Trade Finance and Margin Funding

We have partnered with specialists in the Trade finance and Margin Funding industries and are able to offer these services in conjunction with our foreign exchange expertise.

TRADE FINANCE

Trade finance provides the customer with cash to enable it to finance its purchases i.e. before a debtor has arisen. It provides the customer with pre-shipment finance and then provides the customer with credit (usually 90 days). This enables the Customer to receive the goods, sell them and collect the debtor proceeds.

The ideal customer has the following characteristics:

• It is usually a private company that is involved in some form of local or international trade. i.e. It buys goods or services.
• It is usually owner driven which enable quick decisions to be made.
• The customer is usually a small to medium enterprise.
• It must be profitable and must show good growth potential.

MARGIN FUNDING

In order for companies to manage currency risk and exposure to large movements in foreign currency clients need to be able to take out forward exchange contracts (FECs).

When you enter into a Forward Exchange Contract (FEC) for the purchase or sale of Foreign Exchange you are often required to deposit an Initial Margin equivalent to at least 10% of the Rand value of the FEC. In addition you may be called upon from time to time, to place on deposit additional Variation Margins should there by an unfavorable movement in the rate of the underlying foreign currency.

These Initial and Variation Margins have to remain in a deposit account with the Bank for the full duration of the FEC, to be used by the Bank should you as the client, fail to perform any obligations in terms of the FEC.

This requirement can place a significant drain on your business’s cashflow as it ties up these funds for the full period of the FEC and they cannot be accessed for any reason during this period.

The Margin Financing Facility offered by Forex Capital alleviates this problem by underwriting the Initial and Variation Margins on your behalf for a fee and thereby frees up your cash resources to meet current working capital requirements in your business and provides you with facility to take out forward contracts to secure your margins in your business.