What is Open Trade Finance?
Open trade finance is a simple, low cost and collateral-free way to finance export trade.
Trade finance is needed when an exporter wants to be paid at shipment but a buyer wants to pay later.
Open trade finance is a simple system for exporters provided by PrimaDollar and others to meet this need:
- The exporter is paid in cash at shipment
- The buyer pays later, and we take the buyer credit risk
PrimaDollar offers a simple pricing system based upon a single flat fee. There are no other fees provided the buyer pays on time. See here how our export pricing works.
For importers or buyers – and for Supply Chain Trade Finance – pricing is usually set by the buyer’s own funders. See here for more information.
What about adding a letter of credit?
Sometimes an exporter wants a letter of credit in order to obtain pre-shipment finance, or because local exchange controls require it. PrimaDollar can arrange for a letter of credit to be added to any open trade finance transaction. When this is required, our letters of credit are issued by Barclays Bank plc, one of the largest banks in the world.
However, we are increasingly successful at persuading banks to accept that our payment at shipment is already sufficient to shelter pre-shipment finance. In other words, local banks will give back-to-back finance against our open limit and ability to pay against documents and before the exporter hands over control of his goods.
Moreover, our digital trade finance platform makes this even simpler and clearer for the local bank who can track, in real time, the various moving parts involved in trades (cash, shipments, and documents). For about how our systems help to remove the need for LCs, read more here.
You pay at shipment, how does that work?
Before shipping the goods, please check with us that your buyer limit is in place and there is sufficient space on the limit for your trade. With the limit in good order, you can ship the goods and then show us your shipping documents. When we see the shipping documents, we will pay you in cash usually 90% of the invoice value. The balance is paid later when we are paid by the buyer.
There are different ways to manage the shipping documents.
- You can send the shipping documents to us directly. This is the easiest.
- If you prefer to lodge your documents with your local bank, we may still be able to pay. We need a confirmation from your local bank that they are holding your documents and will release them against our payment.
- Sometimes your buyer will authorise us to pay against a copy of the shipping documents – in which case we usually do not insist on seeing the originals.
You pay 90%-95% at shipment – why not 100%?
Where we agree and buyers agree, we sometimes pay more even than 95%, but our standard system involves retaining a small balance of the invoice is to ensure that you, the exporter, have an incentive to help us collect the sums due from the buyer and provide a reserve in case there are problems. We will pay you the balance less our charges when the buyer pays us.
What does it cost?
You can see our charges for yourself here.
How can I find out more?
With a global network and global coverage, talk to us.