Overview
The Export Buyer's Credit is the medium or long term financing facility granted by ABC backed by China Export & Credit Insurance Corporation (SinoSure) to the importer or the importer's bank, in support of the export of capital goods and services in China such as electromechanical products, complete plants, and international project contracting.
Features
1. Optimization of the exporter's asset and liability structure.
Since the Export Buyer's Credit is a financing facility granted to the importer or the importer's bank, the exporter is able to receive payment immediately without financing. This ensures the exporter's receipt of payment and contributes to faster funds turnover while the risk of foreign exchange rate is mitigated.
2. Reduction of the importer's financing costs.
It offers an alternative financing channel for the importer while the importer has access to lower financing costs compared with general commercial loans since the insurance premium (or collateral rate) and loan interest rates are usually lower than the market average.
Procedures
1. The Conclusion of Letter of Intent.
The exporter applies to ABC for the letter of intent or letter of interest for the buyer's credit at the time of the preliminary business negotiation with the importer or when participating in overseas project bidding. At the same time, the exporter applies to SinoSure for the letter of intent or letter of interest for Export Buyer's Credit Insurance. ABC verifies relevant conditions and accepts or revises the financing program proposed by the exporter, based on relevant data, through relevant authority or credit database. Then, ABC will issue a letter of intent or letter of interest for financing which is not legally binding to the exporter.
2. Project negotiation and review.
ABC tracks the progress of the project, assists the exporter and the borrower in negotiation of the business contract, and finalizes the percentage of export buyer's credit and the terms of payment, making sure the methods of repayment and settlement are in consistency with the withdrawal and payment terms under the loan.
3. Negotiation and execution of the loan agreement and insurance agreement.
4. Use of proceeds.
The exporter makes the shipment and entrusts the relevant department for collection or L/C related business in accordance with the agreement. Then the documents are submitted to the borrower for review and the borrower shall send his payment instruction. The exporter may make a withdrawal at ABC when all preconditions have been met. The exporter regularly submits his contract progress report, specifying the progress of delivery or project implementation as well as the settlement of payment.
Tips
1. The term of the loan is usually less than 10 years (from the effective date of the loan contract to the date of paying off the principal and interest thereof).
2. The borrower shall be an importer, importer's bank (the on-lending bank), or statutory sovereign borrower of the importer's country (such as the Ministry of Finance, the central bank or the similar) as accepted by ABC.
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