Supply-Chain Finance

Duration: 90 Minutes
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It seems the latest and greatest technique for creating business efficiencies is "supply-chain management." An important component of this is supply-chain finance. So what, exactly, is "supply-chain finance"? Although the term has been applied in a wide range of contexts, it has particular application to structures in which a bank provides financing to the suppliers of a bank customer.
Supply Chain Finance
Instructor: Buddy Baker
Product ID: 500202

While the concept has roots in letters of credit and forfaiting, it is a new approach and is still mutating. Variations are known as "reverse factoring" and "approved invoice financing" and may involve "purchase order-invoice matching applications" and "bank payment obligations." Importers are desirous of such solutions to the problem of making sure one’s suppliers are able to obtain dependable, low-cost financing. Banks are struggling with the risks and costs of developing new products and exporters are finding themselves faced with offers they must not refuse to join their customers’ supply-chain finance programs. This session will examine the origins of supply-chain finance, the current state, and the projected future and its impact on importers, exporters, and banks.

Agenda:
  • Definition: Purchase of receivables from suppliers of a single buyer, based on the credit of the buyer
  • Involves getting something signed by the buyer to signify "acceptance" of invoices
  • Buyer cannot sign a credit agreement
  • Other names: "Reverse factoring," "single-buyer A/R purchasing," "approved payables finance"
  • Why are importers interested in supply-chain finance?
  • Evolution out of import L/Cs
  • Payables extension programs
  • Prime Revenue and other structures
  • "P.O. matching" services (TradeCard, the SWIFT Trade Utility, and others)
  • Issues
    • The SEC comment on bank debt vs. accounts payable
    • The buyer’s obligations are unsecured
    • Security interests on assets of foreign suppliers
    • AML KYC on a customer’s suppliers
    • The missing element: pre-export financing ("packing credit")
  • Trade acceptances
  • "Authorities to Pay"
  • The current playing field
    • Domestic programs
    • Purchase order-invoice matching applications
    • Bank Payment Obligations ("BPOs")
    • on-line trade acceptances
    • value-dated payment orders/payable-through drafts
  • ECA and MDB support
    • Exim’s Supply-Chain Finance Program
    • IFC’s Supply-Chain Finance Program
Why Should you Attend:
  • Explore the history and drivers of supply-chain finance
  • Compare the mechanics of various supply-chain finance programs with each other
  • Compare the risks and costs of supply-chain finance with letters of credit
  • Understand the accounting issues faced by importers and exporters when arranging receivables purchases
  • Review supply-chain finance programs being offered by Exim Bank and the World Bank
Objectives of the Presentation:
  • The Predecessors of Supply-Chain Finance
    • Letters of credit
    • Trade acceptances and forfaiting
    • Purchase order tracking
    • Payables extension programs
  • Challenges
    • The SEC opinion on bank debt
    • Security interest laws in countries of suppliers
    • "True sale" laws
    • Pre-export financing
  • The Current Playing Field
    • Domestic programs
    • Purchase order-invoice matching applications
    • Bank Payment Obligations ("BPOs")
    • On-line trade acceptances
    • Value-dated payment orders
    • Export Credit Agency and Multilateral Development Bank support
Who can Benefit:
  • Attorneys
  • Credit and Collection Managers
  • Presidents
  • Vice Presidents
  • Business Owners
  • Managers
  • Lending Professionals
  • Accountants
  • Bankers
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Instructor Profile:
Walter (Buddy) Baker has over 30 years of experience in international trade finance. In May 2009 he joined Fifth Third Bank where he heads their Global Trade Solutions Delivery team. Fifth Third is one of the 20 largest banks in the US and provides a full range of risk mitigation and financing products for exporters and importers. Prior to Fifth Third, Buddy worked for Atradius Trade Credit Insurance, ABN AMRO Bank, Bank of America, Wachovia Bank, and The First National Bank of Chicago.

Buddy is a recognized expert in trade finance and author of numerous magazine articles and the books Users’ Handbook to Documentary Credits under UCP600, Documentary Payments & Short-Term Trade Finance, and The Regulatory Environment of Letters of Credit and Trade Finance. He owns the consulting firm Global Trade Risk Management Strategies, which specializes in educational training, and makes frequent presentations for national associations of exporters, importers, bankers and lawyers. Mr. Baker serves as a member-at-large of the National Letter of Credit Committee of the International Financial Services Association and is actively involved in establishing national and worldwide standard practices for LCs, such as the recent revision of the Uniform Customs and Practice for Documentary Credits (referred to as UCP600), the official ICC guide for examining letter of credit documents, called the International Standard Banking Practices for the Examination of Documents under Documentary Credits, the eUCP supplement to the UCP dealing with electronic documents, the International Standby Practices, and Article 5 of the Uniform Commercial Code. He acts as an advisor to the Institute for International Banking Law and Practice and also serves on the Board of Directors of the Association of International Credit and Trade Finance Professionals (ICTF), a multinational association of export credit managers.

Buddy earned his undergraduate degree at Yale University and his MBA at Northwestern.
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