(Video) Port to Port Finance. What is it? How Does It Work?
Importing capital equipment or commodity like goods?
Now you don’t need factoring.
Learn exactly what Port to Port Finance is.
Learn how it works and what’s involved in a typical transaction, plus find out how it differs from Purchase Order Finance.
For anyone interested in trading overseas, this is a must see!
Diagram, Video and Transcript below
Hi, everybody. I’m Daniel from AR Cash Flow. Today we’re going to talk about port to port finance. What exactly is port to port finance? Well, that’s where we finance goods from one port, bring it overseas, to another port, which is usually within Australia. It doesn’t have to be within Australia, but what does have to be Australian is our client.
So how is port to port finance different from purchase order finance? Well, there’s a couple of major differences. The first major difference is there’s no need to pre-sell the goods, although that is advised. But you don’t have to have a purchase order from your end customers.
The second thing is that it usually used for more commodity like types of products or products that have high intrinsic values, such as forklifts or capital equipment. Some things that it’s not, things that couldn’t easily be resold to other things, such as high fashion goods.
The other difference with port to port finance compared to purchase order finance is that there’s no requirement for factoring. So you don’t have to be dealing with your end customer on credit terms.
Let’s have a little look now about how the logistics of it work. What happens is your client or yourself give us a small deposit for the goods. We take that deposit and use it as a form of collateral. We give a letter of credit to the manufacturer overseas, usually for the full amount of the purchase price.
Once the goods are made, they’re then shipped through to the port. We clear them through customs. Once they’re cleared through customs, we then sit on the goods, not literally, but we hold the goods until we’re paid by either yourself or the customer.
In certain circumstances, we’ll let the goods go, and that’s where you’ve got credit-worthy customers, or in the case of capital equipment, where the customer has an equipment finance facility in place. In that situation, we would just direct the finance company to pay us out upon commissioning of the goods.
That’s how port to port finance works. If you’d like to know more, please give us a call on our 1300 number or visit our Facebook page. That’s Facebook.com/ARCashFlowTrade. Thanks for watching.