Past, present and future of trade finance. Bank guarantees are in demand by private businesses more than ever Bank guarantees as a tool for trade financing

Large-scale transactions in business are always associated with great risks. It is not always possible to make sure that a partner is reliable. To reduce the share of these risks, such financial instruments as a letter of credit and a bank guarantee are intended.

The intended purpose of both banking products is the same. But the essence of their action differs from each other, although this difference is not always visible to bank customers.

It is used more often than a letter of credit. A bank guarantee is a written agreement under which a financial institution - a bank, assumes obligations under an agreement between the customer and the contractor.

The bank is the guarantor of the transaction. He undertakes to pay the customer money if the contract for the supply of goods and services has not been executed. He insures himself. The bank will be able to dispose of the collateral if the transaction fails.

Bank guarantee, bills

Types of bank guarantees

Depending on the purpose, this tool is used for:

Providing applications at auctions, auctions. With its help, the winner of the competition ensures the fulfillment of the terms of the contract.
Fulfillment of obligations under other contracts. If the executor has disrupted the transaction or untimely and not fully completed it, the bank pays guarantee funds to the customer.
Refund of advance payment. This type of guarantee governs the use of the advance by the contractor. If the fact is established that the money goes for other purposes, then the entire amount must be returned to the customer. This helps prevent money laundering.

Terms of receipt

The bank has a number of requirements for those who apply for this product. Each financial institution puts forward its own conditions. However, there is a list of mandatory requirements:

existence on the market for at least one year;
the absence of negative aspects of interaction with government agencies and extra-budgetary funds;
positive credit history.

The applicant should collect a certain package of documentation, which includes:

The founding documents of the company.
Her accounting records.
Documents for an auction or other types of contract.

A pledge is provided as security.

The debtor has the right to provide real estate, transport, tangible assets, equipment. A bank guarantee against a bill is also widely used.

Promissory note guarantee

For collateral, bills of exchange are accepted, both issued by other credit institutions and by the same bank to which the applicant applied for a guarantee.

A bill of exchange is a security issued in a strictly defined format. It is a written obligation to pay its owner a specified amount within a specific period. This is a kind of debt.

Promissory note guarantee

Types of bills

There are two main types: simple And transferable.

A promissory note is unconditional. It obliges the debtor to pay a specific amount at the appointed time to the creditor. The debtor writes it out on his own.

When using a bill of exchange, another participant was involved. The creditor obliges the debtor to pay a fixed amount to a third party, who in this case is the holder of the security.

According to the nature of the profit received, it can be interest and discount. According to the second, there is no profit in the form of interest. Its income is the difference between the selling price and the face value. This is the discount, which can have a zero value.

Most often, a bill is a registered security. It includes a specific person who receives the right to demand a debt. There are also warrant bills to bearer. They indicate only the debtor, the amount of debt, the date and place of settlement.

Guarantee and bill

A bill applying for collateral for a bank guarantee must include the following mandatory details:

face value of the paper;
information about the place of its compilation;
the date of payment and the place where it will be made;
name of the first owner;
signatures of authorized persons, seal, bill of exchange note.

According to the current laws, the total debt of the organization-issuer should not exceed half of the money it has. The currency of the money of the security and that which the guarantee insures must be the same. Such a security is issued by the piece, in the quantity that the client needs. A bill of exchange can be issued to both a legal entity and an individual.

Not every credit organization is ready to accept a bill of exchange as security. Indeed, in this case, it becomes necessary to check the drawer for its financial stability.

However, the main advantage of these securities lies in their liquidity. It is not difficult to sell bills, and there is no need to convert the face value of the paper into a monetary equivalent, as was the case with transport or real estate. To pay the debt in case of violation of the terms of the agreement, you can transfer not money, but the papers themselves.

If an apartment or a vehicle is offered as collateral, first of all, they need to be evaluated, which means spending time considering the possibility of issuing a bank guarantee. The analysis of a bill of exchange document is much faster and easier. If a guarantee is needed to secure an auction, the time factor becomes very important, as auctions have a fixed time frame. You can simply not have time to get a guarantee before the start of the competition.

Letter of credit

A banking institution also draws up such a type of risk insurance as letter of credit. This is an obligation of the bank, issued at the request of the buyer to pay the seller a specified amount, if the latter complies with all the terms of the agreement. The seller must document the fulfillment. Here the bank acts as a third party, transferring money from one participant in the transaction to another.

Suppose the buyer and seller enter into a supply agreement. None of them wants to act on prepayment or preliminary delivery. Then the buyer goes to the bank and opens a letter of credit. The amount of the calculation will be the one that he must pay for the purchased goods. As soon as the subject of the transaction is received by the buyer, the seller has the right to send the necessary documents to the bank. And he is already transferring the payment under the letter of credit. The documents presented by the seller may be:

waybills endorsed by the customer of goods and services;
acts confirming the shipment;
other papers prescribed in the contract.

In this way, companies that have never worked with each other are insured. The letter of credit is also used in foreign trade. The main difference from a guarantee is that the bank does not risk its assets.

