Sourcing and Supply Stage (Non Funded)
A Bank Guarantee is a unilateral contract between the bank as a guarantor and the customer as a warrantee, in which the bank undertakes to make payment to a specified beneficiary within limits of a stated sum of money in the event the customer/warrantee fails to perform an obligation.
Advance Payment Guarantees
In some cases, your business may require advance payments to be able to kick start a project and further fulfil the terms of the contract satisfactorily. Credit Bank is able to provide an Advance Payment Guarantee to you providing assurance that the payments issued by the project owners will be used as intended – towards the satisfactory completion of the project as per the terms of the engaged contract.
The Fine Print
- For existing customers, the bank can consider 50% cash, 50% alternative acceptable security
- Fully secured-cash cover for new relationship
- Charge of 1.5% per quarter
Some of the other types of guarantees available include;
Undertakes to refund any advance payments made to the beneficiary if the goods/services are unsatisfactory or supplier fails altogether
Covers a missing bill of lading enabling importer clear goods
Check Payment Guarantee
At Credit Bank, we have the capacity and expertise to issue other forms of guarantee depending on the requirements of our customers. No matter your situation, we will make it work for you.
When you spot a tender advertisement asking for a Bid Bond, this is it. A Tender/Bid Bond is a guarantee issued by us on your behalf to aid the in the bidding for a contract/supplies. It assures the owner of the tender that the supplier will deliver as per the terms stipulated in the contract.
Bid Bonds can be processed in just 2 hours and can cost from as low as KES 2,000.
Once you land that deal, you may be required to submit a performance bond. A performance bond provides assurance that the project/job awarded will be done satisfactorily as per the terms of the contract engaged.
The guaranteed amount is usually 10% of the contract value. The validity is usually until the full completion of the contract and may include a further claim period
At Credit Bank, we have issue a variety of bonds to suit your needs as a business. Other forms of bonds we issue include:
- Customs Bonds
- Transit Bonds
- Security Bonds
- Immigration Bonds
Letters of Credit
A Letter of Credit (LC) facility is availed to buyers and/or importers and offers you secure payment terms to your suppliers and/or exporters abroad. The terms simultaneously ensure the prompt delivery of your goods and services and in the condition expressed. Once the contract and/or delivery has been fulfilled as required, payment is then released to the supplier/exporter. The LC can be local or international.
An LC therefore serves as a guarantee to the seller that he/she will be paid by the customer. It also acts as a guarantee to the buyer that what they are buying will meet the required specifications.
Credit Bank offers LCs in addition to arranging for confirmation of Letters of Credit by a range of world-class international banking institutions.
Benefits of a Letter of Credit
- Under a Letter of Credit, the payment risk is eliminated meaning you can therefore negotiate better price discounts with your suppliers or request extended credit terms to help improve cash flow because import payment is guaranteed by bank upon presentation of compliant documents by the beneficiary.
- You are able to maintain control over the transaction through the defined LC terms and mechanisms.
- Payment is only after shipment and supplier’s compliance hence the risk of not receiving goods ordered can be reduced
- Eliminates the country risk
- The facility available in local as well as foreign currencies
- Finance can be availed to beneficiary on the strength of the letter of credit.
- The terms and conditions of the letter of credit cannot be amended without his consent.
- With Credit Bank, you will also get a dedicated team that ensures seamless follow-up at all stages of the import / export and the payment process giving you peace of mind.
At Credit Bank, there are various types of LCs that are available and can be structured to suit your transaction requirements including
- Import and Export LCs
- Back to back LCs – The beneficiary of a letter of credit uses the Master LC as security/cover and a basis to issue another letter of credit (import LC) in favour of their supplier. The Master LC and the import LC are two separate letters of credit, but with same terms.
- Transferable LCs – The Bank facilitates the amendment of a Letter of Credit from the original beneficiary to one or more second beneficiaries.
- Confirmed Letter of Credit – The Bank authorizes Correspondent Banks overseas to confirm the letter of credit, in effect the correspondent Bank takes up the undertaking under the said letter of credit on behalf of Credit Bank.
- Revolving LCs – This is a facility used where constant and regular shipments from same supplier are to be effected over a given time period. Amount of the letter of credit is reinstated without specific formal amendment being required.
