An overview of Ebury’s Trade Finance product

Last updated

May 21,2020

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Written by

Esther

Ebury’s Trade finance product is designed to bridge the gap between paying suppliers and receiving payments from clients or customers and consists of Supply Chain Finance (SCF) for importers and Invoice Discounting for exporters.

In business, it’s very common to buy stock and then have to wait for a substantial period of time to reap the financial rewards of selling. The trade cycle tends to create liquidity gaps, which can contribute to cash flow peaks and troughs resulting in businesses being unable to replenish stock where there is clearly a demand.

Supply Chain Finance (SCF) can be applied to national and international arrangements. It’s increasingly common for businesses to work with and sell to suppliers and clients all over the world, so international trade finance plays a critical role in keeping the buying and selling processes well-oiled.

What is Supply Chain Finance?

Fostering strong relationships between buyer and supplier brings about strong network effects that ultimately serve the needs of the end customer with competitive pricing and availability. Historically relationships between buyer and supplier have been strained as suppliers look for payment as early as possible and buyers prefer to delay payment for as long as possible.

Supply chain finance finds its use when a large buyer, with stronger credit than its suppliers, has the ability to access credit lines from a lender more cheaply than its suppliers. By using the advantage of access to credit, the buyer is able to negotiate better payment terms while preserving its own cash and allowing suppliers to secure payment early. A win win situation for both buyer and supplier.

With the recent advancement in technology, Supply Chain Finance has become a more effective way to access working capital as it works effectively at scale, is automated, provides tracking of digital invoices and electronic settlement.

Payables Finance program (buyer) between buyer and finance provider

Payable Finance Program

How Supply Chain Finance works in practise?

  • SCF is enabled through Ebury’s technology platform that makes it possible to extend payment terms to buyers while accelerating payment to suppliers.

  • Suppliers of all sizes upload their invoices directly to the portal.

  • The buyer approves the invoice for early payment by Ebury and the full invoice amount is transferred to the supplier’s bank account.

  • At maturity of the invoice period (with or without extension), the buyer will pay the due amount directly to Ebury including financing cost which will be calculated on a daily basis.

  • Buyers arrange the financing that allows suppliers to get early payment in return for either extended payment days or supplier discounts for early settlement.

  • Buyers can be of all sizes, once an established buyer-finance/SCF provider relationship exists.

With buyer initiated supply chain finance, we pay your suppliers so you don't have to

Particularly useful where:

  • Clients would like to capture opportunities for substantial early payment discounts or additional revenue.

  • Providing additional working capital for seasonal peaks.

You decide how much to repay and when, using our flexible terms to offer your business maximum agility.

Buyer Initiated in 4 Easy Steps

1

Advice which suppliers you would like us to pay (there is no supplier agreement)

2

Your finance team load the invoices to the TradeBridge system as they would with your regular banking platform

3

TradeBridge make a same day settlement of the invoice

4

You repay us the invoice value plus fees on the agreed due date

Trade finance provides several benefits for small businesses

  • Speed

    Trade finance facilities can be provided within a matter of days, enabling you to deal with suppliers with minimal hassle and to eliminate the risk of delays within the supply chain.

  • Flexibility

    You have the ability to structure the number of days the facility is used for, interest is fixed for the first 30 days and thereafter is charged daily up to 150 days.

  • Growth

    If you’re waiting for payments, and you can’t invest in stock, this could hold you back. With access to supplier finance you can place more orders in line with customer demand without running the risk of emptying your bank accounts.

  • Trust

    Creating strong trading relationships: trade is dependent on trust, and it’s incredibly important for businesses to establish a good reputation. If you’re able to pay suppliers on time, and there are no hurdles in the trade cycle, this will facilitate stronger ties and enable you to continue doing business with your preferred suppliers and exporters.