Letter of credit as a way of risk insurance

Types of letter of credit

Financiers have identified several types of letter of credit forms of payment.

In terms of security, it can be:

Coated. In this case, one bank transfers the amount of security to another for the entire term of the letter of credit.
Uncovered, means that the issuer does not transfer the amount, but gives the executing bank the right to write it off, within the size of the letter of credit. Banks negotiate the settlement procedure among themselves independently.

By nature, the following varieties are distinguished:

Confirmed. This is a payment guarantee from another banking institution. In this case, the nominated bank undertakes to make the payment regardless of receipts from the issuing bank.
Revocable. It can be both changed and withdrawn at the written request of the payer without prior agreement with the recipient.
Irrevocable. Canceled or changed only with the consent of the recipient.

In practice, covered irrevocable letters of credit are considered the most popular.

Standby letter of credit

It is often confused with a guarantee. The essence of such a document is the payment by the guarantor to the customer of the amount in case the supplier fails to fulfill the terms of the transaction.

The reserve type is characterized by a number of features:

Provision of this document for the entire period of the warranty contract.
The obligation of a banking institution to fulfill a payment if the supplier has fulfilled the agreement in bad faith.
Ensuring payment to the supplier in full.
Need to apply for coverage.

For the executor of the contract, the letter of credit makes it possible not to make an advance payment and to defer payment. It also provides confidence in the payment of money even in case of force majeure. The customer receives a payment guarantee from several financial institutions. There are no risks when sending goods without prepayment. The settlement of the letter of credit is quite fast.

Among the disadvantages of this form of payment, only the high cost of registration and a more complex process can be distinguished.

Difference between guarantee and letter of credit

Despite the fact that both banking products protect the interests of the parties, they differ from each other. Main differences:

A letter of credit is a method of payment. A guarantee is a guarantee of various obligations.
A letter of credit is used for a longer time; it is a kind of trade settlement format. A guarantee is a one-time agreement for one transaction.
Letters of credit optimize the procedure for settlements between the parties to the transaction, and guarantees ensure the confidence of one participant in the financial stability of the partner.

In trade finance, instruments such as letters of credit and bank guarantees are becoming increasingly common. This provides security for all parties to the agreement.

In order to avoid the occurrence of internal and external risks associated with foreign economic activity, modern requirements for the organization of this activity of enterprises provide for the mandatory construction of schemes in international settlements that would be effective. Among these risks, the main one is the loss of own funds. Therefore, in Lately In practice, more and more attention is paid to the following forms to ensure the commitments made in the field of foreign trade transactions:

international bank guarantee.

International bank guarantee

These financial instruments are becoming more and more relevant both among suppliers and buyers. This is because both tools are easy to use. In addition, all the risks associated with them are borne by the banking institution.

First of all, starting to consider the roles in international settlements that an international bank guarantee and a standby letter of credit perform, it is worth clarifying that there is a significant difference between these documents. In principle, both of these banking instruments are the same. And the goal of each is to secure the obligations assumed by one party to the other, in accordance with the terms of the contract. But standby letters of credit originated in the United States, where they became popular for use, although the issuance of bank guarantees in the United States is not a type of banking activity, as established by the provisions of the law. Following current trends in the development of banking activities, the products of this activity, as well as the increase in customer requirements, US banks took up the development of a new product. Thus, an exceptionally new banking product called a standby letter of credit was created. Its use in international trade contributed to the provision of additional security to bank customers in terms of fulfilling contractual obligations in relation to counterparties. In addition, banks also benefited from this product. Since there are no restrictions on transactions using documentary letters of credit in the United States of America, a new source of income has opened up for US banks.

Unlike letters of credit, bank guarantees are a classic banking product. Not only banks offer guarantee services Russian Federation and Europe, but also banking institutions in other countries. Thanks to many years of experience in the field of bank guarantees, these banks are able to establish good relations with customers, providing advice on the design and issuance of bank guarantees, as well as assisting in the selection of the best guarantee option, taking into account the nature of the obligations that the guarantee provides.

Thus, both bank guarantees and a standby letter of credit are financial instruments that can be used to achieve the same goals. Regarding the features that each of them possess, they will be discussed below.

Standby letter of credit

This type of banking product is a kind of documentary letter of credit and represents the obligations assumed by the issuing bank in relation to the beneficiary. These obligations may relate to claims on the need to reimburse the amount of money received by the applicant. Or regarding the return of a pre-paid payment (advance payment) issued to the applicant. In other situations, they may include requirements for the payment by the applicant of an obligation in case of non-fulfillment for any reason of its conditions. Examples of situations in which a standby letter of credit is used:

If the seller and the buyer have concluded a contract, according to which the seller must deliver goods / render services to the buyer, then the seller has the right to demand that the buyer provide additional guarantees in relation to the fulfillment of obligations to pay for these goods or services. In such situations, a standby letter of credit provides assurance to the seller that if a sum of money is not paid by the buyer, it will be paid by the guarantor party. In turn, the role of the guarantor is performed by the bank that issued this standby letter of credit (issued a bank guarantee).
If, when the seller sells goods to the buyer, the terms of the contract provide for an advance payment in favor of the seller, then the buyer has the right to demand an additional guarantee that the goods will be delivered (services rendered) within the period specified in the contract and in full. Otherwise, the advance payment must be returned to the buyer. In this case, the standby letter of credit also acts as additional security for the seller's obligation.

