Clubbing Import bills for Single Buyers Credit Transaction

Club DealsImporter regularly gets multiple bills from same supplier and from multiple suppliers. Clubbing these multiple import bills to a single Buyers Credit transaction will reduce overseas bank interest cost.

For Example

  • Two Buyers Credit transactions of $50K each for 180 days will cost at 6 Month Libor + 100 bps
  • Single Buyers Credit transaction of $ 1 lacs will cost at 6 Month Libor + 65 bps

Structure

  1. Importer receives multiple Import bills (same or multiple supplier)
  2. Importer takes single quote through Buyers Credit Consultant. by providing details of all bills.
  3. LOU issuing bank sends single lou with details of multiple bills.
  4. Overseas bank does single funding to LOU issuing Bank.
  5. On receipt of funds by LOU issuing bank, debits it’s Nostro Account equivalent to each bill amount and pay to suppliers respectively.

Prior Checks

  1. Whether LOU issuing bank will allow clubbing single suppliers transaction or multiple supplier transactions or both. Regulatory there are no issue but at times banker in willing to support such transactions because of lack of knowledge or system issues.
  2. Tenure of buyers credit will be based on earliest Bill of Lading (BL) date. Say BL 1 is dated : 10/01/2015 and BL 2 is dated: 20/01/2015, than first BL date is considered for purpose of calculating buyers credit tenure from date of shipment and as per operating cycle.
  3. Arriving at single funding date. Because transaction under different payment modes will have different due dates.

Risk

Even after doing all the above correctly, Incase LOU issuing bank sends separate LOU (because of any reason), overseas bank will hold the funding of transaction, as pricing was provided for single payment. This might result in delay in payment to suppliers, delay in release of documents etc.

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