The Export Finance business sector supports the settlement of medium and long-term financing agreements in the form of

• buyer's credits

• supplier's credits and

• consolidation credits

on the basis of fixed repayment plans and with the participation of export credit insurers or other risk-minimizing instruments (e.g. guarantees).

The module contains a main contract “Export Finance Contract (EC)” where all contractual data pertaining to the export finance contract can be saved. This is where all the information from the acquisition process is recorded, and where the financing is planned, approved and prepared for disbursement.

Preparation, disbursement, repayment of amounts and maturities for an export financing agreement as well as requests for damage claim payments are handled in a single dossier.

Under an export finance contract, at least one sub-contract “Export Finance Dossier (EF)” must be created. A maximum of 99 dossiers can be created; they can also be in a currency other than the currency of the main contract, or for a different party. For example, if several different exporters supply plant components, then a separate dossier for each exporter can be created under the financing contract. Currency conversion for each foreign-currency dossier is carried out using a conversion rate defined in the main contract.

A separate repayment schedule must be defined for each dossier; it serves as a temporary repayment plan and can be used as the basis at the time of disbursement. The basic parameters used to calculate the repayment plans (see General Information) may differ between the individual dossiers.

In order to distribute and successfully reduce the risks of an export finance, the application contains a risk mitigation concept involving sub-participants and risk bearers.

Each export finance contract may have up to 99 participants (usually banks). Their respective shares are managed via the participations panel. For each of the participants, a separate repayment schedule is calculated at the time of disbursement and managed in separate, individual accounts. Interest rate differentials between the agent bank and sub-participants (referred to as „skim“) can be calculated. For detailed information on both these topics, see Participations and General Information.

In addition, up to 99 risk bearers may participate in each export finance contract. The risk bearers (usually government-owned or private credit insurers or foreign banks) secure the exporter, or the bank, in the event of a default, if the borrower is unable to meet his liabilities. For detailed information, see Collateral.

In the case of a buyer’s credit, the bank of the exporter grants a loan to the buyer of the goods. The proceeds are paid to the exporter in settlement of the purchase price and must be paid back to the bank by the debtor. For buyer’s credits, the bank acts as chief negotiator in dealing with the borrower abroad, and the exporter remains in the background. Buyer’s credits are only suitable as a form of financing above a certain financial value since the loan documentation requirements are quite complex.

In the case of a supplier’s credit, the exporter sells his goods, including the financing transaction to the bank. Doing so makes the payment terms and conditions an integral part of the supply contract, and this in turn simplifies the formalities of the settlement. With a supplier’s credit, the exporter is given a greater degree of freedom in drafting the financing terms and conditions, since for the exporter the costs, profits and financing costs are included in the total bill. This allows the exporter to offer the buyer of the goods an interest rate that can be higher or lower than the interest rate of the bank. The interest differential existing at time of the sale of the debt/receivable is credited or debited to the exporter. A higher external interest rate will thus allow the exporter to improve his profit margin, or to offset price concessions.

A consolidation credit allows suspended and unpaid interest and/or principal payments from selected dossiers to be consolidated in a new contract. This may become necessary if unpaid maturities from several loans of a borrower or of a risk country need to be rescheduled into a new financing agreement with revised financing conditions (e.g. as regards the interest rate and maturity). The consolidation credit represents an independent contract with reduced data and using a simplified process. The amount of the consolidation credit is calculated automatically based on the sum of the selected amounts of principal and interest.

The export finance contract can be associated with a frame agreement. In a frame agreement, the bank and the counterparty define the contractual benchmarks for subsequent financing stages in order to enhance the efficiency of the coordination process for the current transaction. The benchmarks for a frame agreement are managed in a separate static data system (see Frame Agreement). When creating an export finance contract, an option is provided to search for existing frame agreements and to select the suitable one.

An unambiguous status is determined for each financing contract stored as part of the business transaction. This is largely done on the basis of a previously defined logic and of tests, as well as in part through manual selection by the responsible member of staff (e.g. a change of status in the course of amendments to a contract). During contract settlement, the contract status is checked in order to determine whether transactions are permissible or whether actions may be performed. The following statuses are available:

A dossier can have a status of either 'normal' or 'being amended'.