- Standby LCs
- Red/Green Clause LCs
This is a method of payment that allows Credit Bank to handle import or export documents (Financial or Commercial documents) in accordance with instructions issued and received. Documentary Collection is a transaction whereby the exporter entrusts the collection of payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank (importer’s bank), along with instructions for payment. That is, the documents will be delivered either against payment, against acceptance or on other terms and conditions as agreed between buyer (importer) and seller (exporter).
Funds are received from the importer and remitted to the exporter through the banks involved in the collection transaction in exchange for those documents.
The Documentary Collections facility offers exporters/importers the flexibility, security and comfort to conduct seamless business, as we manage all the document-handling needs on behalf of both export and import clients.
Credit Bank offers this facility in both Local as well Foreign Currency.
Benefits of Documentary Collection
- Documentary collections are less complicated and less expensive.
- The importer is not obligated to pay for goods prior to shipment.
- The exporter retains title to the goods until the importer either pays the face amount on sight or accepts the draft to incur a legal obligation to pay at a specified later date.
- With Credit Bank, a dedicated team ensures seamless follow-up at all stages of the import / export and the payment process giving you peace of mind.
Types of collections handled by Credit Bank
- Import Documentary Collections
Import Documentary Collections are payment mechanisms, usually cheaper than Letters of Credit but provide more security to the supplier than open account transactions. This mode of payment generally boosts trading relationships by reassuring suppliers of their payment and safeguards the importer’s title to goods. Usually funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents.
- Export Documentary Collections
Export Documentary Collections simplify the process of receiving payments from importers while also safeguarding the supplier’s title to the goods until payment has been received or documents have been accepted for payment.
This is undertaking by Credit Bank on behalf of the importer, to honour, payments of Bills of Exchange or drafts from the supplier. This undertaking is similar to that of a Letter of Credit and hence provides the same comfort to the supplier but with an easier structure for the importer. This is applicable to both domestic and international trade.
This bill can subsequently be discounted or used to negotiate better credit terms thus can enhance the trading relationship with the importer.
Financing Stage (Funded)
Local Purchase Order (LPO), Local Service Order (LSO) & Contract Financing
Simply referred to as LPO Financing, this financing gives your business much needed working capital based on the reputation of both your business and the organisation you are supplying goods and services to.
LPO Financing ensures continuity of operations in your business as immediate working capital needs are met.
In the case of a contract, the financing is structured to support the Contractor in implementation of contracts until full completion, covering pre-implementation as well as post-implementation of the contract.
The Fine Print
- Short term working capital financing with repayment pegged on receipt of contract proceeds
- Repayment shall be in full on or before expiry date from the proceeds of the LPO/supply orders
- Other cash flow sources available to the obligor
- Documentation, Terms and Risk Acceptance criterion has been detailed under product framework
Pre-shipment and Post-shipment Financing
Also referred to as Pre-export Finance, is issued when your supplier (the seller) wants the payment of the goods before shipment. The main objectives are to enable you (the exporter) to:
- Procure raw materials
- Carry out the manufacturing process
- Provide a secure warehouse for goods and raw materials
- Process and pack the goods
- Ship the goods to the buyers
- Meet other financial cost of the business
With pre-shipment financing your working capital requirements are provided for by Credit Bank provided there is a confirmed export order from an end buyer/off taker or against a Letter of Credit.
Post Shipment Financing
This type of financing provides your business (the exporter or seller) with finances against a shipment of goods or supplies made to the (your customer) importer or seller or any other designated agency.
With this facility, there is no need for you as an exporter to wait for the importer (your customer) to deposit the funds. This facility is usually provided against avalised bills by the importer’s bank or under accepted bills under the LC.
Benefits to your Business
- It improves liquidity of the business
- It eases cash flow position by providing greater financial liquidity & flexibility in administrating receivables
- It allows the exporter more liberal terms of payment to existing buyers thus competing with foreign suppliers.
Credit Bank can offer both pre-shipment and post-shipment credit facilities in both Local as well as foreign currency.
With Credit Bank, a dedicated team ensures seamless follow-up at all stages of the import/export and the payment process giving you peace of mind.
Sometimes your business manages to complete an order for its client way ahead of schedule. At other times, your client may have a credit policy of say 60 days. This presents liquidity challenges for especially for small and medium sized enterprises.