Highlights

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Loan Amount

£50,000 - £1M

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Terms

Up to 5 months

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Fund received

Up to 3 days

Ebury Trade Finance Review - The Highlights

Competitors

HSBC, Greensil, PrimeRevenue

Set Up Fees and Maintenance Fees

Zero

Available currencies

You can transfer money internationally in over 150 currencies

International Payments

Easy-to-use online portal is free and comes as standard so you can manage your account 24/7. You can trade in over 50 currencies online

Business Currency Accounts

Get unique account details under your name, including an account number and other necessary information to make or receive payments in a given currency

Trade Finance Payment Terms

Pay back 150 days later: Reduce your liquidity needs with our longer payment terms

Alternatives to Ebury

HSBC

PrimeRevenue

Greensill

How Ebury works

  • Talk with a member of the team of Funding Street to assess your Trade Finance needs.

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  • Discuss your application with a member of the Funding Street team to prepare the required documents and give you the best chance - leverage off of experience.

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  • Go through the initial application process.

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  • Conference call with an Ebury analyst to discuss and iron out a few questions that may arise and enable Ebury to gain a thorough understanding of your business.

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  • Final credit underwriting approval and issue of documentation.

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  • Digital onboarding and Trade Facility goes live.

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  • Let Ebury do the rest.

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A review of Ebury’s application process in detail and required information

Let's now take a look at the eligibility criteria a business needs to meet before applying for a Trade Finance facility with Ebury.

The application process for a trade finance line with Ebury is very straight forward though it will involve providing financial information about your business so be prepared to spend some time collating this.

    Qualification criteria

  • Turnover more than £1,000,000 annually
  • Trading for a minimum of 2 years
  • Have a positive tangible net worth attached with your balance sheet with a minimum of £100,000.

    Documentation criteria

  • 2 years accounts
  • Trade Debtors
  • Trade Creditors
  • Management Information

Step 1

You will need to make steps to put together the application documents laid out in the table above which will be processed by an analyst who will take a deep dive into your business performance.

    Key aspects to note are:

  • How strong is your balance sheet?
  • How well do you collect payments from your customers?
  • How profitable your business is both at a gross profit and net profit level.
  • How leveraged you are with your existing debt exposure.
  • How you manage Directors Loans and Intercompany Loans.

Step 2

A telephone call is scheduled with you and the credit analyst who will run through the information you have provided, take the time to better understand your business and prepare a report for the credit underwriting team.

Step 3

Your application is reviewed by a credit underwriting team.

summary:

The application process will require you or your accountant to put together management information along with two years sets of annual accounts. A credit call with the underwriting team is a great opportunity to bring to life exactly how the business operated and any other points you want to make. Not everything is in the numbers.

Guide to Trade Finance

trade finance process

1

Upload a trade onto Ebury Online. (Please note that the invoice must be in date and not expired, we cannot proceed if it is out of date).

2

You will receive a link confirming the trade was successfully submitted. The link should then be forwarded to your supplier for confirmation.

3

We send you the Bill of Exchange. If the trade is below 75k (GBP/EUR/USD), we can proceed with a scanned copy – allowing same day payments. The signed hard copy should be sent by post within 3 working days.

4

Once we receive the Bill of Exchange, we will send you a Notice of Acceptance. This is a final confirmation. Once we receive confirmation that this was successfully delivered, the payment will be released.

5

When the payment is released, we will send you an email with the trade confirmation and Proof of Payment attached.

  • The minimum loan duration is 30 days and the maximum is 150 days. - Interest is charged fully for the first 30 days, then it is calculated on a daily basis.
  • Our clients always have the option of repaying early. You can email us with the trade number and date you would like to settle, and we will send you the recalculated interest.
  • We require up to date management accounts (profit and loss and balance sheet) on a monthly or quarterly (case-by-case basis), on the 21st of each month. Please ensure these are available so that trades can be processed quickly.
  • Repayment Reminders will be sent 1 week before and 1 day before repayment is due.

What security is required and how will your existing bank facilities be affected?

Ebury provides unsecured trade finance facilities for SMEs which means that you can keep all your existing bank facilities intact without any disturbance.

Depending on your application and subject to Ebury’s risk assessment of your business, there are a few items that may be requested before agreeing to a facility in the form of the following types of security:

  • A personal guarantee - where the Director of a company will guarantee the credit facility awarded which is unsupported and therefore no physical security required but your assets and liabilities will be reviewed.
  • A cross company guarantee - only in the instance you have a group structure will this be required and if you operate a stand alone company this would not be required. In the instance you have a group structure, a cross company guarantee to ensure the borrower vehicle has a structure where any debt obligations are shared.

