The company had three LC issuing banks and not only did the discounting price vary significantly across banks but was also very high. In addition, one of the banks offered only 90 days of credit. Also with regards operational efficiency, the company was comfortable with one bank but were unable to get discounting lines from them on a continuous basis.
Our customer, part of large Bangladeshi conglomerate in South Asia, engages in trading of goods, value addition and sales in the domestic market. On the back of a growing economy and an increase in consumption of goods in Bangladesh, the company was looking at increasing their turnover. It was in an expansion phase and wanted to increase sales by offering a longer credit period to the distributors of goods.
The company had approved local bank facilities from three Bangladeshi Banks including Letters of Credit (LC) facility for providing Usance Payable at Sight LC to suppliers across China. However, the company needed a longer usance cycle to match the cashflows of the business. Also, the size of individual LCs were small (USD 20K to USD 400 K) but aggregated to millions of dollars every month. Previously the company ended up financing these LCs using the BDT borrowing facilities as there were not many takers for such small LCs. At the time, they were getting the discounting priced on per LC basis and not on the aggregated flows
The company registered with Interlinkages Online to arrange a solution called Usance Payable at Sight (UPAS) for availing financing for a period of 120-150 days while their suppliers got paid at sight in matched currencies This helped in arranging credit for 120-150 days without drawing down on the high cost local debt.
The Importer was able to save on average about 0.75% per annum when compared with alternative financing sources for the earlier 90-day cycle. But when compared for a 150-day cycle the savings were significantly higher - in the range of 4-5% per annum. This is because for the longer tenors the company was borrowing in local currency at a significantly higher cost and Interlinkages replaced this local high cost financing with matched foreign currency financing.
Through Interlinkages Online, the company connected with multiple banks globally and the financing quotes were arranged within 2-4 working days for all transactions.
The service team of Interlinkages supported the closure of the deal end-to-end which included draft document negotiation with the financing banks and sorting any operational issues with the issuing banks.
Over the last one year, Interlinkages Online has been our ‘go to’ product for all LC UPAS needs. We were able to get quotes across issuing banks and the rates were significantly better than the market alternatives. We have specially found the long tenor quotes to be extremely competitive. We also value the relationship with the Interlinkages team for bringing the Global banks to our table and sorting out any operational issues whenever needed for smooth transactions.
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