Short-term financing is needed to cover costs of purchasing, producing, packaging and shipping finished goods to clients. Mid-to-long-term financing supports export trade businesses through funding buildings and equipment. Basic export trade finance includes letters of credit, advances, and loans. Letters of credit guarantee payment, advances provide funds in advance of delivery, and loans are sums of money given with an agreement for repayment over time. Accessing export trade financing requires trust, capacity, and a track record that can be built over time by working with recognized industry partners and financial institutions.

2. Presented by Stephanie Diakité, CATEK
Oct. 31, 2010 – USAID-SIAO Seminar Series
Ouagadougou, Burkina Faso

3. SHORTTERM FINANCING
Funding needed to cover the
costs of the purchase or
production, packaging, and
forwarding of finished
products for delivery to
clients.
MIDAND LONGTERM
FINANCING
Funding needed to support the
export trade business such as
buildings and equipment.TIEDTO
ORDERS
TIEDTO
BUSINESS
STRATEGY

4. BASIC EXPORTTRADE FINANCE PRODUCTS
Letters
and Lines
of credit
Advances
Loans

5.  Advances - funds or
services extended by
buyers or pre-export
suppliers in advance of
delivery  Loans - a sum of meny that is
given by one party to another
for a limited amount of time.
It is to be repaid according to
terms of the loan agreement
which includes any interest to
be charged and a timeframe
for repayment.
Example – client
advance to acquire
raw materials for
processing
Example – commercial loan to
acquire and install processing
equipment

6.  A letter of credit is a document issued by a bank that acts as a
guarantee of payment to a beneficiary.
LETTEROF CREDIT
If the party (your
purchaser or you as it
pertains to your pre-
export suppliers) do
not perform their
obligations, the bank
pays.
Source of repayment of
the transaction
meaning that the
exporter will get paid
with the redemption of
the letter of credit

7. Revocable letter of credit
LC can be revoked by the issuing bank without the agreement of the beneficiary.
Irrevocable letter of credit
Cannot be cancelled or amended without all the parties agreement.
Standby letter of credit
Guarantee of payment. If the beneficiary does not get paid by its customer, it can
then demand payment from the bank by forwarding a copy of the invoice that
was not paid and supporting documentation.
Revolving letter of credit
It is established when there are regular shipments of the same commodity between
supplier and customer. Eliminates the need to issue an LC for each individual
transaction.

8. 

• Lump sum of money
• Repayment by installments over a
defined period of time (capital +
interest)Loan
• Maximum amount of money available
• Can be used as needed
• Repayment is flexible (capital + interest)
• Capital reimbursed becomes available
for use
Line of
credit
LOANS AND
LINESOF
CREDITARE
DIFFERENT!

9.  Traditional Channels
 Customers
 Commercial banks
 Developmentbanks
 Specialized public
services
 Equity partners
 Other Channels
 Savings and loan
cooperatives and
associations
 Microcredit organizations
transitioning to savings and
loan organizations
 Personal and/or
professional contacts and
acquaintances

10. Buyers and pre-export suppliers
needs assurances before they
will advance funds on
purchasing or supply – TRUST,
CAPACITY andTRACK
RECORD are keys to access
Banks and other financial
institutions require hard and soft
guarantees of recovery – TRUST,
CAPACITY,TRACK RECORD
AND the possession of
GUARANTEEABLE property
and/or contracts are keys to
access

11. TRUST
TRACK
RECORD
CAPACITY
HARDAND SOFT
GUARANTEES

12. Work with and through
recognized industry channels
and operators – more deals are
made on referral than any
other way!
Work with financial institutions
that know your industry, your
suppliers and purchasers. If they
don’t know your sector, they will
not be motivated to finance your
export activity!
Get in the financial services
loop – transactional history
builds trust, the lack of such is
detrimental to access to
financial services.
Use financial instituitons that
have guarantee and/or special
lending programs for your
industry, SME/SMI.

13. Transparency and good
governance are key! Sharing your
strengths and weaknesses with
your partners will enable you to
work together to make a deal and
to subsequently get it financed.
Submitting clear, credible
applications for financing,
including professional
business plans, is an important
step in proving your capacity
to pay back financing.
Reinvesting in your business will
enable you to grow capacity for
bigger and better deals. If financial
servicdes organizations see that you
invest in your business, they will be
more inclined to believe in your
prospects!
Opening your capital to
partners with capacity you have
not yet build is a means of
acceleriating your access to
good deals and necessary
financing.

14. Start ups need not apply is very
prevalent.
Until you have a track record, you
may have to depend on advances
and informal lending channels.
Be sure to document your successes
int his type of financing and share
them with formal financial services
providers as you grow.
Build a financial services history –
financial institutions make
decisions on transaction histories
and subsequent recovery
perspective!
BuildingTrack Record

15. Prevailing regulations require
hard guarantees up to and
often exceeding 100% for
commercial lending. The
most recognized hard
guarantee is titled property.
Negotiating contract security
with your purchasers is a way
to access pre-export letters
and lines of credit.
Domicilingreceivables is a
recognized soft guarantee for
the vast majority of financial
institutions.
Tapping into development
guarantees available through
specialized public services is a
way of attaining guarantee
criteria.

16. Applicationletter (or
form)including
specific product your
are making
applicationfor and
rate you would like
to see applied
Synopsis of the
businessplan specific
to the application– for
shortterm financing
this is the business
plan for the term, for
mid-long term
financing, this is the 5
yearplan
Documentation
proving soft and hard
guaranteesyou are
bringingto the table
BusinessPlan
specific to the
application
PROMISING
FINANCING
APPLICATION

17. Background,experience and market
Projected sales for the fianancing period
Conditionsof sale
Financingneeds for the period
Projected financial results
Practicalmeasures for re-payement of the financing
Annexes – Sales contracts and letters of intent,Guarantees

18. •Background
•Legal Status
•Capitaland partnership
•Managementand technical team
•Financialcondition
•Descriptionof the activitiesof the business
•Historyof activities implementedand principal clients
Presentation
of the
Business
•Presentationof the products and services of the business
•Source and means of supply of raw material and other components of the products and services of the
businessor of finished material for resale
•Local and export markets
•Marketshare and positioning
•Salespolicy and ways and means(price, marketing,distribution,etc.)
•Competition
•Strengthsand weaknesses compared to competitors
Products and
Services

19. •Humanresources
•Technical resources
•Infrastructure and equipment
•Financialresources
•Technological resources
•Otherexisting resources
Existing
Resources
•Product and service vision over the next five years
•Expected resultsin terms of market share and positioning
•Additionalresources necessary to attainthe vision (human, technical, infra and equipment,financial,
technological,other)
Short, mid and
long term projects
•Profit and loss over the next five years
•Five year projected financial planExpected results

20. Learn more about the USAID West AfricaTrade Hub project at
www.watradehub.com
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Trade Hub project newsletter, Tradewinds. Send an email to
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