At Credit Bank, we offer Invoice Discounting where clients are allowed to draw funds on the basis of work done and invoiced but payment for the work done is yet to materialize.
What it Entails
- The applicant must have had six months bank relationship-not necessarily existing client (any bank relationship)
- The applicant must have had good supply history-successful performance/Payment of previous invoices from reputable institutions.
- Tripartite agreements with reputable companies to be allowed (letter of undertaking).
- Discount maximum of 80% of the invoice amount.
- Maximum duration 3 months.
- Approval charge/fee of 2%.
Import and Export Loans
Liquidity challenges are a part of small and medium sized business operations. Import Loans allows you access to short-term cash in advance to enable you (the importer) to meet your immediate payment obligations. Under such arrangements, Credit Bank finances your import commitments by making payment against the Letter of Credit or Documentary Collections and we then receive that payment from you at a predetermined date in the future.
Here, the credit period between the time that we provide financing and the time you repay us should be sufficient for either manufacture of the goods for final sale or for direct sale to your end buyers.
There are pre and post import loans available depending on the stage of the import process.
Benefits of Import Loans
- Get access to financial resources to clear goods from the port, manufacture, store or arrange for final sale to the end buyer.
- The facility enables you to pay bills on time and creates room to generate receivables
- Ability to reimburse the suppliers on a sight basis or when the tenor is due, therefore be in a greater bargaining position – typically in terms of the contract price
This facility is available in local as well as foreign currencies.
If you are in the export business, liquidity challenges may arise from time to time. At Credit Bank, we provide you (the exporter/seller) with access to working capital finance in the form of an Export Loan prior to shipment or delivery of goods. A facility can also be provided against evidence of shipment of goods or supplies made to the importer.
With Export Loans, you will be able to unlock cash before the importer (your buyer) pays you especially where the trade terms allow for a credit period.
Benefits of Export Loans
- Improves your liquidity position as the you get paid for export bills in advance before the bills are due for payment
- It eases cash flow position by providing greater financial liquidity & flexibility in administrating your receivables
- It allows you (the exporter) more liberal terms of payment to existing buyers thus competing with foreign suppliers.
This facility is also available in local as well as foreign currencies.
Your business can be able to raise additional working capital using stock/inventory. Credit Bank avails this financing to businesses with the aim of assisting you to increase sales volume and capitalize on other expansion opportunities.
Benefits of Inventory/Stock Loans
- Allows you to order in bulk and negotiate discounts
- Enables you to meet seasonal and/or unexpected demands
- Get/offer more attractive terms
- Enhances your reputation with suppliers
Structured Trade Solutions
Not all solutions we give as Credit Bank can fit your business’ needs. That’s why when you come to us, we take the time to understand your business’ needs and offer you tailormade solutions. These provide you with credit enhancement structures through which capital solutions are provided outside the traditional fall back on securities.
In such transactions, the solutions usually entail facilities where the intention is to facilitate repayment by the liquidation of flow of goods/commodities. The transaction usually revolves around working with our customers identifying and mitigating risks associated with the transaction to ensure the smooth flow of the transaction.
Benefits of Structured Trade Finance
- Structured financing tuned to the customers production and trade cycle
- Enhanced operation liquidity
- Get a dedicated team that walks you through the entire process
A guarantee is a unilateral contract in which the guarantor undertakes to make a payment to a specified beneficiary within certain limits of a stated sum of money when the third party (contractor / supplier) fails to perform an obligation as per the terms of the contract. The Insurance Agency in this case becomes the guarantor.
There are 2 types of Inusrance Guarantees available:
This is a written guarantee from a third party guarantor (A Bank or An Insurance Company) submitted to a Principal by a Contractor (bidder) which ensures that on winning of a bid, the contractor will proceed with the contract and will replace the bid bond with a performance Bond otherwise, the guarantor will pay the principal the difference between the contractor’s bid and the next highest bidder.
A bid bond is not an insurance, and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor
Also known as a contract bond. It is issued by an insurance company to guarantee satisfactory completion of a project by a contractor. It ensures payment of a sum (not exceeding a stated maximum) of money in case the contractor fails in the full performance of the contract.