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Estimation of the requirement of Trade Facilities
Dear all,
I need your help in estimating the trade finance facility required by my company.
I can use Usd.1,500K towards the settlement of Trade Loans (payments made to trade creditors through Bank loans) maturing every month, which works out to Usd.18,000K for a year. I have an offer from a Bank, which is willing to extend credit for 180 days.
In this scenario, I have worked out the maximum facilities that I can request as:
1800K*180/360 = Usd.9,000K. This is simple and straight forward.
But I have multiple offers from various Banks:
Bank 1 - willing to give 120 days credit,
Bank 2 - willing to give 30 days credit
Bank 3 - willing to give 45 days credit
Please note, as an when the amounts are settled to the Bank, fresh space gets created, which can be used for further payments to the suppliers.
In the above circumstances, kindly advise, as to the maximum facilities than should be negotiated with the Bankers.
Thanks & regards,
D.S.Rao
I need your help in estimating the trade finance facility required by my company.
I can use Usd.1,500K towards the settlement of Trade Loans (payments made to trade creditors through Bank loans) maturing every month, which works out to Usd.18,000K for a year. I have an offer from a Bank, which is willing to extend credit for 180 days.
In this scenario, I have worked out the maximum facilities that I can request as:
1800K*180/360 = Usd.9,000K. This is simple and straight forward.
But I have multiple offers from various Banks:
Bank 1 - willing to give 120 days credit,
Bank 2 - willing to give 30 days credit
Bank 3 - willing to give 45 days credit
Please note, as an when the amounts are settled to the Bank, fresh space gets created, which can be used for further payments to the suppliers.
In the above circumstances, kindly advise, as to the maximum facilities than should be negotiated with the Bankers.
Thanks & regards,
D.S.Rao
Views: 30
Replies to This Discussion
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Permalink Reply by Balaji on -
hi Mr.Rao,
We are doing the finance for,
Finance on projects, Finance on Land – Assets < 100% Market value >
Sourcing Bank Guarantees. Discounting to Cash Values – Collateral.
Bank Coordination of release of early Mortgage property, NPAs.
Factoring of past finance portfolios. Currency Management, Portfolio Management
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Permalink Reply by BRINDHA GOVINDAN on
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we are looking for trade facilities. kindly advise.
thanks with reg
brindha
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Permalink Reply by T.Venkataramanan on
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other details terms of credit, monthly collectionsother liabilities etc will be required
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Permalink Reply by verona dorman on
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Dear Mr. Rao,
The information you have provided is limited.
1. What are the interest rate that these banks are offering?
2. how often will you need this facility?
3. What is your liability each month and what impact will this facility have on it?
4. How do you seeyour collections in the future....this will enable you to decide the best terms to accept?
If you are able to answer these questions I could best help.
Verona
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Permalink Reply by Mohammed Ali Mirza on
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Dear Rao,
Your Question is purely based upon your creditors terms meaning what the LC stipulates. Its always better to get a 180 days credit period but it also entails higher bank costs. Another thing to analyse is your companys cash cycle associated with the turnaound of your product flow and delivery which will determine the funds availibility to settle different trade obligations. Shorter credit periods attract less bank costs. You also have to figure out whats the companys total trade value (requirement) and then analyse the cash flows in hand and then decide upon the best trade credit term. Choosing the right Bank with the best correspondent services is also a factor in deciding your Trade Facilites.
I hope this would suffice.
Regards
M.Ali Mirza
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