Introduction
Purchase order financing: to support stocking and shipping for exporters under international trade and suppliers under domestic trade (hereinafter "seller"), at the request of the seller, Bank of China provides the seller with specialized trade finance of purchasing, production and transportation under the purchase order according to the trade contract or purchase order (hereinafter "order") submitted.
Functions
The product can satisfy suppliers' financing demand in stocking and shipping, help suppliers in expanding trade opportunities and reducing capital occupation rate.
Target Customers
Suppliers with financing demands in the stage of stocking, production or shipment.
Application Qualifications
1. The underlying transaction has an authentic trade background and the order is valid with clear and explicit content;
2. The supplier has a strong capability of fulfilling agreement and keeps a long-term and stable business relationship with the buyer; the buyer can reach Bank of China's relevant standards with good credit;
3. Relevant clearing procedures are carried out in Bank of China after cargo shipment;
4. The financing term should match the term of procurement, production and shipment under the order and should not exceed 180 days (inclusive) in principle.
Process
1. Submit such original documents as the order or trade contract;
2. Sign the Order Financing Contract;
3. The customer submits the Order Financing Withdrawal Application, and Bank of China starts financing after review on the application;
4. After stock shipment, relevant procedures of account receivable settlement are carried out in Bank of China;
5. When receiving buyer's payment at maturity, Bank of China deducts the financing principal and interest as well as relevant charges, and transfers the balance (if any) to the customer.
Case
Company A is a private enterprise mainly engaging in producing and exporting digital hair beauty products, which has stable quality and high safety as well as rapid sales growth. The company has also established mutual trust relationship with its downstream buyers. As one of its customers, Company F is an American company, one of the world's largest brand name companies in professional hairdressing industry. Their cooperation started in 2006. Company A is the first Chinese partner company of Company F. The sales of hair straighteners from Company A to Company F gradually accounts for 10% of the former's total.
In order to reduce costs and simplify procedures, the settlement between Company A and F is converted from L/C to credit sales, thus the original packing loan product is no more applicable. With the rapid growth of the company's orders in quantity, purchasing materials with its own capital can not meet the demand of its business development. Thus, the company dare not take many of the orders, which restricted the development of the company.
Company A turned to Bank of China for solutions to above problems. After investigation, Bank of China recommends the order financing product to Company A, and designs a solution which combines order financing and export commercial invoice discounting:
1. During the stage of stocking, order financing service is processed according to the orders, so as to support Company A in its procurement of raw materials with a financing period of three months;
2. After the delivery, Company A submits invoices to Bank of China and designates Bank of China as the single receiving bank. Bank of China carries out export commercial invoice discounting and returns the fund financed;
3. On the day of maturity, Company F makes repayment and refunds Bank of China with financing money.
By means of Bank of China order financing product, all the problems confronted by Company A have been solved; also, the company's business is expanded unceasingly.
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