In both the first and second cases, the beneficiary transfers possible risks of non-payment of the amount or non-compliance with the terms of the main contract to a third party, which acts as a financial intermediary in settlements between the beneficiary and the principal. The third party issues this standby letter of credit, which will subsequently act as a protection for the beneficiary from possible risks.

When working in the banking market, it is important to understand the difference between ordinary documentary letters of credit and standby letters of credit. Their main difference lies in the fact that what is the nature of the obligations that are guaranteed to the beneficiary. In cases of using an ordinary documentary letter of credit, the beneficiary must present a package of documents that meet the terms of the letter of credit. They will act as evidence of the proper fulfillment of the terms of the contract (the shipment was carried out within the period specified in the contract). According to the standby letter of credit, the beneficiary will need to provide documents proving the non-fulfillment of the terms of the contract by the applicant before the beneficiary.

A standby letter of credit also has a number of features that distinguish it from a regular one:

Payment under a standby letter of credit is subject to the presentation of a specific document, which is a demand for payment due to the fact that the principal has not fulfilled its obligations to the beneficiary in accordance with the terms of the contract. And payment under a regular documentary letter of credit can occur upon presentation of the original shipping documents and other documents to the bank.

Under a standby letter of credit, payment is not carried out as often, unlike a documentary one. This is because the probability of providing shipping documents is much higher than the probability of requesting payment.
A standby letter of credit is used to settle financial/commodity transactions, while a regular documentary letter of credit is used only to settle commodity transactions.

Over the years of banking practice, there have been situations when standby letters of credit were issued in favor of other banking institutions. This occurs in cases where it is impossible to use a direct letter of credit. Or when loan relationships arise between banks.

A standby letter of credit is a fairly flexible bank document. In most cases, it is used in settlements for trade transactions, provided that open account. In this situation, the seller agrees to open a standby letter of credit in his favor. Subsequently, under this letter of credit, payment can be made in the event that the buyer fails to pay for the goods delivered to him in accordance with the terms of the contract.

In most cases, the execution of standby letters of credit is carried out upon the first presentation of a demand from the beneficiary in writing. In order to submit a claim for the payment of a payment, the beneficiary must provide the bank with a certificate in writing about the failure to fulfill the obligations assumed by the applicant to the beneficiary.

Often, in order for the payment to be issued to the beneficiary immediately, a condition is provided in the standby letter of credit. According to him, the bank must make a payment without requiring the provision of evidence of reasonableness this requirement, as well as his correctness. First, the bank is obliged to make a payment to the beneficiary.

Therefore, the first risk faced by the bank is that there is a high probability of bad faith behavior on the part of the beneficiary in terms of making an unproven claim to receive payment under the letter of credit. Accordingly, when working with these banking instruments, as a standby letter of credit, Special attention should be given to the possible increase in the amount of the letter of credit itself, as well as the special terminology used in the field of application of letters of credit in order to prevent various kinds of misunderstandings.

bank guarantee

Bank guarantees are a financial instrument that is an irrevocable obligation of the bank that issued the guarantee to pay a payment in favor of the beneficiary if a situation arises related to the failure of the principal to fulfill any obligations to the beneficiary in accordance with the conditions specified in the main contract. The application of guarantees is governed by the applicable domestic law of the country in which the guarantor bank is located. Also, relations on the use of bank guarantees are regulated by the provisions of the International Chamber of Commerce, which include regulations:

No. 458 "Uniform Rules for Payment Guarantees"

No. 325 "Uniform Rules for Contract Guarantees"

These publications control the manner in which bank guarantees may be used. These acts essentially perform the same role as the normative act No. 500 "Uniform Customs and Practice for Documentary Letters of Credit". Each bank has its own standard bank guarantee form with specific text. At the same time, it should be noted that act No. 325 has not received universal recognition and therefore is practically not used in modern banking.

The regulations of the Uniform Rules No. 458 for payment guarantees determine that a guarantee can be used as any guarantee, debt obligation, any other payment obligation that has been issued in writing by a banking institution, insurance organization or other person that guarantees the payment of a certain amount of money against presentation of documents that comply with the terms of this written obligation. This guarantee may be issued:

in response to the request of the principal or in accordance with the provisions and at the expense of the party of the principal;
in response to the request of a bank (insurance company, other party) acting on behalf of/on behalf of the applicant and in accordance with the instructions of this bank.

