20 years: Trade finance & banking
In Trade Finance the documentation is the same regardless of the transaction size. In this video, Andy explains the different types of documentation required for a transaction.
In Trade Finance the documentation is the same regardless of the transaction size. In this video, Andy explains the different types of documentation required for a transaction.
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4 mins 11 secs
In order to transact successfully, you need to be able to originate and manage transactions from the initial call through to successful repayment. Legal documentation is required to define the relationship between the client and the financier at each stage of the transaction. The main forms are: the Trade Finance Facility Agreement (TFF), the Security Agreement and the Facility Agreement.
Key learning objectives:
Explain the purpose of each agreement
Identify the main legal agreements in trade finance
Recognise the additional documentation required to satisfy each agreement
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A Trade Finance Facility Agreement (TFF) provides a framework around which transactions are funded.
Typically it is for a defined period of between one and three years and it gives the client the right to request funding from the trade financier for multiple transactions during that period.
There will often be a non-utilisation fee or minimum usage requirements to ensure that the financier does not lose out if no transactions occur.
The Security Agreement provides the security for the lender, ensuring that each transaction is fully secured. Typically this includes two sections:
The Facility Agreement normally contains conditions that need to be met, such as the client needing to provide invoices, bills of lading and copies (or occasionally originals) of any required documentation.
The quantity of documentation on a transaction can be large and careful checks need to be made to ensure that the security position is maintained. No matter how much you trust a client, there are often multiple counterparties involved in a transaction and so any checks made are not just checks upon your client, but a safeguard to protect them against other less scrupulous people.
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