Enabling Sustainable Growth for Dutch Exporters

What it is:

Collaborative arrangements between buyers, suppliers, and financial institutions that optimize working capital and reduce financing costs throughout the supply chain.

Mechanisms:

• Invoice/Purchase Order Financing: Using the supplier's strong credit rating to provide better terms and conditions to their international buyers, facilitating sales while maintaining buyer liquidity
• Distributor financing: Working capital support for foreign distributors to increase purchases

Benefits:

• Optimizes working capital throughout the supply chain
• Reduces financing costs for all parties involved
• Enables exporters to offer competitive payment terms to buyers
• Strengthens relationships with distributors
• Facilitates larger order volumes through improved buyer liquidity

What they are:

Documentary commitments by banks, commonly referred to as Letters of Credit (LC), on behalf of buyers to pay exporters when compliant documents are presented, acting as a secure payment method in international trade.

Types:

• Sight LC: Provides immediate payment to exporters upon presentation of compliant documents.
• Usance LC: Offers extended payment terms to buyers while providing exporters with documented payment commitments.
• Confirmed LC: Adds a second bank's guarantee to honor the LC, providing additional security for exporters.
• Discounted LC: Allows exporters to finance their buyers while simultaneously receiving immediate cash by discounting the LC.

Benefits:

• Provides payment security for exporters in international transactions
• Enables extended payment terms for buyers while providing payment security for exporters
• Facilitates trade with new or higher-risk buyers
• Enhances exporters' ability to secure financing against documented receivables

What they are:

Legally binding commitments issued by banks to ensure fulfillment of financial obligations. They serve as risk mitigation tools for both exporters and buyers in international trade. Note that these may also be referred to as "Bonds" in certain markets

Types:

• Payment Guarantee: Issued by the buyer's bank to guarantee payment to the seller, reducing non-payment risk for exporters.
• Advance Payment Guarantee: Protects buyers who make advance payments by ensuring refund if exporters fail to deliver goods or services as agreed.
• Performance Guarantee: Ensures that exporters will fulfill their contractual obligations to buyer satisfaction.
• Retention Guarantee: Covers the retention amount withheld by buyers until project completion or end of warranty period.

Benefits:

• Mitigates financial risk for both exporters and buyers
• Facilitates access to larger projects and tenders
• Builds trust and credibility in international business relationships

What they are:

Specialized arrangements that protect both exporters and their banks against all types of guarantee calls (both fair and unfair calls) while freeing up bank credit facilities for additional business opportunities.

Benefits

• Enables exporters to maintain liquidity for business operations while still providing required guarantees to buyers
• Reduces exporter's risk exposure through direct counter guarantees
• Frees up exporter's credit facilities, improving overall credit capacity
• Can be structured as standalone products or as part of comprehensive packages like Fair Calling Facilities

What it is:

Medium to long-term insurance that protects exporters against non-payment risks from foreign buyers due to commercial or political factors backed by Export Credit Agencies (ECAs). Typically covers capital goods transactions with payment terms of 2-10+ years. Both supplier credit structures (where the exporter extends credit to the buyer) and buyer credit structures (where a financial institution provides financing directly to the buyer) are possible.

Benefits:

• Covers both commercial risks (buyer insolvency, payment default) and political risks (war, political violence, expropriation and other forms of government intervention, currency inconvertibility)
• Enables competitive extended payment terms of 2-10+ years for both small and large capital projects in any market
• Enables exporters to offer competitive payment terms while managing receivables risk
• Provides confidence to pursue opportunities in emerging or higher-risk markets with enhanced risk protection

What it is:

Post-shipment, short-term insurance that protects companies against buyer non-payment, covering domestic and international trade transactions. Unlike Export Credit Insurance, Trade Credit Insurance typically covers commercial transactions with payment terms up to 180 days.

Benefits:

• Protects against both insolvency and protracted default
• Often includes market intelligence on buyers' creditworthiness
• Enhances bankability of receivables for securing additional financing
• Can be structured as single buyer or whole turnover policies

What they are:

Trade finance techniques for converting export receivables into immediate cash flow.

Factoring:

Short-term receivables financing where exporters sell their accounts receivable at a discount to specialist firms (factors) who then manage collection.

Forfaiting:

A specialized form of medium to long-term receivables financing where exporters sell their foreign receivables (typically documented by bills of exchange, promissory notes, or letters of credit) to a forfaiter typically on a non-recourse basis.

Benefits:

• Converts future payments into immediate cash, improving exporter's liquidity
• Eliminates collection costs
• Removes receivables from the exporter's balance sheet

What it is:

A financing arrangement where capital equipment is leased across international borders, typically for standard "plug-and-play" capital goods. Two main structures exist: financial leases where ownership transfers to the customer upon final payment, and operational leases where ownership remains with the leasing party throughout the lease term. Both structures allow customers to access equipment without immediate full payment while providing exporters with secured payment streams and asset recovery rights in case of non-payment.

Benefits:

• Enables customers to obtain equipment without major upfront capital expenditure
• Provides exporters with secured payment streams and collateral through equipment ownership or title retention
• Facilitates asset recovery in case of payment default, reducing credit risk exposure
• Often offers tax advantages to both parties through cross-border arrangements
• Extends the sales reach to customers who prefer operational expenditure over capital expenditure
• Can be combined with expropriation risk insurance for additional protection in higher-risk markets

What they are:

Strategic investments in joint ventures or start-ups in target markets to secure distribution channels or manufacturing facilities for exported products. Most effective when the exporter actively participates in the venture, bringing not just capital but also operational expertise.

Benefits:

• Creates strategic partnerships that secure market access
• Enables exporters to leverage operational expertise as value-added investors
• Secures long-term off-take agreements for exported products through ownership stakes
• Establishes local presence through joint ventures with distribution partners
• Allows using minority stakes to cement long-term customer relationships while maintaining influence
• Option to provide governance stability in multi-investor environments through neutral positioning