03/04/2024

Export-Import
Financing
Nguyen Xuan Vinh
March 2024

Contents
• Credit fundamentals
• Definitions
• Principles and requirements
• Export-import financing
• Export financing
• Import financing

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Credit fundamentals
• Definition of credit
• the provision of resources by lenders to borrowers for usage in a determined
period of time and repayment at maturity
• Based on the lenders’ assessment of the borrowers’ creditworthiness
• Commercial credit vs. bank credit
• Cấp tín dụng là việc tổ chức tín dụng thỏa thuận để khách hàng sử dụng một khoản tiền với nguyên tắc có
hoàn trả bằng các nghiệp vụ cho vay, chiết khấu, cho thuê tài chính, bảo lãnh ngân hàng và các nghiệp vụ
khác
• Cho vay là một hình thức cấp tín dụng, theo đó tổ chức tín dụng giao cho khách hàng sử dụng một khoản tiền
để sử dụng vào mục đích và thời gian nhất định theo thoả thuận với nguyên tắc có hoàn trả cả gốc và lãi
• Bảo lãnh ngân hàng là …
• Chiết khấu là …

Credit fundamentals (2)

• Credit principles (nguyên tắc tín dụng)
• Appropriate purpose (đúng mục đích): as per credit agreement and legal
• Repayment (có hoàn trả) of principal and interest: timely as per schedule
• Credit requirements (Điều kiện vay vốn)
• Civil legal and civil act capacity (năng lực pháp luật và hành vi ds)
• Legal purpose
• Financial capacity
• Profitable business plan and feasible project
• Credit security (đảm bảo tín dụng)

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Credit fundamentals (3)

• Credit period
• Interest
• Credit amount and limit
• Repayment of principal and interest
• Documents for a credit application

Export-Import Financing
• Trade financing: a form of credit to finance for working capital
(liquidity needs) of exporting/importing firms
• High value
• Short term
• Connected to trade transactions and methods of payments
• It can be classified into
• Export financing
• Import financing

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Working capital needs Needs for

additional
financing

Cash Needs for Current

Short-term loan
Cash wc wc
Receivables current Receivables
Payables WC Inventory
Payables
Inventory
Long-term loan

Planning
Fixed asset Equity

At time of evaluation

Thang09/2010 Nguyễn Xuân Vinh - Ch3 Tindung 7

Export financing
• Pre-shipment exporter loan
• Purchase of raw material and goods under principal contract or purchase
order
• Financing under LC
• Post-shipment financing
• Negotiation under LC
• Financing under D/P or D/A
• Factoring

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Financing under LC at sight

• Short term financing: max. 6 months
• Purpose: purchase of materials and goods, and production of goods
for exporting
• Credit amount: 70% exporting LC value
• Repayment sources: export LC proceeds + other sale revenue
• Collateral: without

Financing under export LC

1
Sale contract
Importer Exporter
Application for LC

Request for financing

Advising LC

2
4 5

Issuing bank Advising LC Advising bank/

3 Financing bank

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Financing under LC at sight (2)

• Conditions:
• Experience in exporting
• Annual exporting revenue
• The relationship with the importing partner (period, regularity)
• Value of export LCs honored
• Previous export LCs documents
• Market of goods for exports
• Documents required:
• Necessary documents for loan request
• Export LC, sale contract

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Negotiation under LC
• The (negotiating) bank advances funds to the exporter (beneficiary)
by purchase of drafts and/or documents under complying
presentation
• Credit amount: up to 98% LC value
• Repayment: proceeds from export LC
• Collateral: without (if some conditions satisfied)

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Financing under LC Negotiation

1

Importer Shipping the goods Exporter

Presenting Documents

Negotiation
2 2

3
Documents
Issuing bank Financing bank/
Reimburse Nominated bank
4 5 Repayment of
negotiation
amount

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Negotiation under LC (2)

• Conditions:
• Complying presentation (and with recourse)
• Annual exporting revenue and financial/business situation
• The relationship with the importer, 5 largest export LC documents
• Documents required:
• Necessary documents for loan request
• Original LC documents

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Financing under D/P

• The remitting bank advances funds to the exporter based on the
exporter’s presenting of documents under export collection
• Credit amount: 95% collection value
• Repayment: proceeds received under D/P
• Collateral: real estate, inventory

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Documentary Collection

1
Sale contract
Importer Exporter
Commercial documents

Collection + Financing

Shipping of goods Application for financing:

Payment/acceptance

Repayment advice

- Application
Bill of exchange

- Sale contract
5 5 - business/financial reports
2 7
4 - Credit security
- Goods documents
3

Collecting bank Documents

Remitting bank
(NH thu hộ) Telegraphic Transfer (NH nhờ thu)
6

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Import Financing
• Pre-shipment importer loan
• Financing for prepayment of contract
• Post-shipment importer loan
• Financing under LC or collection

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Financing for prepayment of import contracts

• Purpose: financing working capital for importing materials and goods
(for prepayment)
• Financing period: up to 12 months
• Credit amount: 60% - 80%
• Repayment sources: sale revenues
• Collateral: real estate, machinery

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The process for Remittance before

goods receipt
1
Sale contract
Application for financing:
Importer Exporter
- Application
- Sale contract Delivery/documents

Remittance order
- business/financial reports 6

Debit advice
- Credit security

Credit advice
2 3
5

Documents:
- Application for remittance
- Sale contract Importer Telegraphic Transfer
Exporter
- Invoice
bank bank
- A commitment or pledge 4

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Financing under import LC or collection

• Purpose: financing working capital for importing materials and goods
• Financing period: up to 12 months
• Credit amount: 60% - 80%
• Repayment sources: sale revenues
• Collateral: real estate, machinery or the imported goods

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Negotiation/Payment of a LC
5
Application for financing: Importer Shipping the goods Exporter
- Application

Presenting Documents
Payment/acceptance
- Sale contract
- business/financial reports

Documents

Payment/
Negotiation
- Credit security
- LC documents 9
6 6 8
- Customs declaration 9

7
Documents
Issuing bank Advising bank/
Reimburse/ pay/accept Nominated bank
8

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Documentary Collection

1
Sale contract
Importer Exporter
Application for financing:
Commercial documents

- Application Shipping of goods

Payment/acceptance

Collection request

- Sale contract
Bill of exchange

- business/financial reports
Credit advice

- Credit security 5 5
- goods documents 2 7
4
- Customs declaration
3

Collecting bank Documents

Remitting bank
(NH thu hộ) Telegraphic Transfer (NH nhờ thu)
6

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