• Advance payments or export pre-finance

    Chapter 3 - Cotton marketing - The role of banks in cotton export finance 

    If the buyer and the exporter have a good track record and a trusting relationship, they might agree that part of the payment for the future exports should be made in advance. To provide clear conditions for the advance payment and its reimbursement if the exporter fails to meet its contractual delivery obligations, banks are involved to provide assurances through guarantees and letters of credit.

    Banks can also be involved in financing advance payments on behalf of the buyer or even for their own account. In these cases, the bank grants a loan to a cotton exporter in an emerging market country, either directly or indirectly via the buyer. The facility is repaid using the proceeds from the sale of the cotton. As a rule, the receivables under the sales contract are assigned to the bank and paid directly by the buyer to the borrower’s account with the bank. The bank could also ask for the underlying cotton to be pledged in its favour. 
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    Cotton Exporter's Guide

    Brochure - African cotton promotion
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