Post-financing documentary letter of credit

Letter of credit postfinancing is a financial instrument under which BGK provides a short-term credit to an importer's bank (the issuing bank) who issued a letter of credit (l/c) in favor of a Polish Exporter (the beneficiary of the l/c). BGK transfers funds from the credit to the Exporter (the beneficiary of the l/c) as a payment against documents presented under the l/c.

The credit is secured by an insurance guarantee issued by Korporacja Ubezpieczeń Kredytów Eksportowych S.A. (KUKE)
Postfinancing may be provided in case of confirmed and unconfirmed letters of credit, both payable at sight and with deferred payment.

Advantages of BGK postfinancing:

• complements commercial offer of Polish Exporters,
• enhances attractiveness of commercial offer presented by Exporters,
• enables transactions in the markets of higher risk,
• enables adding confirmation to letters of credit from the countries of non-marketable risk,
• provides deferred payment terms for Importers,
• Exporters become independent of contracting parties risk,
• there is no recourse to l/c beneficiaries.
  

Basic terms:

• credit repayment period - up to 2 years,
• financing of up to 100 % of l/c amount,
• Seat of the issuing bank shall be located in a non-marketable risk country,
• l/c is subject to „Uniform Customs and Practice for Documentary Credit", ICC Publication,
• only products of Poland can be financed by the credit
  

Costs:

• interest based on EURIBOR/LIBOR/WIBOR rates increased by a BGK margin - to be borne by the Importer,
• BGK's fees and commissions related to the l/c are usually covered by the l/c beneficiary as per BGK Tariff and Commissions Table.

Scheme of transaction:

1. Conclusion of a contract between a Polish Exporter and a foreign Importer.
2. Establishment of the terms of postfinancing between BGK and the issuing bank (Importer's bank) and issuance of letter of credit by the importer's bank with a postfinancing option.
3. Issuance of an insurance guarantee by KUKE (by order of BGK)
4. Shipment of goods or delivery of services by the Exporter
5. Presentation of the documents requested under the l/c by the Exporter at BGK counters in connection with shipment/delivery
6. BGK's payment to the Exporter and at the same time the credit disbursement by BGK against the issuing bank's loan account and granting the loan by the importer's bank to the Importer
7. Repayment of the credit - the Importer repays the credit to his bank and, irrespectively of that repayment, the issuing bank repays the credit to BGK

Contact:
Foreign Trade Support Department
Al. Jerozolimskie 7, 00-955 Warszawa
Tel. +48 22 599 81 64, +48 22 596 59 50, +48 22 596 58 05
Fax + 48 22 522 91 28
E-mail: dwhz@bgk.com.pl