We are knitwear manufacturer and exporter based in Pakistan.

My customers have recently started asking for credit terms 30 to 60 days from the date their receive goods in US and Europe. We have been working on 25% advance 75% upon scanning of shipping documents with most of the customers. My customers tell me that their suppliers from China are giving them 60 days to pay after goods reach US or EU ports. They want me to compete. Business is slow these days and we need to offer some credit to the customer but at the same time want to be safe.

We have recently opened an office in TN USA where we have employeed one person to do the sales for us. We also have a legal LLC in US. I was thinking about billing all goods to US company and the selling to end customer through US company after buying credit insurance / factoring.

Need inpurt/suggestions from members of this forum.

Thanks in advance.

Qamar Aftab

CEO, Image Garments (Pvt.) Ltd.

 

 

 

Factoring and credit insurance is a good idea, you can make use of your US office with this. However you must make clear to your partners that this is for your own safety and not against them. Additionally, some of your partners may not be eligible for credit insurance, so I would consider first whether there is a chance of losing clients (however who is not eligible for a credit insurance, wouldn't have paid at 30 days either).


c[]

Quoting from [Qamar]:

We are knitwear manufacturer and exporter based in Pakistan.

My customers have recently started asking for credit terms 30 to 60 days from the date their receive goods in US and Europe. We have been working on 25% advance 75% upon scanning of shipping documents with most of the customers. My customers tell me that their suppliers from China are giving them 60 days to pay after goods reach US or EU ports. They want me to compete. Business is slow these days and we need to offer some credit to the customer but at the same time want to be safe.

We have recently opened an office in TN USA where we have employeed one person to do the sales for us. We also have a legal LLC in US. I was thinking about billing all goods to US company and the selling to end customer through US company after buying credit insurance / factoring.

Need inpurt/suggestions from members of this forum.

Thanks in advance.

Qamar Aftab

CEO, Image Garments (Pvt.) Ltd.

 

 Do you adopt usance  L/C before ? do you have professional partner to check it ?Please consider the safety and risk  factor .

In my opinion ,US and EU businessman are not generally adopt the L/C . I agree with Gabor Bathori very much . 

 

Quoting from [Qamar]:

We are knitwear manufacturer and exporter based in Pakistan.

My customers have recently started asking for credit terms 30 to 60 days from the date their receive goods in US and Europe. We have been working on 25% advance 75% upon scanning of shipping documents with most of the customers. My customers tell me that their suppliers from China are giving them 60 days to pay after goods reach US or EU ports. They want me to compete. Business is slow these days and we need to offer some credit to the customer but at the same time want to be safe.

We have recently opened an office in TN USA where we have employeed one person to do the sales for us. We also have a legal LLC in US. I was thinking about billing all goods to US company and the selling to end customer through US company after buying credit insurance / factoring.

Need inpurt/suggestions from members of this forum.

Thanks in advance.

Qamar Aftab

CEO, Image Garments (Pvt.) Ltd.

 

 ok Qamar how are you it,s ok to extend credit to customers that have at least bought from you  about 5 times and have paid each time and you should do your best to know your customer use your instinct but only start @14 day,s  2 times and then go just to 30 day,s unless you are real sure of them and get to know them personally

 

Christopher/LionShare metals inc

 

I have attended a conference today, where an Hungarian foreign trade bank explained some financial methods to secure exporters. I am sure such insurance companies and banks exist in Pakistan as well.


1. There is a so called "buyers credit", where your bank gives a credit to your buyer for the period of payment (in your case 90 days) and reimburses yourself immediately for the full amount. This is good because the credibility of your buyer is verified first, additionally the bank takes all risks from you and gets into contact directly with your buyer. You pay the banking costs, but the buyer pays the interests.


2. There is the classic factoring, where you sell the credit to the bank with some commission deducted.


3. You can have a credit insurance for a reasonable fee, however, since this is an insurance you must take a portion of the risk (here at least 5-10%, but the more risk you accept the lower the insurance fee is). Also, the insurance can be combined with either method above for better security (also if you have insurance the bank gives the buyers' credit or an export credit with better conditions).


Of course these all have costs, but this way you are quite safe. I don't know how do you get along with your buyers but for expanding their payment time a few percent price increase should be acceptable for them which would cover your banking costs.


Hope it helps.


c[]

Thank you for a very good advice.

Since I am in Pakistan with limited staff in US, I would like to know which are good factoring / credit insurance companies to consider in the US so that I can ask my US office to contact such companies in the US.

Quoting from [Gabor Bathori]:

I have attended a conference today, where an Hungarian foreign trade bank explained some financial methods to secure exporters. I am sure such insurance companies and banks exist in Pakistan as well.


1. There is a so called "buyers credit", where your bank gives a credit to your buyer for the period of payment (in your case 90 days) and reimburses yourself immediately for the full amount. This is good because the credibility of your buyer is verified first, additionally the bank takes all risks from you and gets into contact directly with your buyer. You pay the banking costs, but the buyer pays the interests.