Classification of bank guarantees

A payment bank guarantee can be used in situations where the buyer makes a demand to pay for goods subject to an open account. At the same time, the seller agrees in response to this demand, but, in turn, requires the issuance of a guarantee in his favor regarding the payment. According to it, the bank undertakes to pay the seller if the buyer does not make the payment upon receipt of a document from the seller confirming this.
Loan repayment guarantee, which can be used as collateral for a corporate type of loan. For example, overseas subsidiaries need a loan. The latter can be provided to companies if they issue guarantees to the parent company. In the event of a warranty situation, it will ensure the return of the amounts issued.
Tender bank guarantee, the issuance of which the buyer may require to secure the requirements for the conclusion of a contract agreed in advance by the parties. As a rule, the tender guarantee (bid guarantee) covers amounts within 1-5% of the total contract value.
Guaranteed fulfillment of obligations in accordance with the terms of the contract. Sometimes situations arise when the buyer makes a demand to the supplier's bank to issue him a bank guarantee so that it provides a guarantee for the seller to ship the goods in full and within the specified time, according to the terms of the contract. If the terms of the contract are violated by the supplier, the bank will be forced to make a payment to the buyer in the amount of about 10-50% of the total value of the contract.
Advance return guarantee. Sometimes the buyer may make a preliminary advance payment in favor of the seller. Therefore, he has the right to demand a counter guarantee for the return of the advance from the supplier's bank, so that in case of non-fulfillment of the terms of the contract (non-delivery of goods), the supplier's bank will ensure the return of the advance made previously.

Bank guarantees and standby letters of credit serve the same purpose. They are used as security for the fulfillment of obligations by one of the parties to the other. Also, bank guarantees can be used in other circumstances, if there is no simple transaction for the supply of goods. Therefore, it often becomes necessary to issue a guarantee when conducting transactions related to real estate. Such projects in most cases involve the use of tender guarantees (offer guarantees). They are used by contractors starting a new project. This guarantee is applied in order to demonstrate its financial capabilities in relation to the fulfillment of the conditions specified in the contract. This bank document can also be used when arranging project financing. Contractors involved in project financing also use bank guarantees. The implementation of projects in the field of heavy industry can be attributed to a specific area of use of a bank guarantee. In such projects, suppliers will face the condition of the mandatory provision of a guarantee that ensures the fulfillment of their obligations. In particular, this concerns the fact that the goods supplied in accordance with the terms of the contract will fully comply with them.

Bank guarantees can be:

Direct, which are issued directly in the name of the party that is the beneficiary, and can be advised through his bank (the presentation of any obligations by this bank is not required). If situations arise that for some reason the potential guarantor bank does not meet the requirements of the beneficiary, then in the calculations of the international plan there may be an actual scheme where a confirmed international bank guarantee is used.
Indirect (confirmed), when implementing the schemes of which, the issuing bank asks another bank to issue a guarantee in favor of the beneficiary. As a security by the issuing bank of its obligations, it issues a counter document (counter-guarantee) in favor of this local banking institution. This type of bank guarantee is used in cases where, for some reason, the issuance of direct guarantees is prohibited. Or in situations where the beneficiary makes a requirement to issue a guarantee to a specific local bank.

Many trade finance instruments have been in use for hundreds or even thousands of years. Of course, modern technologies will change this market as well, but the potential for trade finance using traditional instruments is still very high.

LILY FIALKO, MAXIM RIZHSKY

Thousand years of experience

Approximately 4 thousand years ago, the first prototypes of the trading banks of the Ancient World appeared in Assyria and Babylon. They loaned grain to farmers and merchants. In the Middle Ages, the Italians continued the business of merchant banks. Jewish settlers were involved in the trade, bringing ancient practices from the East. Techniques designed to finance long trade trips were applied to lending to grain production and trade.

A letter of credit, or rather, a financial instrument similar to it, was offered by the Templars back in the 11th century. The merchant could deposit funds and receive a receipt from one of the branches of the wide "branch network" of the Templars. The receipt provided food and lodging during the journey and allowed funds to be received in local currency at the end point of the journey. In the 17th century in France there was a similar product - a letter of credit. The merchant received from his banker a letter to a banker from the city where he was going, with a request to pay a certain amount. The merchant's bank refunded the amount to the paying bank on a preliminary or subsequent basis.

Among the prototypes of the bill, one can note syngraphs and chirographs that arose in ancient Greece and were borrowed from the Roman Empire. In V??? century in China, bill-like feiqian securities arose. Among the Arab prototypes of the bill are the hawala and suftaj debt documents. Most likely, it was they who influenced the emergence in the X???-X?V centuries in Italy of the first forms of the bill itself.

Initially, the holder of the bill was forbidden to transfer rights to other persons. However, by the beginning of the 17th century, restrictions had become a deterrent to trade, and they were gradually abolished. Promissory notes began to be transferred by affixing a special order of the holder - endorsement (Italian in dosso - back, spine, reverse side; the inscription was made, as a rule, on the reverse side of the bill).

