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Whilst the provision of a loan to a manufacturer for the purchase of components presents high performance risk, this chapter explains how the evaluation of risk and structuring of a pre-shipment finance facility can provide much needed funding which otherwise would not be available by conventional lending assessment. The importance of the borrower’s solvency during manufacture and dependency on other lending facilities is discussed.
When an export letter of credit is to be used as the primary source of facility repayment, the required terms and conditions are described. Consideration is also given to a scenario where the sale of the manufactured goods is to be made on an open account basis.
The structuring techniques are explained to include the criteria for facility drawdown.