FAQs - ETF

What is Export Trade Facilitation (ETF)?


ETF is a receivables management, financing and other business service designed to improve an exporter's cash flow and in some cases, cover risk.  This is best suited for financing trade, and unlike other financing services, it generally requires no collateral.   
 

What is with recourse and without recourse ETF?

With recourse ETF (in the event the customer fails to pay on maturity), requires the exporter to pay back the advance obtained.  In non-recourse ETF, Kyko provides financing and assumes the entire credit risk, this will bear the bad debt risk in the case of the inability of the customer to pay.  Kyko pays exporters on behalf of their customers without recourse.  
 

How does ETF benefit an exporter?

Kyko turns the exporter's invoice into cash, which means that the exporter can have instant access to its earnings.  Exporters do not have to wait for the usual extended period for remittance from their customers.  Therefore, an export enjoys a healthier cash flow while offering longer payment terms to its customers.  Kyko can also assist with all other facets of your business, including inventory storage, shipment worldwide and collecting accounts from customers.
 

How much does Kyko pay upon shipment?

Kyko pays up to 90% of the invoice value as soon as a shipment is made.  
 

Apart from getting money quickly, what are the other benefits to an exporter? 

As the bulk of the payment is made immediately upon shipment, the foreign exchange risk is virtually eliminated.  Further, the exporter gets full protection against bad debt, so there is no credit risk.  The exporter can also offer payment terms to its customers on an open account basis, which assists in generating more busines.  The amount of money an exporter can obtain from Kyko automatically adjusts to the level of turnover; therefore, Kyko is able to provide a growing business with growing financial resources.  Finally, collection and credit control functions are carried out by Kyko, which saves time and money to the exporter, and the exporter need not spend time and resources in collection efforts.          

 

 

Would an exporter lose direct control over its sales if it uses ETF? 

Certainly not!  Kyko not only keeps the exporter regularly informed on the position of every individual customer's account, but also consults the exporter as to collection procedures if required.

 

Would ETF cause friction between an exporter an its customers?

Kyko understands and appreciates an exporter's concern over this matter. However, in practice and in the context of modern day business, customers are unlikely to react adversely to the use of ETF. In fact, it permits customers to obtain extended payment terms, which is often invaluable to them.  Kyko recognizes the importance of the customer to the exporter, and to help foster a closer exporter/customer relationship, every courtesy and consideration is given by Kyko to the exporter's customers. Further, ETF helps the exporter avoid any possible potential embarrassment of having to directly seek payment from its customers.
 

Does ETF make the customer think that the exporter is financially strapped? 

On the contrary, international customers now accept ETF as a normal, progressive business service.  For growth-oriented companies, ETF is the preferred choice.  In fact, the financial component of ETF, like factoring, is perceived as a sign of a company's rapid growth.  An indication of a growing organization is one which keeps a keen focus on its core activities of production and marketing, while outsourcing non-core activities such as collections and credit control to experienced professionals.  Factoring is without a doubt a significant global trend.  During 2009, the total volume of business handled by factoring companies around the world was over 1.3 Billion Euros.  ETF, like factoring is rapidly becoming the obvious business tool for growing companies operating in export markets.

 

How is the exporter kept informed of the payments made by its customer? 

Kyko pays the balance of the invoice amount to the exporter within seven days from receipt of payment by the customer.  The exporter is immediately informed of its customers' payment status, as well as deductions, if any.  

 

Does the exporter have to pledge assets to Kyko to obtain ETF?

No! This is the greatest advantage of ETF offered by Kyko.  This means that the exporter can get immediate payment towards its export receivables from Kyko and keep all its assets free for funding from local banks.

 

When is the balance amount paid to the exporter? 

Kyko pays the exporter the balance amount within seven days of receiving payment from the customer.

 

How is the GR form dealt with in the event of non-payment by the customer? 

Exporters should check with their advisors regarding this, but generally, the fees charged by Kyko can be accounted for as an early payment discount usually granted to customers.   

 

 

Will the exporter be able to avail itself to a pre-shipment credit facility from Kyko?

Kyko will offer pre-shipment credit only to companies in certain countries. The government regulations of some countries prohibit foreign companies such as Kyko to offer any form of loans or credit to companies based in such countries.

 

Is ETF suitable for every company 

No.  As much as Kyko would like to provide ETF to every exporter, those meeting the following criteria are generally unsuitable:
-    Where the credit offered to the customer is more than 360 days or where the customer desires to pay by Letter of Credit
-    Where there are consignment sales or return arrangements
-    Where the sales value is too small and goods/services are being sold to a large number of customers
-    Where sales are made to customers or in certain countries which are not creditworthy

         

What types of industries are suitable for ETF?

Manufacturing and trading companies are the two main types of industries that benefit more from ETF.  However, Kyko can tailer the facility to cover export of the following services: 
-    Advertising firms
-    Legal firms
-    Architectural firms
-    Medical firms
-    Construction & engineering companies
-    Software, BPO, IT, ITES
 

ETF sounds attractive, but what are the costs?

Kyko charges a service fee which is a percentage of the invoice value, and includes all costs related to credit insurance, collation administration, as well as interest.  There may be a one-time set up fee to cover legal, insurance and registration costs. 
 

What is the service fee based on? 

The service fee is levied based on the work involved in collection, administration as well as for credit protection of the gross value of the invoice and is based on the following criteria:  

-    Gross sales volume
-    Payment terms offered to the customer
-    Number of invoices and credit notes
-    Degree of credit risk represented by the customer or the transaction  
 
 

ETF seems like a rather expensive way of getting capital and other services, doesn't it?

No. The correct way to evaluate ETF is in terms of the exporter’s growth objectives and the opportunity an exporter loses by foregoing business on account of unavailability of funds.  By enabling the exporter to gain access to additional working capital without restricting other forms of borrowing, ETF provides a unique form of financing. When the exporter counts the additional savings it will enjoy in terms of staff salaries, office overhead, bad debt and all the incidentals that are incurred in maintaining its sales ledger and enforcing payment obligations, the exporter sees how valuable ETF really is.

 

Is the financing portion of ETF better than credit insurance? 

Whether the exporter should use credit insurance or ETF will depend on the exporter's individual needs. Below is a comparison of the features of credit insurance and Kyko’s ETF:
 Features   Credit Insurance  Kyko ETF
 Credit Cover     70% - 90%  90% - 100%
 The exporter has to bear the first loss  Yes      No
 Limit on the loss per year  Yes  No
 Payment Terms  Maximum 180 days  Up to 365 days
 Formal claim procedure  Yes  No
 Payment of loss  Months or years to settle  Immediate
 Debt collection  No  Yes
 Financing  No  Yes
 Credit Protection  Local currency  Foreign currency

  

What is the process for obtaining ETF?

First, send us an e-mail at Credit@KykoGlobal.com advising us of your interest in availing of Kyko's services.  We will forward you an application form.  Together with the completed application form, we ask that you provide us with a full list of your customers and their respective addresses.  We will be able to use this information to conduct our due diligence and determine the credit limit for each customer.  Next, we'll have our legal counsel compile the necessary paperwork.  Please note that Kyko does not charge any fees upfront.