The Russian word "veksel" comes from the German Wechsel, which means "exchange", "transition". In Russia, the bill appeared at the beginning of the 18th century due to the development of international trade - at that time mainly with the German principalities.

trillion market

"The volume of world trade in 2013 amounted to $18.8 trillion, and the first quarter of 2014 showed an increase of about 4% year-on-year. Approximately 15-16% of this volume was settled using documentary letters of credit and collection, so the potential of the trade finance market is huge" , - says Tatiana Shalashnikova, head of the documentary operations and trade finance department of Raiffeisenbank.

Head of Trade Finance Department of Rietumu Bank (Latvia) Natalia Perkhova gives slightly different figures. According to her, in last years the volume of trade finance in the world was declining: in 2013 it amounted to $124.1 billion, 32% less than a year earlier. "This year has been very volatile for the markets, and, in all likelihood, following its results, we will see a continuation of the downtrend," she predicts.

According to Alexander Biryuchinsky, Deputy Head of the Department of Documentary Operations and Trade Finance at Gazprombank, "the main factors influencing the development of the global trade finance market are the level and volume of global trade, changes in regulatory approaches (in particular, the introduction of Basel III standards), and the widespread tightening of client verification procedures. , the fight against the legalization of illegally obtained income, as well as the requirements to comply with sanctions restrictions."

The predominance of certain instruments in the trade finance market also depends on the situation in the global economy in general and in international financial markets in particular. "During periods of economic recovery in conditions of excess liquidity, instruments that allow one to simultaneously attract significant amounts of financing for long periods (issue of bonds, pre-export financing, etc.) become very popular on the markets. In times of crisis, in conditions of compressed liquidity and growing distrust on markets, the role of development institutions, export credit agencies, and other state institutions that act as creditors or insure the risks of other creditors is increasing. Transactions involving these institutions make it possible to attract long-term money on attractive terms even during periods of crisis, "explains Biryuchinsky.

"In the context of global instability, many financial institutions limit or even completely curtail the direction of trade finance. Although, on the contrary, we see certain prospects and opening niches in this direction. Over the past five years, Rietumu has been purposefully developing trade finance, which allows us to work successfully in this even in the most difficult times,” Perkhova says, adding that “at present, Rietumu is practically the only bank in the Baltic region that specializes in this area.”

Crisis crisis, but in modern world An industry with a thousand-year history cannot stand still. Perkhova believes that "the world is striving to simplify and speed up settlements in international trade," and lists the main trends.

First of all, "in world practice there is a tendency to reduce settlements through letters of credit, transactions are carried out on a simpler, faster and more trusting basis." “Speed is important, original documents are being replaced by electronic ones, email is used instead of standard mail,” says Perkhova. “In this situation, banks, which are conservative by nature and burdened with many regulatory procedures, should also follow this trend and be flexible, respond quickly and make decisions ".

In addition, "many private investment funds have emerged ready to finance international trade." “It's no secret,” explains Perkhova, “that the deposit rates are very low and private investors are exploring other options for placing money at a more attractive interest rate. Such funds can afford more flexible approaches (including various risks) demanded by international trading companies, and become prominent players in the trade finance market."

Compliance has become much more important than before - compliance with activities trading companies, as well as the banks and financial institutions that finance them, to legislative acts and international sanctions. “Everyone is hearing a very recent story with the leader of trade finance, BNP Paribas, which was fined by the US government for financing trade transactions with countries under sanctions,” Perkhova recalls. “As a result, the bank that occupied a leading position significantly reduced trade finance activities."

Experts agree that the role of factoring operations is growing in world trade. According to Shalashnikova, "international factoring received a new impetus in development: in 2013, the growth in the turnover of the factoring market in the world amounted to about 8%."

Over the past five years, according to Shalashnikova, several new trade finance instruments have appeared on the market, "among which one can single out BPOs (bank payment obligations)." However, experts believe that cardinal changes in the set of trade finance instruments should not be expected yet.

According to Perkhova, the new tools will be of interest primarily to small and medium-sized companies. "Large corporations certainly have access to cash resources, the situation is worse with the availability of financing for smaller companies. Perhaps new tools should solve exactly this issue," she says.

Russian question

In the post-Soviet space, despite the fact that the provision on a promissory note and a bill of exchange known in narrow circles was approved in the USSR in the 1930s, trade finance has been actively developed only in the last 20 years. However, even now in Russia it is not much different from the world.

"If we talk about the features of the trade finance market in the post-Soviet space, then, probably, it should be noted that they primarily depend on the specifics of the legislation and, accordingly, on the regulation of foreign economic activity in a particular country. But in general, I would not talk about which some global differences,” notes Shalashnikova. "In most post-Soviet countries, almost all the main instruments of trade finance are implemented. However, there are restrictions on products related to the peculiarities of local legislation (including currency)," Biryuchinsky believes. "The trade finance market in the CIS countries, due to historical reasons, is still relatively young. Domestic banks do not always use all the tools available in the arsenal of traditional trade finance banks with Western roots. Certain restrictions are imposed by the existing currency regulation and the imperfection of customs procedures," says Perkhova .