Ebury Fees & Exchange Rates

Interest rates applied to the facility are calculated on an APR basis much like a loan or overdraft facility you have previously used. Rates are subject to the underwriting process. Ebury will also check your existing foreign currency providers past transactions and run through an exercise to see where they may be able to save you money, free of charge.

Interest is calculated on a daily rate after the first 30 days and you have up to 150 days to pay the facility back and redraw for further supplier payments.

What Fees are associated with Ebury’s trade finance facility?

0%

Arrangement Fees

0%

Maintenance Fees

0%

Non utilisation Fees

0%

Exit Fees

Just in case you missed it, that’s zero percent fees associated with this credit line.

Accounting Principals and Supply Chain Finance

As explained above, SCF agreements should improve the liquidity and working capital situation of a business and from a pure economic perspective, there is no difference between having a trade payable due in 30 days and having a bank debt due in 30 days.

A point to consider is the impact of considering accounts payable as either commercial (trade payable) or financial (bank debt) from an accounting point of view will impact the following:

  • Financial ratios

    Classifying payables under a SCF as financial debt instead of commercial debt will improve (i.e. shorten) the Days Payable Outstanding (DPO) ratio. However, it will have a negative impact on Net Debt and the Net debt to EBITDA ratio.

  • Cash flow statements

    A payment to a supplier is typically classified as operating cash flow. Extending the payment term under a SCF also adds a financing component to the payment. Introducing a SCF agreement that is considered financial debt would shift the cash flow from operating to financing, which would be favourable in the long term.

  • Debt covenants

    Classifying a liability under a SCF agreement as financial debt may put a buyer in breach of its debt covenants, which are often based on financial ratios such as Debt to Equity or Debt to EBITDA.

International Financial Reporting Standards (IFRS) do not provide detailed accounting guidance as to the classification of supplier invoices under a SCF. Consequently, judgement is required, which will likely result in diversity in practice.

The recommendations are that whatever presentation adopted, additional disclosures will often be necessary to explain the nature of the arrangements and the financial reporting judgements made.

Why we like Ebury

Overall we like Ebury for their efficient application process, drive to help entrepreneurs in the UK who import with a structured trade finance facility and the fact they have technology at the center of what they do but still strong on building relationships.

Highlights

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Fast application turnaround times providing you have submitted the correct information

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Technology driven and same day payments to suppliers

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Availability of currency accounts, international payments all online with your account

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Frequent discussions with the FX dealers to update you on the market

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No Fees associated with their trade finance facility

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Relationships count and you will have access to a dedicated account manager

Case Study

Luxury perfume manufacturer secures prestigious Airline contract to be the exclusive beauty supplier to 1st class passengers with the support of a new credit line from Ebury

Case Study Icon

Executive summary

A leading successful British perfume manufacturer which retails its products in some of the most prestigious department stores all over the world was approached by an airline to have an exclusive product designed specifically for the carriers first class passengers.

About the business that needed funding

Lulu’s Luxury perfumes was established in 2000 and has grown from a UK centric to a worldwide luxury brand with stockists in over 20 countries. Lulu Luxury perfumes employs over 50 staff with a strong year on year growth of 15% and revenue in the region of £4m per year.

The working capital challenge the business faced

Lulu’s CEO had a great relationship with his incumbent high street bank who had previously supported the expansion of the business with a term loan secured against a residential property.

In the Spring of 2019, the CEO was invited by a prestigious airline and invited to pitch to supply the first-class passengers of the airline with luxury perfume designed and co-branded with the airline. Lulu’s Luxury perfume won the contract and were required to supply a guarantee of £250,000 as the first batch of stock to the airline would be sale or return.

The challenge was that Lulu’s Luxury perfume had no further security available and to tie up valuable cash in the form of a security bond would have taken valuable liquidity away from the business which was not possible.

