Express Provides White Glove Service to a PPE Supplier with a $1.3MM LC Facility

Express Trade Capital Inc. recently closed a $1.3MM letter of credit (LC) facility to help finance its client’s purchase of Personal Protective Equipment (PPE) from a manufacturer in Vietnam. Prior to the transaction, Express’s client – a commodities trader – obtained a purchase order backed by an LC from their end customer, an established distributor of PPE and consumer goods. 

The client in turn came to Express to issue a similarly worded LC to their Vietnamese supplier.  Undeterred by the high dose of action, Express put on its finance gloves and dug into the transaction.  By structuring what is typically called a back-to-back LC, the client felt safe that their purchase of nitrile gloves would meet their buyer’s specs since the supplier’s requirements under Express’ LC mirror the end customer’s LC requirements. Basically, the LC acts as PPE for the client’s business by protecting them throughout the transaction.

The transaction will unfold in several phases.  First, the goods must pass SGS’ quality control inspections overseas.  Once they pass inspections, the end-buyer funds an escrow account that is used as a back-up to their LC.  The Vietnamese manufacturer is paid through Express’ LC when they supply the required shipping and inspection documents to the satisfaction of the client.  A second inspection at the client’s US warehouse will trigger release payment from their end customer’s LC.  This unique financing structure has multiple layers of protection and is a win-win for all involved.

Though the buyer and supplier have over 20 million feet of social distance between them, they came together to quarantine and eradicate the viral scourge of mistrust between overseas parties.  Without masking over the issues, Express delivered a solution that vaccinated the client against the risk of non-conforming shipments and quality control while safeguarding the supplier from the risk of releasing goods without payment.  More than treating the symptoms, the LC cured the problem at its source.  

For those unfamiliar with LCs, the instrument offers numerous advantages to companies who purchase or sell goods and services overseas:

•            Deposits are not required because LCs are generally opened for the full purchase amount

•            LCs provide an established global mechanism for purchases between multinational parties

•            LCs bolster supply chains by facilitating contracts for expansion into overseas markets

•            LCs provide safeguards to ensure products is delivered according to the client’s specs

Operating since 1993, Express Trade Capital, Inc. provides tailored financial products including Factoring, Purchase Order Funding, and Letter of Credit facilities. Our Freight Forwarding division also provides supply chain management through our comprehensive international freight forwarding services. For more information on how we can help your business grow, please visit us at https://www.expresstradecapital.com/contact or contact Dina Davletshina at dina@expresstradecapital.com.