According to her, "Russia now accounts for about 9% of the global trade finance market, according to the results of 2013, the volume of the Russian market is estimated at $11.8 billion." Shalashnikova notes that the Russian portfolio of trade finance transactions showed steady growth in 2013 and in the first half of 2014, even though the foreign trade turnover in the Russian Federation in January-June of this year decreased by 2% (to $ 396 billion, exports remained at the same level, imports decreased by 5.4%. Here Perkhova is more pessimistic. "Following the results of 2014, we can expect a noticeable decrease in market volumes," she says. And Biryuchinsky adds that geopolitical factors, including sanctions imposed on a number of Russian banks, companies and certain types of products, have a significant impact on the Russian trade finance market.

In general, Russia is an attractive market with growth potential, Perkhova is sure. "Classic trade finance is most often used in the trading of raw materials and commodities, which these territories are rich in. Another thing is that this potential can be realized if there are favorable political, economic and legislative prerequisites," she says. Although in the short term "the issue of maintaining the achieved level of volumes is more urgent."

Basic concepts and tools of trade finance

Glossary

Trade finance(trade finance) is an important element of foreign trade activity and trade operations in the country. It includes a number of instruments for financing and supporting sales, import and export transactions.

Trade finance instruments are divided into four areas: financing of trade operations in the country, financing of import deliveries, financing of export deliveries, settlements for international transactions.

For trade finance in the country instruments such as forfeiting, bills of exchange, bank guarantees and letters of credit are intended.

For import financing you can use a loan guaranteed by the buyer's (importer's) bank, a loan from a foreign bank under the insurance coverage of an export credit agency, a loan from a supplier (exporter) under the insurance coverage of an export credit agency, a loan from a foreign bank to the buyer (importer).

For export financing you can apply forfaiting, international factoring, a bank loan under the insurance coverage of EXIAR (Russian Agency for Export Credit and Investment Insurance), a loan from Roseximbank (a subsidiary of VEB), pre-export financing under a supply contract.

For international settlements you can use covered and uncovered bank letters of credit, collection. Here, a letter of credit is used to reduce the commercial risks of delivery (non-delivery of goods, non-delivery of payment, etc.).

Letter of credit— the bank's obligation, accepted at the request of the client (payer/buyer), to pay a certain amount to a third party (beneficiary/seller) upon presentation of documents that meet all the requirements of the letter of credit. The tool is convenient when the parties to the transaction are not ready to work on an advance payment or prepayment. The buyer can be sure that the bank will transfer funds in favor of the seller of the goods only upon receipt of documents proving that the seller has fulfilled the contractual obligations. The seller receives a guarantee that the bank will make payment for the delivered goods.

bill of exchange- a written obligation of a strictly established form, giving one person (the holder of a bill of exchange) the right to receive from the debtor under the bill of the amount determined by the document within the specified time. In the case of a promissory note, the debtor is the drawer, in the case of a bill of exchange (draft) - another person (drawee) indicated in the bill, which is the debtor in relation to the drawer.

bank guarantee- a guarantee for the fulfillment by the client of monetary or other obligations issued by the guarantor bank. In case of non-fulfillment of these obligations, the bank that issued the guarantee shall be liable for the borrower's debts within the limits specified in the guarantee.

Forfaiting- purchase by a bank or a specialized non-banking forfeit company of the rights of claim to the client's receivables (debts of enterprises to the client, expressed in negotiable securities). The bank/company assumes the obligation not to require anything from the client in the future if it is impossible to receive payment from his debtor and thereby assumes the risk of the latter's insolvency.

Factoring- a set of financial services that a bank or a factoring company provides to manufacturers and suppliers in exchange for the assignment of rights to a client's receivables. Allows companies operating on a deferred payment basis to receive funds under already concluded contracts before the buyer pays for goods and services. Three persons usually participate in the factoring operation: the factor (factoring company or bank) - the buyer of the requirement, the supplier of the goods (creditor) and the buyer of the goods (debtor).

Pre-export financing— provision of funds by a credit institution to an exporting seller against collateral in the form of confirmed orders from foreign buyers. Usually, the exporter enters into an agreement with the buyer for the latter to make payments directly to the credit institution.

Collection- a method of settlement between two parties, in which the exporter instructs his bank to receive payment or acceptance (confirmation that this amount will be paid) directly from the buyer (importer) or through another bank.

Trade finance (TF) is an important part of the transactional services offered by most international banks. It is a payment instrument that at the same time effectively manages the risks associated with the implementation of activities on an international scale.

Implementation methodology

In order to succeed in today's global marketplace and win sales from foreign competitors, exporters must offer their consumers attractive sales terms supported by appropriate payment methods. Receipt of payment in full and on time is the ultimate goal of every export sale, so the appropriate payment method must be selected to minimize payment risk while still meeting the buyer's needs. For exporters, any sale is a gift until payment is received. Therefore, the exporter wants to be paid as soon as possible, preferably as soon as the order is placed or before the goods are shipped. For importers, any payment is a donation until the goods are received. Thus, importers want to receive the goods as soon as possible, but defer payment for as long as possible, preferably until the goods are resold to generate enough revenue to pay the exporter.