2. There is the classic factoring, where you sell the credit to the bank with some commission deducted.


3. You can have a credit insurance for a reasonable fee, however, since this is an insurance you must take a portion of the risk (here at least 5-10%, but the more risk you accept the lower the insurance fee is). Also, the insurance can be combined with either method above for better security (also if you have insurance the bank gives the buyers' credit or an export credit with better conditions).


Of course these all have costs, but this way you are quite safe. I don't know how do you get along with your buyers but for expanding their payment time a few percent price increase should be acceptable for them which would cover your banking costs.


Hope it helps.


c[]

        

 

Dear Qamar Aftab,

 

Regarding your customer requesting credit and how to handle the matter; first I would like to point out that your customer is probably only asking for credit because of the economic slow down the world is experiencing and not just telling the real problem.

 

 The solution to this kind of problem is to also ask someone else for credit ( mirror the problem to someone else) . I don’t mean this in a crude way but quite frankly it’s an opportunity for a company such as ours. We can offer you credit on your input goods that you could import from our company manufactured in . This credit can be revolving and can be for short periods and upto 24 months. You have to be well established for you to be insured and approved by our embassy in your country.

 

As money is tight customers are going to want credit from your factory and if you try to do things the way that you have always done things then you may find that other factories that give credit attract your customers away from you.

 

I suggest you act now and contact us if your are interested in goods from ….

 

Cheers for now!  

 

Ian Mvula

NACMTC SA (Pty) Limited                        

info@nacmtc.co.za       

Cell: +27 83 510 1527         

 

 

Quoting from [lesley li]:

Quoting from [Qamar]:

We are knitwear manufacturer and exporter based in Pakistan.

My customers have recently started asking for credit terms 30 to 60 days from the date their receive goods in US and Europe. We have been working on 25% advance 75% upon scanning of shipping documents with most of the customers. My customers tell me that their suppliers from China are giving them 60 days to pay after goods reach US or EU ports. They want me to compete. Business is slow these days and we need to offer some credit to the customer but at the same time want to be safe.

We have recently opened an office in TN USA where we have employeed one person to do the sales for us. We also have a legal LLC in US. I was thinking about billing all goods to US company and the selling to end customer through US company after buying credit insurance / factoring.

Need inpurt/suggestions from members of this forum.

Thanks in advance.

Qamar Aftab

CEO, Image Garments (Pvt.) Ltd.

 

 Do you adopt usance  L/C before ? do you have professional partner to check it ?Please consider the safety and risk  factor .

In my opinion ,US and EU businessman are not generally adopt the L/C . I agree with Gabor Bathori very much . 

 

Oamar Aftab.

My dear, in international business there must be an element of credit policy which you must have put down to keep you up with the problems associated with financing. Your customers are the life wire through which your company exist to do the productions for export.

To be candid, I advise that you should know your customers very well  enough to grant them credit facilities. Pay visits to them in their countries, know their families nucleus and extended. Allow that free interactions between both, you will be amazed the tremendous sales you will be making through this but simple process.

NGIGE, Ndidi L.(JP)F.AIE

Qamar,

I have experiences both as an exporter and an importer and in my opinion, the only way I will agree to give credit to buyers in the international trade is if the transaction is covered by a usance L/C.

Thanks.

Quoting from[gcc888]:

Qamar,

I have experiencesboth as an exporter and an importer and in my opinion, the only way I will agree to give credit to buyers in the international trade is if the transaction is covered by a usance L/C.

Thanks.

Can you explain this further... I am very new requesting LC.. My first experience did not go at all because the buyer put too many limitations and I could never send the product out.

How is that an LC is set to allow 60 or 90 days credit. I thought that the customer had to have the money in the bank anyhow before the LC is expedited to the seller,So how will this make a difference that the LC is set for 60 of 90 days payment to the seller?

Quoting from [JoseChemical]:

Can you explain this further... I am very new requesting LC.. My first experience did not go at all because the buyer put too many limitations and I could never send the product out.

How is that an LC is set to allow 60 or 90 days credit. I thought that the customer had to have the money in the bank anyhow before the LC is expedited to the seller,So how will this make a difference that the LC is set for 60 of 90 days payment to the seller?

A buyer does not necessarily had to have money in the bank for his bank to allow LC openings. If the buyer has a previously approved credit facility with his bank, he can go ahead and open LC's subject to the credit limits imposed by the bank. It is no different from your bank extending you an unsecured loan.

The difference to the buyer on setting 60 or 90 days credit on the LC is that they only need to pay their bank or incurr interest costs upon the end of the 60 or 90 days credit.

On the side of the seller, they will only receive payment after the end of the credit period but one thing good about this is that the payment is guaranteed since it will now be subject to the credit risk of the buyer's bank.