Good day

Assume a trade deal in which buyer (middleman) of product X requires financing for a single transaction of value USD100,000.

The middleman then becomes the seller (before he made the purchase of goods, he already had a final buyer).

In this instance, the final buyer did NOT provide funds in advance. The middleman has to take ownership (buy/pay for) the goods and will sell at a margin.

Assume the middleman (MM) does not have USD100,000 in the business account in order to buy the goods. MM requests financing from a bank.

Financing would be temporary (for a few days).

In general:

1. Does MM have to provide security for the full amount (USD100,000)?

2. Which documents are required by the bank to be able to grant such temporary funding? E.g. contracts with both buyer  and seller?

Thank you.

J Reichert

Quoting from [Juane]:

Good day

Assume a trade deal in which buyer (middleman) of product X requires financing for a single transaction of value USD100,000.

The middleman then becomes the seller (before he made the purchase of goods, he already had a final buyer).

In this instance, the final buyer did NOT provide funds in advance. The middleman has to take ownership (buy/pay for) the goods and will sell at a margin.

Assume the middleman (MM) does not have USD100,000 in the business account in order to buy the goods. MM requests financing from a bank.

Financing would be temporary (for a few days).

In general:

1. Does MM have to provide security for the full amount (USD100,000)?

2. Which documents are required by the bank to be able to grant such temporary funding? E.g. contracts with both buyer  and seller?

Thank you.

J Reichert

First are you under contract to buy from the supplier, or are you trying to save face with the supplier?

Next, because you are in Taiwan you need to get in touch with the Taiwan's Export-Import Bank (EIB).  They can offer you financing in this realm.

Ranger

Quoting from [Juane]:

Good day

Assume a trade deal in which buyer (middleman) of product X requires financing for a single transaction of value USD100,000.

The middleman then becomes the seller (before he made the purchase of goods, he already had a final buyer).

In this instance, the final buyer did NOT provide funds in advance. The middleman has to take ownership (buy/pay for) the goods and will sell at a margin.

Assume the middleman (MM) does not have USD100,000 in the business account in order to buy the goods. MM requests financing from a bank.

Financing would be temporary (for a few days).

In general:

1. Does MM have to provide security for the full amount (USD100,000)?

2. Which documents are required by the bank to be able to grant such temporary funding? E.g. contracts with both buyer  and seller?

Thank you.

J Reichert

 

 

I would think you need to speak to a factoring company or purchase order finance company. Most banks will not get involved in this transaction without additional security, land, home, etc..

A purchase order finance company / factoring company would consider lending with a copy of the purchase order and the contract between supplier  and MM and a copy of the contract between buyer and MM. If comfortable, the finance company will typically lend up to 50% to 60% of the value of the purchase order, this typically covers the cost to manufacture the goods. Once the goods pass quality control and are loaded on the vessel, the shipping documents, bill of lading, etc.. will be presented to the finance company. The finance company will then pay the supplier, the MM is now responsible for delivering the goods to the buyer. This will create an invoice to the buyer, this invoice will be presented to the factoring company. They will lend up to 85% of the value of the invoice. The purchase order loan will be paid off and the an additional sum of money will be available to the MM. Typically 35% less fees for the purchase order transaction. The buyer will then pay for the goods upon delivery or when terms are up, typically, via L/C or n/30 days. Once the balance of the invoice is paid by the buyer, the factoring company will then remit the remaining 15% less fees for factoring the invoice.

I hope this helps answer your question.