Payments carry a significant amount of risk, especially when they are made across borders and between relatively new trading partners. The need for exporters to design a commercial contract to cover the risks to their exports as much as possible is as important as knowing the different forms of trade finance available to close a deal. Trade finance falls into two main categories:

Bank-guaranteed trade finance (i.e., trade finance)
- Letters of credit
- Guarantees
- Collection
Trade finance without a bank guarantee
- Open account

Financing requires a unified and standardized terminology and nomenclature. A complete picture of where the trade finance market is heading is set out in existing publications from international associations (eg ICC-SWIFT) that describe reference models and glossaries for trade finance. These documents provide definitions that can serve as a general guideline for banks, their customers and service providers in order to provide basic clarity as the supply chain finance market continues to grow and develop.

Links

See also Trade Finance Guide of the US Department of Commerce.

Andrey Tyurin, head of the practice of attracting bank financing of KSK Group, spoke with the host of Kommersant FM, Petr Kosenko, about what a bank guarantee is and why such a service has recently been gaining popularity, as part of the Aims and Means program.

Hello, the program “Aims and Means” is on the air. I am Peter Kosenko. And today, the guest of the Kommersant FM studio is Andrey Tyurin, head of the practice of attracting bank financing for KSK groups. Hello Andrey.

Good afternoon.

So, the topic of our today's conversation: "Difficulties in the way of a bank guarantee, or a bank guarantee as a tool for business development." Is it true that applying for a bank guarantee is today a fairly demanded interest on the part of representatives of various kinds of business?

Now private Russian business needs this tool more than ever. For the past two years, we have been in a protracted crisis in our country, and, of course, companies are looking for a way to extra income began to turn their attention to the state order sector. And in order to work in this sector according to the 44th Federal Law, the provision of bank guarantees is required.

What is a bank guarantee? As a simple layman, I imagine a scheme when an entrepreneur goes to the bank for a loan for some project. What is a bank guarantee? Is it bank money, or is it potential bank money?

It can be called the bank's virtual money. The bank guarantees the fulfillment of the obligations that our potential client assumes in the event of some kind of force majeure, and if the bank guarantee is claimed by the customer - this is called the disclosure of a bank guarantee - then the client already owes money to the bank, as with a classic loan.

- In other words, is it such an indirect, perhaps, way for a businessman to get credit?

It can be called one of the forms of financing.

Who today in what areas of business most often resorts to this type of obtaining financing or obtaining guarantees for financing?

The activities are very different - this is construction, and trade, and the supply of equipment. There are a lot of orders, enough for everyone, so for everyone who is interested in developing their business, in increasing revenue, profit, this will be relevant.

How to choose the right partner bank? Because it is absolutely obvious that the conditions will be different for different banks. And, accordingly, as a kind of collateral, the entrepreneur will need to leave all sorts of his guarantees, property, and so on.

The most important thing to start with is choosing reliable bank-partner. Because we see news every week in the media that a bank's license has been revoked. There are absolutely no guarantees that if the bank is large, then the license will not be revoked, because the licenses of the bank in the top 100, top 50 have already been revoked. Therefore, it is important for the client to understand how reliable the bank is. Of course, a client who is a professional in his field cannot be a professional in some other where he does not work. For this, there are consultants who constantly monitor the market, study it, look at the dynamics that take place in banks. In particular, at KSK Group we have a powerful analytical center that constantly monitors our partner banks. Banks come to us with offers of cooperation. We initially look at the conditions that they offer, but after that we will definitely check them thoroughly. If the bank is unreliable, then we refuse to work with such a bank. According to this principle, we select partner banks.

With regard to conditions, the presence of consultants for the client must be justified. Therefore, we solve various problems for the client. We can make exclusive conditions, offer something, somewhere lower the rate, somewhere loyalty in terms of security, and so on. Now banks, in order to cover their risks, ask for collateral from customers. As a rule, this is a deposit, this is real money. But in my understanding, the economic meaning of this is lost, because if the client had money, he would in principle guarantee his obligations with his live money. Then the customer would not worry. This is logical.

- Wouldn't it make sense, relatively speaking, to go and apply for a bank guarantee?

And pay more money for it, because it's not free. Therefore, for our clients, by attracting bank guarantees, in addition to choosing a reliable partner bank, we also offer them exclusive conditions. All our clients who contact us receive bank guarantees without collateral, without collateral. Perhaps, in some other difficult situation, there may be security, but it is insignificant, literally 10-15% of the market.

- And apply for bank guarantees for what amounts?

The amounts are completely different. KSK groups for the target client focuses on amounts somewhere from 50 million rubles. But this does not mean that if some client comes, and at the moment he does not need such large sum, but he wants to work in limits, and these limits provide for amounts less than 3, 5, 10 million rubles, we will not work with them. Of course, we will go into this project and implement it.

