Import Finance Facility

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Loan granted to finance importation of raw materials or finished goods.

An Advance facility offered specifically to facilitate the importation of current/working assets

Import Finance Facility may be availed via Bas (Banker Acceptance), CPs (Commercial Paper) or ODF (Overdraft Facility) in non-checking accounts Associated risk includes new or unforeseen regulatory policy, supply, demand, unpredictable fluctuations in FX rates, improper (over/under) invoicing

Modes of Payment In International Trade

  1. Open account – seller dispatches goods to the buyer (without payment) with an agreement to make payment within a specified period
  2. Bills  for  collection  – seller dispatches goods to the buyer with an agreement that the buyer makes payment within a specified period but underlying document delivered to its banker
  3. Advance payment – buyer pays the seller before goods are dispatched
  4. Letter  of credit  – debt instrument issued by a bank on behalf of its customer to make payment to third party against certain stipulated documents

Letter of Credit

  • Governed by Uniform Customs and Practice for Documentary Credits
  • (UCP 600)
  • Applicant – buyer
  • Issuing bank – buyer's bank (resident in buyer's country)
  • Advising bank – seller's bank (resident in seller's country)
  • Beneficiary – seller

Modes of LC Payment

  • Sight payment
  • Deferred payment
  • Acceptance Negotiation
  • Company's trade cycle
  • Experience/track record
  • Terms of payment (Confirmed or Unconfirmed LC/Sight or deferred payment)
  • Nature of goods (Prohibited or not/Perishable or not) Customer's contribution
  • Demand deficiency/Marketability
  • FX fluctuation


  • Equity contribution by customer
  • Documents required for establishment of LC submitted
  • Independent verification of price & marketability to avoid over/under invoicing
  • Consignment   o f   goods   t o   t he   or der   o f   t he bank/warehousing   arrangement,   integrity/capacity   of company to pay on arrival of shipping documents
  • Independent security etc.
  • Proforma invoice from supplier/Form 'M' Customer's stock level
  • Contribution   (minimum   of   30%   of   Landing   Cost   – CIF+ Custom duty+ Clearing Charges)
  • Documentary evidence of previous importation
  • Profitability Analysis
  • Security
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October 27, 2016
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