Other Banking Services – and methods of payment in foreign trade

Standing order:

Standing order is useful for fixed amount payments that are known to be due on certain dates, e.g: flat rent, car insurance or subscription fees. The client authorise bank in writing to make regular payments until it is withdrawn. Banks charge some money after each transactions.

Direct Debit:

It is an authority you give to the bank to makde regular payments from a current account to the account o fan organization called the originator eg: public utility companies, or suppliers.

Telebank:

It is a free 24-hour automatic and / or live voice service which makes banking easy from any touch tone phone and make a wide range of services available.

Mortgage:

It is a long term loan given by a bank or financial institution for the purpose of purchasing or renovating a house or buying land or other hight value assets. The money is repaid monthly over a period of years. In a mortgage by legal charge, the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it. Flexible mortgage payment system exists, which means the payment are graduated, increasing for a period of time and then level off.

The process of the mortgage:
- mortgage specialist makes a pre-scoring
- if you are eligible for a loan and if you are creditworthy
- specialist calculates the proportion of own resources and the value of the collateral
- appraiser assess the value of the property
- you have to fill in an application form
- if this form is approved, the contract is signed
- you have to provide the following documents: ownership registration of the property, property appraisal, contract of sale stamped by Land Registry Office, uninterrupted employment history, verification of regulat income

Factoring:

Factoring is a flexible form of finance, which advances money to a company as and when it issues new invoices. Factoring can bridge the gap between raising an invoice and getting that invoice paid. Factoring provides the cash flow necessary for working capital and growth.
There are two major advantages of factoring over overdrafts or other forms of personal or business loans, these are:
Factoring is flexible in that the amount you can borrow grows directly with your sales. This is essential to enable companies to fund their growth, since you must usually pay your suppliers before you receive payments from your customers.
No other assets are needed to secure this funding.

Whether you are a new start business or your enjoying healthy growth and increasing sales, or you’re considering expansion, unpaid invoices can really constrain your business. If you are thinking about expanding, the last thing you need is unreliable cash flow. This is where the right factoring provider can help you.
It's a fact of business that many customers delay settling invoices for as long as possible. In many cases you may have to wait 60 days or longer before invoices are settled. This all adds up to bad news when you still need to pay your staff and suppliers on time.
Without the right amount of cash flow when you need it, you may well have to divert precious resources to chasing payment when you should be chasing new business.

Documentary Letter of Credit:

It is a reliable and safe method of payment, and it protects the seller as well as the buyer. It is an undertaking given by a bank at the request of a customer to pay a particular amount in an agreed currency to a beneficiary on condition that the beneficiary presents stipulated documents within a prescribed time limit.

How does a L/C work?
1. The buyer (importer) asks his bank to issue or open a L/C in favour of the seller for the amount of the purchase. There is usually a special application form, which the buyer fills in and sends to his bank. It states all the main points of the parties and the action.
2. The importer’s bank will then select a bank in the exporter’s country to act as its agent, and will notify them that the credit has been opened.
3. The agent bank will notify the exporter that a credit has been opened, and they may add their own confirmation by promising to see that the conditions of payment against the documents will be fulfilled. If they confirm the letter, the L/C is a confirmed credit.
4. The buyer (exporter) ships the goods before the credit expires and sends the shipping documents to the agent bank that checks the documents against the conditions and pays him.
5. The agent bank will then send the documents and debit the importer’s bank with the cost and charges.
6. The importer’s bank then checks the documents, pays the agent bank and sends the documents to the importer so that he can claim the goods.

Types of the Letter of Credit
1. Irrevocable: The buyer cannot cancel the credit.
2. Confirmed: A bank in the seller’s country pays the credit.
3. Sight or straight credit: Immediate payment of the full amount on presentation of the documents. (Cash payment)
4. Acceptance credit: Payment of the full amount at maturity. The contract specifies payment at a future date with a bill of exchange. After presentation of the documents, the bill can be discounted in order to obtain the credit amount (less discount) immediately.
5. Deferred payment credit: Payment of the full amount at maturity. The contract specifies payment at a future date without a bill of exchange; therefore there is no possibility of discounting. It can be accepted as security for an advance.
6. Red clause credit: Under it the seller can obtain an advance from the correspondent bank, but it is the issuing bank that assumes liability. This advance is intended to finance the manufacture or purchase of the goods, which are going to be delivered under the documentary credit.
7. Revolving credit: When the goods are to be delivered in part shipments (instalments) at specified intervals, payment can be made under a revolving credit, which covers the value of each instalment as it is delivered. After the utilization of the first amount the next portion becomes automatically available.
8. Negotiation credit: (or commercial letter of credit) Payment of the credit amount will be made by any bank, not only by the advising bank. (Negotiation means the purchase and sale of bills of exchange.)
9. Transferable credit: The beneficiary may transfer his claim under that credit to a third party. If the credit is divisible and transferable, the amount can be paid to several beneficiaries.
10. Back-to-back credit: It is used when a middleman wishes to transfer to a supplier his claim under a documentary credit, which is not transferable. The middleman’s bank, accepting the first credit issued in the middleman’s favour, opens a second credit in favour of the supplier.