Factoring transaction funding

Factoring transaction scheme description

For factoring transactions funding, Commercial Banks (hereinafter referred to as the RKDF Partner Banks) issue funds within the established limits in the frame of the loan facility.

The supplier (exporter) and the borrower enter into an agreement for the supplier current assets funding, or a factoring agreement under existing contracts with the customers. At the discretion of the borrower, the contract may establish both notification and undisclosed factoring. The supplier enters into a firm agreement with the customer, obliging the customer (upon goods delivery) to pay according to the contract the full amount with no right to return the goods. The supplier delivers the goods and transfers it to the customer against the acceptance certificate. The supplier submit to the borrower the supply agreement, acceptance certificates, an invoice, as well as other documents confirming the shipment and acceptance of goods by the customer together with the application for funding.

The loan holder (against the submitted documents) within several working days from the date of the supplier documents submission, transfers the funds ( 90% of the contract amount) to the supplier bank account specified in the agreement between the supplier and the customer.

The customer transfers the payment amount to the supplier bank account. The bank, in accordance with a direct debit agreement, or the corresponding factoring agreement, closes the supplier debt to the Partner Bank. RKDF Partner Banks/Commercial Banks Risks fully accepts the loan non-repayment risks. 

Supplier evaluation procedure prior to the funding under the “Factoring transactions funding" loan product - at the discretion of the Partner Bank.

Target industry segment:

Small and medium-sized businesses, companies-tax residents of the Kyrgyz Republic, exporting products in favor of Russian customers (retail chains and other companies), operating for at least 6 months

Requirements for Partner Banks:

According to the requirements under the "Lending to small and medium-sized businesses through commercial banks" Program. Partner Banks accept all risks on loans/factoring transactions.

Purpose of loan:

Funding up to 90% of the amount of one delivery through the buy-backs of short-term receivables from the customer (by the decision of the Partner Bank, a higher limit can be established for the factoring transaction: for the most reliable customers up to 100% of the export contract)

Types of goods subject to funding

  • agricultural products.
  • textile products.
  • processing of agricultural products produced in the Kyrgyz Republic, including food production
  • beverages production based on the agro-processing.
  • manufacture of leather goods and related products
  • other products manufactured in the Kyrgyz Republic (as agreed with the KRDF), with the exception of mining

Product/Customers

— Russian retail chains and Russian companies, including intermediary.

By the decision of the Partner Bank, the risks of intermediary companies may be additionally covered by the customer bank guarantee in favor of the supplier bank (factor)

Currency

  • in KGS (if the RKDF has appropriate funding).
  • Russian rubles (if the RKDF has adequate funding).
  • In US dollars.

Funding in US dollars is possible provided that the export contract is paid in US dollars

Terms of borrowers funding by the bank:

Depending on the product type and the specific contract, there are the following terms:

  • 30 days
  • 60 days
  • 90 days
  • 180 days

There is a possibility of early repayment

Currency risk

Foreign exchange risks are covered by the borrower

Terms of Partner Banks funding by the RKDF

Coincides with the term of the factoring transaction

Final rate for borrowers

  • No more than 10% per annum in KGS, including all fees charged from the borrower
  • Not more than 6% per annum in US dollars, including all fees charged from the borrower
  • In Russian rubles, the rate is set individually (in case the funds availability)

The final rate for the borrower should not exceed the rate established by the RKDF, increased by 5 percentage points

Minimum loan amount per borrower

1,000,000 KGS/equivalent in US dollars/equivalent in Russia rubles

Maximum loan amount per borrower

70,000,000 KGS/equivalent in US dollars/equivalent in Russia rubles.

Exceeding the maximum limit is possible provided for the RKDF no-objection.

Factoring type

1.      Notification factoring with mandatory notification of the customer about the assignment of the legal claim [1];

2.      Undisclosed factoring, without customer notification about factoring operations, with mandatory regression to the Borrower.

Loan application packages

  • supply contract with the customer;
  • confirmation of goods delivery (invoice/acceptance certificate from the retail outlet etc.);
  • financial statements, bank statements, statutory documents, other documents on the company activities;
  • as well as other documents at the request of the Partner Bank.

Collateral security

At the discretion of the Partner Bank

Additional requirements

  • The funded amount cannot exceed the sum of the average supply volume in favor of the customer for the last 3 months. For the most reliable clients of Partner Banks, this criterion can be revised on an individual basis at the decision of the Partner Bank;
  • Stable financial position of the company;
  • Positive credit history and business reputation of the borrower;

Borrower Requirements/

Requirements for SMEs

  • Supply of at least 3 orders;
  • Non-cash settlement for supplied goods;

 

 

[1] Factoring can be done through an electronic trading platform.