Introduction
The "Rong Tong Da" business refers that customers pledge Bank of China with their qualified account receivables which are dispersed and occur frequently with different deadlines during their selling (under credit sale (O/A) and documentary collection(D/P or D/A) and L/C). These accounts receivables form an "accounts receivable pool" with a relatively stable balance. The returned money of the account receivables pool is used by Bank of China as a risk prevention measure in conducting various businesses of trade finance and letter of guarantee credit for customers (not including import factoring, domestic comprehensive factoring (the buyer) or financing type letter of guarantee/standby L/C).
Functions
1. By means of qualified accounts receivable as the pledge, the problem of inadequate credit line of the company can be solved effectively;
2. It helps the company in revitalizing accounts receivable and improving fund efficiency;
3. Methods of financing and withdrawal are flexible and cost efficiency is maximized.
Target Customers
1. SMEs which have relative shortage of working capital, urgently need banks' credit support but are short of immoveable pledges or third party guarantee;
2. Large state-owned enterprises and listed companies that have demands for supply chain management and accounts receivable management.
Application Qualifications
Customers conducting Rong Tong Da business should be qualified for the following conditions:
1. In principle, the period of trade settlement business conducted in Bank of China should be over one year or the continuous operational period of the business should be over two years;
2. Credit rating is Grade B or above;
3. Sound operation and financial position of business;
4. Customers have normal relation with Bank of China, without any bad credit records in the credit reference system of the People's Bank of China;
5. In recent years, accounts receivable balance formed by trade settlement business conducted in Bank of China is stable.
Process
1. The customer submits application for trade finance or letter of guarantee business;
2. For the pledged accounts receivable in the sum of trade finance and letter of guarantee businesses, the customer signs the Maximum Pledge Contract (for Rong Tong Da Business) with Bank of China;
3. Bank of China verifies the effective pledge amount in customer's accounts receivable pool and available line of Rong Tong Da business, and conducts the business within the financing line;
4. Bank of China conducts pledge registration via the "publication system for accounts receivable pledge registration" of the People's Bank of China;
5. Bank of China conducts such businesses as trade finance and letter of guarantee for customers.
Case
Company S mainly engages in operation of chemical engineering products which are popular in domestic and overseas markets. The domestic and overseas sales settlements are made within 30-60 days after buyers receive the goods. The repayment of accounts receivable is performed well with a relatively stable balance. Company S needs to purchase raw material from overseas suppliers for production of finished products and settlement is made via remittance. With rapid business development, Company S is confronted with increasing pressure of capital turnover and in urgent need of obtaining finance from bank.
Company S is faced with the following problems during its application to the bank for finance:
(1) Because of its shortage of pledge and third party guarantee, it is difficult for the company to acquire adequate credit line from the bank;
(2) If we finance for each single accounts receivable during the product selling process of Company S, the company's financing requirement of flexibility and convenience can not be satisfied, because accounts receivables of Company S are numerous and dispersed with different terms, which will make the financing complicated as the financing period and amount are restricted by the due date and the sum of the receivables;
(3) Considering financial costs control, the company does not want to conduct letter of credit or financing business in banks by means of renewing trade finance or paying deposits.
Bank of China recommends Company S with "Rong Tong Da" product and designs a solution scheme for Company S as follows:
Bank of China accepts qualified accounts receivables of Company S as a pledge to form "accounts receivables pool" with a stable balance. Also, according to effective pledge amount of the "accounts receivable pool", Bank of China conducts multiple outward remittance advance transactions for the company for purchasing raw materials from outside China.
With support of Bank of China "Rong Tong Da" product, the problems confronting Company S are solved completely:
The product solves the problem that Company S cannot acquire credit support from bank due to its shortage of pledge guarantee; it helps Company S in revitalizing accounts receivable and reducing fund cost; Bank of China conducts trade finance business for Company S within the effective pledge amount of the "accounts receivable pool". Since the problem that financing period and sum are restricted by the due date and sum of single accounts receivable is removed, financing and withdrawal methods become more flexible and convenient, thus the company's demands are satisfied.
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