TRADE FACILITIES

Trade facilities are facilities given by the banker to the merchant in order to help them to do trading. Basically act as an intermediate between buyer and seller. There are different mode of assisting apart from cash, few common facilities are Cheque Discounting, Bill Discounting, Letter of Credit, Invoice Discounting, Guarantee, and Overdraft.

CHEQUE DISCOUNTING

In such case, the merchant can take cash from the bank in terms of providing a postdated cheque as security. Suppose: Mr. X have made a purchase and have a credit note of 30 days. I can submit the bill to the bank and the bank will pay to the supplier on my behalf and later deduct the same amount after 30 days.

BANK GUARANTEE

Sometime the bank act as a guarantor in business on behalf of the customer to the client. It is done basically to provide performance assurance of its customer.

LETTER OF CREDIT

The banker here act as a guarantor that the payment will be credited as per the agreement. It helps the importers and exporters more confident in trading as it reduces the risk of payment. It is usually a written document undertaking that a bank gives on behalf the customer to the exporter an amount within a specified time frame. Terms generally range from 30 days to 90 days.

BILL DISCOUNTING

Bill Discounting is a major trade activity. Banker takes discount from a seller to release funds before the credit period ends. It usually happens when a buyer buys goods from the seller and the payment is to be made through letter of credit.

INVOICE DISCOUNTING

Is a short term instant cash access tied up in your outstanding invoices. It helps to improve the cash flow of the company, pay employee salaries and other vendors on time. As a result the borrower pay a percentage of the invoice amount to the banker as a fee.

OVERDRAFT

The customer gets the benefits from the bank to withdraw money more than they have in his account, or even when he have no money in his account. This help the business man to overcome their short term cash flow problem. The banker charge a fee when there is negative balance or insufficient fund in the account.

ADVANTAGES

  • Flexibility : It encourages customers to make larger purchases. The upfront payment to your Suppliers can also be made in the Supplier’s local currency which removes the currency risk and can achieve significant Supplier discounts. As y
  • Convenience : The facilities provided by the bank as discussed above make the businessman convenient in trading as short term finance is easily manageable.
  • Security : As bank play an intermediary role in trading. It give the merchant confident in doing business as bank act as a guarantor. Goods moving from one place to another are also secure now as we have insurance facility to secure it.
  • Transaction Flow : It helps business to focus on growth activities. This system help the businessman to better control their trade business and to provide credit without interfering with your trading relationships. It encourage more frequent and higher volume purchases.

According to the Data provided by the Khalifa Fund shows that approximately 50 to 70 per cent of SMEs have had their applications for funding from conventional banks rejected and loans to SMEs account for just four per cent of outstanding bank credit in the UAE.

Conventional lenders are sometimes unwilling or unable to support SMEs, give often-limited asset pool or lack of a proven record of company operations and so we are here to help to get such facilities from the bank on behalf of you so that you can meet your short term capital and grow your business smoothly.