How Ebury were able to help

  • Ebury were introduced to the business owner by the team at Funding Street and were given a background to the business and the management team.
  • Within 4 days, Ebury had received and assessed a financial information pack with two years of accounts, management information and bank statements to back up the story around Lulu’s Luxury perfume’s success.
  • Ebury also took the time to understand how Lulu’s Luxury perfumes were being paid for this new contract and their existing exposure to currency fluctuations.

The outcome

Within a 10-days, Ebury had credit approved and agreed a facility, issued documentation for signing closely followed by digitally onboarding the client. A new credit facility was opened on the 11th day and went live on the same day with full access provided for the first payment to the Luxury perfume business supplier. The new Supply Chain Finance facility had no effect on the existing banking relationship or any of the security arrangements in place.

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£300,000

cred limit

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$1.28

forward contract

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150 days

payment terms

summary:

Ebury’s Trade Finance credit lines can be used in conjunction with existing bank facilities and does not require any security arrangements that might disturb bank credit lines. A stand alone supply chain finance credit line is great for growth, use within busy periods or a way to extend payment terms with stringent suppliers.

Ebury Trade Finance FAQs

  • Is Ebury regulated by the UK’s Financial Conduct Authority?

    Yes

  • What about Ebur’s Credibility & Security

    Ebury has received investment most recently from Santander and offers a suite of innovative money transfer services. The business is regulated by the FCA and client funds are stored under a segregated account at a tier 1 bank.

  • Ebury online payments platform

    Ebury stands out for its fully-featured online payments platform. The platform allows you to access all of Ebury’s main benefits, including:

    • Fast and simple money transfers to suppliers
    • Instant payment notifications and analytics
    • Audit trail accessed online to ensure transparency and good governance
  • Do I have to provide security or a guarantee?

    Ebury offers unsecured lending via a Bill of Exchange. They don’t take title over the goods or a charge over the business. Their facility simply integrates with your existing set-up to assist with cash flow. In some cases, they may request a personal guarantee or cross company guarantee.

  • Are there fees involved?

    There are no fees to be paid to set up or maintain your trade finance facility, you only pay when Ebury finances an invoice and this is charged on a pro rata basis, fixed for the first 30 days and calculated daily thereafter. No charges or fees for early settlement either.

  • Will Ebury run a credit check?

    Once the application pack has been submitted and Ebury has completed the initial credit call, Ebury will run internal checks of their own. Your personal or company credit rating will not be affected.

  • What is Ebury's Trade Finance product?

    An unsecured Trade Finance facility which can be used to pay International or domestic suppliers up front.

  • How does Ebury’s Supply Chain Finance work?

    Ebury offers a revolving credit facility with up to £3 million to pay supplier invoices up front and allows for up to 150 days to settle the balance.

    The revolving credit facility is free to set up, free to maintain and carry no charges if it's not used.

  • How does Ebury’s Supply Chain Finance work with my existing bank facilities?

    It’s completely unsecured (no debenture, no title over goods; won't conflict with existing banking relationships, no public charges at companies house).

  • What type of security is required from Ebury for a line of credit?

    Ebury’s Trade Finance is a completely unsecured line of credit and the following criteria must be met:

    • £1 million in annual revenues.
    • £100,000 of tangible net worth.
    • Two years’ healthy trading record.
  • The benefits of using Ebury’s Supply Chain Finance work?

    Upload a supplier invoice onto Ebury’s online platform, they will then send a bill of exchange and once this has been returned to Ebury, the funds will be released to the supplier.

  • How would a business use Supply Chain Finance?

    Upload a supplier invoice onto Ebury’s online platform, they will then send a bill of exchange and once this has been returned to Ebury, the funds will be released to the supplier.

  • How long does it typically take to secure funding?

    Once Ebury has received all the requested financials, the process typically takes between 4 to 10 working days.

  • What supporting documents are needed?

    In order to properly assess your business and approve a line of credit, Ebury will undergo an extensive but fast due diligence process. This includes but not limited to.

    Financial information made up of a minimum of two years accounts, management accounts or VAT returns. After all, you would expect a funder who will help you grow to really take the time to understand your business.

7 Ways Supply Chain Finance can increase your working capital

2020

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