A Mumbai based chemical solvent importer regularly borrows funds in foreign currency backed by LC under Supplier’s credit route. The payments are made at sight to the beneficiary by the overseas lender which extends trade credit to the client for 90 days. During one of the Supplier’s Credit transaction, the processing ran smoothly until the document handling and acceptance stage. At the time of funding, post receipt of acceptance, the negotiating bank was full up on issuing bank limits and expressed their inability to advance Supplier’s Credit.
Myforexeye Value Addition:
Myforexeye team consulted the Funding Bank to resolve the issue but they were unable to honour the claim as their headquarters had strictly restrained all their branches to lend the funds against that particular issuing bank risk. Given this backdrop, we advised the client to make alternate arrangements of paying the exporter directly should our efforts fail. Though disappointed, the client was supportive on his part and was ready to directly pay off the LC obligation. Consulting with the overseas lender, we approached their HQ citing the client’s predicament.
We based our case on the facts - an offer letter had been issued out for this Supplier’s Credit; it was way too late to make alternate financing arrangements; and this was an MSME client who would be financially inconvenienced. Using our arguments, the overseas lender escalated this case to their HQ. In the interim, the supplier was also taken into confidence regarding the delay of about 1-2 days. The HQ understood the client’s plight and exceptionally approved this advance as a one-off.
The payment was remitted on the second day following the due date. The client was relieved that the funding actually happened since it would have impacted their cash flows significantly. The client was satisfied with the services of Myforexeye team in not only arranging the Supplier’s Credit but also pulling it through to the end.
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