Very often, business representatives complain that in order to get, for example, a bank loan, you need to spend a lot of time beyond your strength. How long does it take to conclude a bank guarantee agreement?

The terms, of course, are much shorter than with a loan, but, nevertheless, they are present. Usually, on average, banks take somewhere up to two weeks to close this deal. In KSK Group, our transactions are much more dynamic, we actually close the issue in three to five days.

These are some absolutely incredible figures, even taking into account the fact that the client is a regular, partner bank. It's still very fast anyway. How is this efficiency achieved?

This is already a long experience of working with these banks, well-established processes, mutual understanding. Therefore, one more of those points that we offer our clients is efficiency in making some decisions, achieving some tasks.

Your company works with amounts starting from 50 million rubles, you help to obtain bank guarantees. And how many cases do your clients fail to fulfill all their obligations for some reason, and what happens in this case?

Such cases are quite frequent, because banks have rather strict requirements for borrowers, especially now. Therefore, when some non-standard situations arise, it is already difficult to find some kind of understanding with the bank. For this, consultants are needed, professionals who, believe me, in this area, mostly face non-standard situations and solve them.

There is, as far as I understand, a black list - these are those companies, those businessmen who once violated the conditions for bank guarantees or loans. Do they have a chance to fix their tarnished reputation? And, again, do you help with this?

Companies are blacklisted when they do not fulfill their obligations to the customer. They are blacklisted for two years. Getting out of this list is already unrealistic, so the maximum that can be done is to immediately approach the issue correctly and receive a bank guarantee in a timely manner. According to the regulations of Federal Law 44, there is a certain number of days that are required for the provision of this financial product. To prevent getting blacklisted, you need to deal with it quickly. Consultants help with this.

How long has your company been working in this area, and is it possible to trace some dynamics of demand for this product on the market in recent years? And some forecast for the future: will this area develop?

We have been working since 2008, but we have been observing such a positive trend in bank guarantees, a surge of interest from private business over the past two years. My vision is that this market will grow.

- I'm sorry, but what is the reason for this? Here in these last two years, why did the growth go?

It seems to me that due to the fact that the crisis situation that occurred in the country, and a lot of companies went bankrupt, there were a lot of unreliable customers. Of course, private business began to look and analyze where you can find a way out. And in my understanding, after all, we have confidence in the state, they understand that the state will still pay. But in order to use these benefits, you need to use these tools. In my understanding, demand will continue to grow due to this, and the volume in this segment will only increase. The growth potential is very large.

- Do you connect this with the fact that state projects will be developed?

State projects at the state level.

How many proposals are related specifically to private business - to some major projects or foreign partners?

No, there are private projects from Russian companies, they also organize tenders, competitions, and this also requires bank guarantees, because the customer also wants to protect himself. The only difference they have is that they can limit, as they see fit, the list of banks from which they will accept bank guarantees. Basically, these are the largest banks, state-owned banks, banks with state participation. They accept bank guarantees from them. This, of course, complicates the work, because large banks make very strong demands on the borrower. There may be a deposit sometimes up to 100%, and some other covenants that the client is not able to fulfill, but, of course, they compensate for this with a rate. For example, the same Sberbank has some of the lowest rates on the market, but these rates must be obtained.

If it's not a secret, how much do your services cost, if not in real numbers, but as a percentage of the cost of the same transaction or contract?

It all depends on what we have to work with, with what problems. Because first we analyze the project, look at it weak spots, we understand how we will solve them, we constantly coordinate this with the client. We have a so-called diary that we keep, and we are constantly in touch with the client, and, having explained to him what this or that money will be taken for, we already show him the amount of the commission. We have it from 1% and further already individually.

- But not from the ceiling in any case, there are absolutely clear calculations and an explanation of why such an amount?

Clear calculations, due to which this is achieved. And, among other things, ROI is calculated (return on investment ratio. - "Kommersant FM") - this is what the client will receive a return on invested, this is also the client, so that he understands what he pays for.

Andrei, can you give an example of some non-standard approach to resolving the issue related to bank guarantees?

Yes, sure. Not so long ago, a client who is engaged in design approached KSK Group. He participated in a contract for 300 million rubles, and he needed a bank guarantee for 60 million rubles. for 10 months. The situation was complicated by the fact that this contract was to be implemented in the Republic of Crimea, and secondly, this client acted as a subcontractor in this contract, and there were very tight deadlines. The client himself tried to get a bank guarantee in banks, but was constantly refused according to these criteria. Our consultants took up this project, analyzed it, selected the right partner bank, managed to provide this service to the client within the time frame that the client needed. For this, the client paid KSK groups 2%, and taking into account the bank guarantee for the bank, the client paid a total of 2.946 million rubles. But at the same time, his profit under the contract amounted to 45 million rubles. ROI for the client was 1527%.

- Are there already regular customers for whom there are some privileges?

Certainly there is. KSK Group is always tuned exclusively to long-term business relationships. Of course, for clients who are constantly with us, there is loyalty in terms of work, in terms of rates.