How does it work?

Letter of Credit

1. Seller having received confirmation from the Advising Bank that a Letter of Credit has been issued on behalf of the Buyer, then initiates the shipment of goods and places in hands of the Shipper or Carrier.

2. Shipping Documents evidencing shipment and Bills of Lading representing title to the goods are sent to the Advising Bank.

3. The Nominated Bank checks the Shipping Documents against requirements of the Letter of Credit and, if they are in order, advises the Seller that it is authorised (if merely a Nominated Bank) or obliged (if also a Confirming Bank) to pay the Seller in accordance with the terms of the Letter of Credit.

4. Nominated bank sends the documents to the Issuing Bank.

5. After checking and being satisfied that the documents meet the requirements of the Letter of Credit the Issuing Bank reimburses (if paid at sight) or transfers monies to the Nominated Bank.

6. The Issuing Bank delivers the documents to the Buyer.

7. The Issuing Bank is reimbursed by the Buyer or the credit line granted by a utilisation of an existing facility.

8. 8a. By virtue of its possession of the documents the Buyer can claim the goods at port from Shipper or Carrier.

   8b. Buyer now has title and can on-sell or process the goods.

Bank Guarantees

Direct Demand Guarantee Structure

1. Buyer and Seller enter into Contract of Sale. Often included is a requirement for additional or independent credit support of the Buyer to perform.

2. Buyer - known as the Applicant - instructs his bank (the Issuing Bank) to issue a Demand Guarantee in favour of the Seller as Beneficiary for obligations of Buyer under the Contract of Sale.

3. Issuing Bank issues the Demand Guarantee.

4. Seller ships goods, undertakes service or performs in accordance with Contract of Sale.

5. Buyer fails to pay for goods or service. Seller serves a written demand to Issuing Bank to pay.

6. Issuing Bank pays Seller in accordance with the terms of the Demand Guarantee.

7. Issuing Bank recovers from Buyer the amounts paid under the Demand Guarantee pursuant to e.g. the terms of the Demand Guarantee facility it granted to Buyer or counter-indemnity provided by Buyer.

Indirect Demand Guarantee Structure

1. Buyer and Seller enter into Contract of Sale. Often included is a requirement for additional or independent credit support of the Buyer to perform.

2. Buyer - known as the Applicant - instructs his bank (the Instructing Bank) to request the Seller's bank (the Issuing Bank) to issue a Demand Guarantee in favour of the Seller as Beneficiary for obligations of Buyer under the Contract of Sale and which the Issuing Bank will be counter-guaranteed by the Instructing Bank.

3. Issuing Bank issues the Demand Guarantee in favour of the Seller as Beneficiary.

4. Instructing Bank issues a Counter-Guarantee in favour of the Issuing Bank in respect of its obligations under the Demand Guarantee.

5. Seller ships goods, undertakes service or performs in accordance with Contract of Sale.

6. Buyer fails to pays for goods or service. Seller serves a written demand to Issuing Bank to pay.

7. Issuing Bank pays Seller in accordance with the terms of the Demand Guarantee.

8. Issuing Bank recovers from Instructing Bank the amounts paid under the Demand Guarantee pursuant to the terms of the Counter-Guarantee.

9. Instructing Bank recovers from the Buyer the amounts paid under the Counter-Guarantee pursuant to e.g. the terms of the facility it granted to Buyer or counter-indemnity provided by Buyer.

Supply Chain Finance

1a. Contract of Sale between Buyer and Supplier. Buyer is usually able to impose extended payment terms on when invoice becomes due for payment.

1b. Supplier provides certain services and/or goods to Buyer.

2. Buyer owes Seller accounts receivable arising under the Contract of Sale and any invoices issued by the Seller. Due to negotiation strength of the Buyer, payment terms tend to be extremely long and thus adverse to the cash flow position of the Supplier.

3. Buyer Agreement between Buyer and Financier pursuant to which Buyer (i) confirms value of Accounts Payable and (ii) undertakes to pay full value to the Financier on maturity.

4. Supplier is on boarded to the Financier's payables platform and Supplier Agreement / Receivables Purchase Agreement between Supplier and Financier pursuant to which Supplier agrees to sell all those Receivables due from the Buyer to the Financier at a discount but Supplier gets paid earlier than maturity date of original invoice.

5. Financier offers to Supplier to discount Buyer Receivables by payment of a set prepayment sum (e.g. 90% of Buyer Receivables' face value less a discount charge).

6. Buyer pays to Financier full value of Buyer Receivables on maturity or invoice due date.

7. Financier pays to Supplier the balance of the purchase price (e.g. 10%) less any other deductions relating to fees and charges then applicable.

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Structured Trade Solutions

Structured Funded trade finance products are complex trade finance tools focused on the provision of funding and/or credit to participants in the trade transaction. These tools include pre-export finance, prepayment finance, tolling, inventory finance, borrowing based facilities and asset-based lending amongst others.

Ways We Help:

• Pre-Export Finance

• Pre-Payment Finance

• Tolling

• Inventory Finance

• Borrowing Base Facilities

• Export & Agency Finance

Other Services

Harness the power of advanced quantitative analytics and AI with Phoenicia Consulting’s specialized services. We assist financial institutions in using AI-driven models to improve risk management, fraud detection, and credit analysis.

Ways We Help:

• Bank Payment Obligations (BPO)

• Documentary Collections

• FX Risk Management

• Trade Advisory