Import businesses are particularly susceptible to liquidity and QA/QC risk.
A very common scenario:
1) An importer works hard over the years to build rapport and eventually suppliers are willing to extend open terms.
2) The supplier encounters financial hardship and is forced to ask the importer for a deposit.
3) The importer must now come up with a deposit (damaging liquidity), and their money is now at risk in the event goods arrive in poor condition (as cost cutting can affect QA/QC standards).
What can an importer do to mitigate liquidity and QA/QC risk?
The Answer: offer their supplier a letter of credit from WESTCAP instead of sending a deposit. Our LCs are backed by OUR cash, NOT YOURS! Your cash is your livelihood–don’t sent it overseas until your goods arrive and you are sure you’re getting exactly what you want. We help hundreds of businesses grow by mitigating liquidity and QA/QC risk, and we can do it for you.
It’s a new year. But it may seem surprisingly like the old year when you deal with your banker trying to handle letters of credit.
Last month we told you about “last mile financing” in the mining arena. This is, you will recall, bridging the gap between when miners normally need to be paid, and when the trader can cash the letter of credit once the cargo has been loaded. We had a number of responses to this message, and have found there is particular interest in shipping, for example, iron ore or manganese ore from Mexico and other spots in Latin America. We have already closed one such relationship, and expect to complete several other fundings over the next few weeks. This particular finance structure is suitable for the industrial ores, but you should not think of it as being usable for precious metals like gold or silver.
About 600 years ago it was common knowledge that if you sailed west from Europe, either the ocean would abruptly end and you would fall off the end of the earth, or there were man-eating dragons waiting for you for lunch. Their lunch, not yours. (See our note about this in our PS.)
People living in that era had it tougher because the facts themselves were in short supply. Today there are enough facts around to satisfy everyone if they bother to look.
That’s why it’s so amazing that misinformation still spreads even amongst professionals in a field.
When we told American friends we had been invited to go to Nigeria, most said: “Try not to catch ebola.” This, as you will see, summed up beautifully a misconception in the United States (and elsewhere, we’re sure) about Africa in general and Nigeria in particular: many people are not well informed about Africa.
Our recent letters have highlighted some of the opportunities that we now see relating to more effective use of letters of credit. There happen to be stunning limitations within the banking systems in different countries in the world, not just in developing nations but even within the European Union. One advantage we have is the ability to bring receiving banks into play which are still entrepreneurial in encouraging and being open to assist in trade finance.
Developing countries are threatened by a housing crisis. New models
are needed to produce affordable and sustainable housing on a large scale. What role can the private sector play?……………..
We hear regularly from clients working to use their capital the best way they can. Some are nervous about using OPM (Other People’s Money) and use strictly their own capital without ever reaching out to other sources. Others don’t have a lot of capital and are searching for ways to make their small amount of capital stretch a whole lot further.
Our own Marshall Jablon talks to Trade and Forfeiting Review, the industry’s number 1 magazine.
Read the Interview Below;