TRADE FINANCE INVESTMENT BENEFITS
Traditionally, international trade has been considered “low risk”.
Compared to other forms of bank lending, preference to trade transactions financing originates in the embedded characteristics of:
- Short duration
- Guaranteed liquidity (goods resale possibilities guarantee transaction financing)
- Self-secured (by the underlying goods and trade receivables)
- Very short investment horizon (execution of multiple transactions within the short life of a documentary credit)
We aim to fund traditional factoring activities (full turnover factoring, single invoice discounting etc.) as well as supply chain finance programs with selected buyers/debtors.
The investment class of REF can weather both bull and bear markets. The investor is not directly exposed to the volatility or market fluctuation or the risks inherent to investing in securities or bonds, because it finances activities in international trade.
Investing in trade receivables has proved to be notably resilient to financial market shocks. Indeed the Greek factoring sector still performed well during the Greek crisis.
Despite the lack of a strong secondary market for trade receivables, the short maturity of these assets provides investors with good access to liquidity.
The trades that the Fund will accept will be of financially strong buyers to minimise the risk of insolvency and protracted default i.e. the failure of the buyer to pay off the invoiced amount before due date. The Fund will also assess whether and to which level the company supplying in the approved trades, is secured against a unilateral breach of contract, by proceed to any legal actions. Taking into account that defaulting on a contract will incur high legal risks, as well as reputational risks leading to long-lasting impact on their business operations and cooperation. To combat potential risk of imposition of an import ban, the Fund will ensure that the all products will be accompanied by the respective certifications issued by the producers and accredited laboratories, confirming the agreed/contracted quality specifications and other terms.
REF is bridging the funding gap between paying suppliers and receiving customer payments.
Trade finance relates to the process of financing commerce and international trade activities including:
- Short term lending
- Letters of Credit
- Export credit and insurance
Companies involved in trade finance include importers and exporters, banks and financiers, insurers, export agencies and other service providers.