One interview to change your perspective on SME Trade Finance
16/Apr/2014 • International Trade•
Having recently launched our new Trade Finance solution for UK Importers, it’s time you heard about the solution from the people behind it. Roman Itskovich, Head of Trade Finance, joined Ebury from Bain Capital where he was part of the private equity deal team. Prior to this he held positions at Foundation Capital VC, co-founded an SME software startup, and was a consultant at Mckinsey & Co.
We thought it best to start at the beginning, with why the Trade Finance solution was developed and how it will benefit UK Importers.
Q: What are the main issues UK Importers face?
A: This varies from business to business, but a common complaint is Importers are often forced to wait long periods of time for payments from customers which decreases their own level of working capital. This is compounded by those industries affected by seasonal importing, as there is the additional difficulty of sourcing the necessary funds to purchase goods earlier in the trade cycle, in order to enjoy discounted rates.
Maintaining working capital is absolutely vital to their business as there are often several months between them making the initial payment for the goods and the onward sale. In some cases to make large purchases overseas, Suppliers may require a guarantee of payment from a third party (bank, financing house etc.), this can be costly to obtain and often requires the consignment of goods to the order of the guarantor.
Q: What are the key points that a business should consider when choosing a Trade Finance provider?
A: A business should take into account various factors when choosing the right Trade Finance provider, they will want a secure means of making payment to their Supplier, occasionally backed by a payment guarantee, the flexibility to make payments as and when required and the certainty of the costs involved up front. The Trade Finance product offered by Ebury offers a simple solution to all these requirements.
Q: How do you ensure that the Trade Finance product you offer is right for the prospective customer?
A: Once we have confirmed that the customer meets our selection criteria, we use the latest financial technology to perform detailed checks on the parties to the trade, giving us the level of confidence in the transaction that we require as a responsible lender whilst ensuring the customer receives a hassle free and efficient service. As part of this process we tailor our product to meet the specific requirements of the customer and their Supplier to enable a smooth transaction flow.
Q: How might this work for an Importer of automotive parts for example?
A: An example of this could be a UK business that manufactures machinery and equipment for the global vehicle industry. As long as their business is based in the UK, their Suppliers can be based almost anywhere in the world, including within the UK itself. If they start struggling with cash flow and working capital challenges they can turn to Ebury to facilitate their growth. To do this they would register as a Buyer with Ebury Trade Finance and at the same time introduce their Suppliers to the programme, who then also enrol. Because Ebury releases payment for each transaction as soon as the Buyer accepts the obligation to pay, the Buyer would be able to provide its Supplier with the working capital required to meet increasing demand. In this way the Supplier now has an additional source of working capital without having to pledge any security to support it. At the same time, the Buyer has been able to stabilise and control its vital supply chain.
Q: You mentioned that the long wait times for payment might negatively affect Importers relationship with their Supplier. How might this relationship work under Trade Finance?
A: Using the Ebury Trade Finance solution the client can ensure their Suppliers receive fast direct payments on a non-recourse basis in the currency of their choice. This ensures immediate liquidity for their Suppliers and working capital advantages for UK Buyers.
Q: So if you had to break the whole process down into 5 simple steps what would they be?
A: Step 1 – The Buyer registers with Ebury and establishes a credit line.
Step 2 – The Buyer and Supplier agree transaction details and the Supplier registers with Ebury.
Step 3 – The Buyer accepts the goods.
Step 4 – Ebury pays 100% of the invoice value to the Supplier.
Step 5 – The Buyer settles the invoice with Ebury up to 120 days later.
Apply now for Ebury Trade Finance