Pre-export, or purchase order, financing is funding used by a borrower to finance the fulfillment of a sales contract with a credit worthy off taker. The terms of the purchase order financing agreement are very specific, requiring the borrower to use loan funds for the purchase of certain materials and/or services needed to deliver goods to the end-customer. In many cases, we apply this financing to pre-export transactions.
EXAMPLE: Pre-Export Financing
IIG extended a facility to a Central American producer of fruit.
- The Firm identified the company's long-term contracts were with reputable off takers worldwide and that the crop production risk was mitigated by the farms being located in two different countries.
- IIG extended a three-year purchase order financing facility guaranteed with the underlying contracts. The facility was to be repaid in 36 equal monthly installments.
- Due to the constant cash collections from the off takers, the loan balance was replenished and new facilities were created numerous times, contributing to a robust client relationship that produced consistent returns for IIG while simultaneously supporting crop production in an emerging market.