The lender rests on the assigned export contract, the buyer pays the lender directly, and the loan is settled from that payment, with any surplus going to the exporter.
Asset-based revolving facility
An asset-based revolving facility is a line of funding you can draw, repay and draw again. Its limit is a set share of the receivables and stock that qualify, so it rises and falls as they do.
Warehouse finance (warehouse receipts)
Warehouse finance lets the owner of stored goods raise a short-term loan against a warehouse receipt. The lender pays out part of the goods' value, holds title until repaid, and the buyer collects the goods once the loan is cleared.
Inventory finance
Inventory finance pays you part of the value of goods you hold before sale. The finance provider keeps title or security over the goods and gives it back when the sale money repays the advance.
Distributor finance
Distributor finance funds a distributor's stock of a large manufacturer's goods until the distributor's own customers pay. The finance provider takes rights over the stock and invoices, and the manufacturer can back the program with a stop-supply letter or buy-back guarantee.
Dynamic discounting
In dynamic discounting, the buyer pays its sellers' approved invoices early from its own cash, and takes a discount that shrinks as the due date gets closer. The seller chooses when to be paid, while the buyer has spare cash.
Payables finance (approved payables, reverse factoring)
In payables finance, a buyer sets up a program so its suppliers can sell approved invoices to a finance provider and get paid early, at a cost based on the buyer's credit. The buyer still pays the full invoice on the original due date.
Trade credit insurance
Trade credit insurance pays an exporter most of an unpaid invoice when a foreign buyer fails to pay for a covered commercial or political reason. The exporter pays a premium and keeps a small share of each loss.
Forfaiting
Forfaiting lets an exporter sell the importer's promise to pay later, such as a promissory note or bill of exchange, to a forfaiter for cash now, without recourse. It suits long credit on capital goods, commodities and large projects.
Invoice discounting
Invoice discounting lets a seller sell its unpaid invoices to a finance provider and get the discounted value early, while it keeps running its own customer accounts. The buyer pays on the due date, and the deal can stay confidential.
Factoring
Factoring lets an exporter sell its unpaid invoices to a factor and get around 80% of the value up front, with the rest when the buyer pays. With non-recourse factoring, the factor also takes the risk that the buyer cannot pay.
Bank payment obligation (BPO)
A bank payment obligation, or BPO, is the buyer's bank's promise to pay the seller's bank once the order, transport and invoice data match. Banks deal only with data, and both banks must use the same matching system.
Bill of exchange and promissory note
A bill of exchange is a seller's signed order for the buyer to pay a fixed sum; a promissory note is the buyer's signed promise to pay. Both can fall due on a set date and can be passed on or sold for cash before then.
Documentary collection, documents against acceptance (D/A)
Under documents against acceptance (D/A), the importer gets the shipping documents by signing a draft that promises payment on a set later date. The exporter gives time to pay and holds a signed promise, while the banks move the papers and take no risk on the buyer.