Trade Financing

Benefit from efficient and effective financing solutions that enable your corporation’s trading activities.

Trade Financing

Providing a cash advance facility to export clients.

Packing Credit Loans (PCLs)

Alawwal provides a cash advance facility to its export clients, allowing you to buy raw materials, manufacture goods and pack them pending shipment and presentation of documentary bills to us.

PCL facilities are granted against acceptable Export Letters of Credit (LCs) for a lesser percentage not exceeding the actual cost of the goods or services and not more than 90% of the LC value. They must be repaid from the export proceeds using the same percentage of the loan granted.

The loan period will be up to 90 days after the shipment date.

Benefits of PCLs:

  • We give you an attractive profit rate.
  • You have more control of your finances.
  • You can easily monitor the usage of funds and repayments.

Forfaiting

Forfaiting allows an exporter to obtain cash by selling their trade receivables at a discount on a ‘without recourse’ basis. Debt instruments, such as bills of exchange and promissory notes or documents drawn against LCs due to mature at a future date without recourse to a previous holder, are eligible for forfaiting.

Usually, an Aval (Avalization) or a guarantee (payment undertaking) issued by an acceptable bank is required to cover the buyer's liability. Similarly, payments covered by acceptable Export Credit Agencies may also be forfaited. Therefore, every instrument that constitutes an irrevocable and unconditional payment undertaking can be forfaited. By forfaiting a debt instrument, Alawwal (the forfeiter) will absorb the following risks associated with such export transactions:

  • Country Risk: the inability or unwillingness of the state to enforce the law and effect payment.
  • Commercial Risk (Bank/Counterparty): the inability or unwillingness of the obligor or guarantor to fulfill their obligation on the due date.
  • Risk Marking: 100% against country or bank limits.

Pricing:

Debt instruments will be offered at an attractive discounted rate, usually quoted as a margin over LIBOR/SAIBOR. This rate includes:

  • Cost of funds.
  • Country or bank risk premium.
  • Profit margin.
  • Commitment fee: if an exporter requires a commitment to forfeit prior to shipment of goods, a nominal charge as a commitment fee will be levied for the period commencing from the start date of the Bank's commitment up to the date of discounting.
  • Financing amount: 100% of the value of the debt instrument in a currency acceptable to us.

Advantages:

  • We’re able to offer supplier credit to importers in more unstable countries at fixed rates.
  • We have the ability to realize a cash sale.
  • There is no interest rate fluctuation risk.
  • We eliminate credit risk and credit administration-related costs.
  • We simplify collection at maturity and minimize related costs.
  • We ensure simplicity and rapid execution.
  • Our service has a positive effect on your balance sheet.

Discounting of Export Bills

(Under unconfirmed Letters of Credit against issuing bank’s risk, without recourse to the beneficiary.)

Banks used to discount Accepted Export Bills under unconfirmed Letters of Credit (LCs) with recourse only against customer credit limit. Marking risk under bank limits without recourse to the exporter is restricted to the accepted bills under Confirmed LCs only.

We can discount Accepted Export Bills under ‘unconfirmed usance’ of LCs against the issuing bank’s risk for our customers on a without-recourse basis. Discounting will be at our sole discretion, and in accordance with the availability of limits for the issuing bank and country.

Pricing:

  • Discount rate.
  • Non-recourse fee, which will be calculated from the date of discounting only on the presented documents’ value until the payment maturity date of such documents.

Advantages:

  • Immediate realization of funds.
  • Cost saving due to the calculation method of non-recourse fee, in comparison to confirmed LCs.
  • Payment made by the bank on a discounted bill is free from price fluctuations, so there is no profit rate or exchange rate fluctuation risk.
  • Attractive discounting rates based on the issuing bank and its country risk.

Without recourse discounting: we will not have the right of recourse to the customer, and advancing funds is at our complete risk, taking into consideration the risk of the issuing bank and its country. This is similar to bill discounting under confirmed LCs.

Discounting/Prepayment of Alawwal’s Own Acceptance of Bills/Payment Undertaking under Import Letters of Credit

This method is used with usance Letters of Credit (LCs) we have issued. A clause is included stating our willingness to discount the accepted bills, without recourse to the beneficiary or the beneficiary’s bank. This can also be used with bills avalized by Alawwal under the Bill of Collection.

This approach is appropriate to exporting countries where regulatory restrictions exist for borrowing foreign currencies in the local market and/or borrowing costs are relatively high. This is an independent transaction subject to a conditional agreement between the exporter, negotiating/confirming bank and Alawwal, considering the credit grading, limit status and repayment capacity of the LC applicant.

Advantages:

  • You have the ability to negotiate better pricing for your goods or services.
  • Your borrowing costs are lowered by obtaining a credit period from suppliers on convincing them to accept usance LCs incorporating a clause offering payment at sight.

Contact Us

Central Region – Riyadh
Tel: +966 (0) 11 4067888 Ext. 1215/1249/1459
+966 (0) 11 5115252 Ext. 1155
E-mail: ca-tradeadvisory@alawwalbank.com

Western Region – Jeddah
Tel: +966 (0)12 2368844 Ext. 2623
E-mail: wa-tradeadvisory@alawwalbank.com

Eastern Region – AlKhobar
Tel: +966 (0)13 8957444 Ext. 3323/3324/3326
E-mail: ea-tradeadvisory@alawwalbank.com

Customer Support
Toll-free number: 8004400020

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Alawwal Bank