How do you monitor and manage the performance and repayment of your export financing contracts?

Export financing is a vital tool for international business development, as it helps you secure funds for your overseas sales and mitigate risks. However, managing your export financing contracts can be challenging, especially if you deal with multiple lenders, buyers, and currencies. In this article, you will learn how to monitor and manage the performance and repayment of your export financing contracts, and what steps to take if problems arise.

1 Understand your contract terms

The first step to managing your export financing contracts is to understand the terms and conditions of each agreement. You should know the interest rate, repayment schedule, fees, penalties, grace period, collateral, and insurance requirements of your lender. You should also be aware of the payment terms, delivery terms, quality standards, and dispute resolution mechanisms of your buyer. Make sure you have a clear and written contract with both parties, and review it periodically for any changes or updates.

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Syed Amin

Export Marketer - Food & Beverages | Almoiz Industries | Ex-Banker
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For Example, In my country Pakistan The tenor of the Export Financing facility is up to 180 days with a rollover option for further 90 days. In case of availing rollover option of further 90 days, exporter is required to show export performance equivalent to 117% of the borrowed amount as per the circular SMEFD 4/2009 State Bank of Pakistan.

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2 Track your cash flow and currency exposure

The second step to managing your export financing contracts is to track your cash flow and currency exposure. You should have a reliable and updated system to record your income and expenses, and to forecast your future cash needs and availability. You should also monitor the exchange rates and currency fluctuations that affect your export financing contracts, and hedge your risk with appropriate instruments, such as forward contracts, options, or swaps. You should also communicate with your lender and buyer regularly, and inform them of any delays or issues that may affect your cash flow or currency exposure.

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3 Evaluate your contract performance and profitability

The third step to managing your export financing contracts is to evaluate your contract performance and profitability. You should measure and analyze the key indicators of your export financing contracts, such as the return on investment, the cost of capital, the profit margin, the break-even point, and the customer satisfaction. You should also compare your actual results with your budget and goals, and identify any gaps or opportunities for improvement. You should also review your contract performance and profitability with your lender and buyer, and seek feedback and suggestions for future cooperation.

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Syed Amin

Export Marketer - Food & Beverages | Almoiz Industries | Ex-Banker
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A firm that exports 3 to 4 times more than the minimum export performance requirement is entitled to claim a rebate equivalent to a half a percentage point reduction in the interest rate charged on its loan; if the ratio of actual exports to minimum export performance is between 4 and 5, the rebate is equivalent to a 1 percentage point reduction in the loan’s interest rate; if the aforementioned ratio exceeds 5, the maximum rebate is equivalent to an interest rate reduction of 1.5 percentage points.4 The maximum maturity for a loan under is (180 days).

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4 Maintain your contract compliance and documentation

The fourth step to managing your export financing contracts is to maintain your contract compliance and documentation. You should follow the rules and regulations of your export financing contracts, and avoid any breaches or defaults that may result in penalties, fines, or legal actions. You should also keep accurate and complete records of your export financing contracts, such as invoices, receipts, shipping documents, inspection certificates, and insurance policies. You should also store and backup your contract documentation securely, and make it accessible for audits or inspections.

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Syed Amin

Export Marketer - Food & Beverages | Almoiz Industries | Ex-Banker
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Taking on more responsibility can help you to be more competitive, particularly if you are selling to customers who do not have import experience. But you also face increased costs and risks. Whatever you agree, it's important to be sure that you can handle your responsibilities. International trade paperwork can be complicated, and mistakes can be costly.

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5 Resolve any contract disputes or problems

The fifth step to managing your export financing contracts is to resolve any contract disputes or problems. You should try to prevent or minimize any conflicts or misunderstandings with your lender or buyer, by communicating clearly and promptly, and by honoring your commitments and obligations. However, if a dispute or problem arises, you should try to resolve it amicably and professionally, by using negotiation, mediation, or arbitration. You should also seek legal advice or assistance if necessary, and protect your rights and interests.

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6 Optimize your contract portfolio and strategy

The sixth step to managing your export financing contracts is to optimize your contract portfolio and strategy. You should review and assess your export financing contracts regularly, and decide whether to renew, modify, or terminate them. You should also look for new or better export financing options or partners, and diversify your sources of funding and markets. You should also align your export financing contracts with your overall business objectives and strategy, and adjust them according to the changing market conditions and customer needs.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Syed Amin

Export Marketer - Food & Beverages | Almoiz Industries | Ex-Banker
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Export finance is a short-term funding agreement available to Suppliers (Exporters) trading with overseas Buyers (Importers). Export finance allows Suppliers to access working capital while they wait for Buyers to pay against invoices.

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How do you monitor and manage the performance and repayment of your export financing contracts?

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1 Understand your contract terms

2 Track your cash flow and currency exposure

3 Evaluate your contract performance and profitability

4 Maintain your contract compliance and documentation

5 Resolve any contract disputes or problems

6 Optimize your contract portfolio and strategy

7 Here’s what else to consider

International Business Development

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