KCB facilitates the movement of goods & services across borders while mitigating counterparty risks by providing Trade Finance & Working Capital solutions.
Whether you’re importing, exporting or trading goods and services domestically, KCB is able to provide you with a wide array of dependable solutions to cover every stage of your trading value chain to support the growth and success of your business.
A letter of credit is an instrument issued by a bank to a seller of goods which substitutes the credit worthiness of the buyer for that of the issuing bank. It is a written conditional undertaking given by a bank to the seller (beneficiary) at the importers request, to effect payment up to a stated amount, within a stated time, against presentation of specified documents which must comply with the terms of the LC.
LCs enables importers and exporters of goods to enter a trade transaction and mitigate the risk of non-payment or non-receipt of goods. The Letter of Credit promises to pay the seller/exporter for goods and services supplied, provided the seller (beneficiary) presents all documents called for and meets all other terms and conditions set out in the LCs.
LCs are governed by the Uniform Customs and Practice for Documentary Credits, 2007 revision (UCP 600) published by the International Chamber of Commerce (ICC)
Payment Types available under LCs:
The master LC issued in favour of the middleman by the final buyer’s bank.
The back-to-back (or slave LC) issued in favour of the ultimate supplier.
The terms and conditions of the back-to-back LC mirror those of the master LC with the exception of the LC amount, unit price, LC expiry date, latest shipment date and presentation period. The payment proceeds derived from the master LC are used to settle payments owed to the ultimate supplier, the residual balance of the master LC proceeds being the profit margin for the middleman.
A transferable LC may only be transferred on same conditions as the original LC except for amount, unit price, expiration date, period after shipping, date for presentation of documents and latest shipping date. A bank is under no obligation to transfer an LC except to the extent and in the manner expressly consented to by that bank. Additionally, unless otherwise agreed at the time of the transfer, all charges incurred in respect of a transfer must be paid by the first beneficiary.
Documents required to issue an Import LC:
Demand Guarantees are instruments designed to secure performance or provide financial recourse in the event of default. A demand guarantee serves to substitute the creditworthiness of the Guarantor for that of its customer (the Principal) who applies for issuance of the guarantee in favour of the Beneficiary.
A demand guarantee constitutes the Guarantor’s written undertaking to pay a named beneficiary a certain sum of funds upon presentation of specified documents that comply to the terms and conditions of the guarantee, and will contain an expiry date or event by which documents must be presented for honour.
Guarantees are similar to LCs in that a guarantee substitutes the issuing Bank’s creditworthiness for that of the Applicant. However, guarantees are generally not used as payment mechanisms and should only be used in the event of default within the underlying commercial obligation. Thus, guarantees should result in payment as a last resort and as such, evidence of default on the part of the Principal is required and should be presented by the named Beneficiary in order to receive payment.
Guarantees are issued subject to the Uniform Rules for Demand Guarantees (URDG), International Chamber of Commerce Publication No. 758.
We offer our customers all types of bank guarantees, both local and international.
Guarantee subtypes include:
In export financing, the exporter (seller) requires financing for the period between shipment of the goods and receipt of payment from the importer (buyer). Export financing may be categorized as pre-shipment financing or post shipment financing.
Pre-shipment financing:
Pre-shipment financing may also be in the form of Local Purchase Order (LPO) financing:
Documentary collections enable a seller to collect payment from an overseas buyer through an intermediary bank. The intermediary bank facilitates the flow of documents from seller to buyer and payment of the transaction. Documentary collections provide the buyer an assurance that on payment or acceptance documents will be released to obtain goods while the seller is assured that documents will be made available only upon release of payment or acceptance.
Documentary collections can be classified into two groups:
Documentary collections are subject to the uniform rules for collections ICC publication No. 522 (URC 522).
Commonly known as post import finance (PIF). This is a short-term financing facility given by the bank to an importer of goods to settle payment obligations to their suppliers. This enables the importer to take advantage of a credit period which is undisclosed to the seller and repay the facility from the sales proceeds of the goods imported.
Standby Letters of Credit are sometimes used as an alternative to guarantees. It is an instrument that secures the beneficiary against loss resulting from failure of the Bank’s customer to perform a contractual obligation. Documents required in an SBLC typically consists of the beneficiary’s statement of demand stating that the bank’s customer (SBLC applicant) has defaulted in certain obligations that the customer has with the beneficiary.
Bills Avalization is the process of irrevocably undertaking to settle payment to the Drawer of an accepted bill of exchange or promissory note on behalf of the Drawee by the Avalizing Bank, typically the collecting bank which will have extended a credit facility for Bills Avalization in favour of its importing clients. A request for KCB to avalize a bill will mean KCB is liable for the importer’s payment obligations under the accepted financial instrument. The importer/buyer/drawee will be expected to have Accepted the bill prior to the banks avalization.
When you receive an order from a known buyer but are unable to finance it from your own operating cashflows, KCB will offer you credit facility for LPO Financing to enable you fulfil the order.
The bank can finance you to purchase stock in bulk while using that same stock as security, under a collateral management arrangement, for as long as your stock is a globally traded commodity for example, refined petroleum products, rice, sugar, tea and coffee.
This is automated funding that enables suppliers to access funds for verified deliveries without the need to provide your own collateral. KCB partners with Buyers to provide support to their network of Suppliers
Terms and Conditions apply.
Don’t stall your project due to pending receivables constraining your cashflows. Our working capital loan facility allows you to manage your liquidity against pending any receipts or collection of payment for work already invoiced. This facility offers the benefit of managing working capital and cash flow requirements for contractors such as wages, salaries and other supplier payments pending collections.
What we need from you:
