Lex-Tek International

Arrangers & Trust

Services for Bankers, Lenders, Financial Advisors and Trustees for Securitized Transactions

As lenders today, you are faced with a number of strategic dilemmas. Your customers no longer distinguish between U.S., overseas or export sales. Theirs is a global marketplace. If you exclude international receivables from their borrowing base, there is a lender down the street that will not.

You do not want to lose your credit-worthy customers, but you know that regulators require greater reserves for foreign credit risk. Even worse, the regulators will frown on your financing receivables without the expertise and/or systems to adequately manage the risk.
AND, the cost of acquiring the expertise and building the systems is often well beyond your budget.

You may have been looking at trade credit insurance as a tool to manage the credit risks of these borrowers and entice new customers with similar needs. Perhaps you want to include a borrower with receivables to OEMS with less than stellar credit. Domestic as well as foreign trade credit risk insurance is again an option.

Receivables and the assignment of a trade credit insurance policy may cover the risk,
BUT THEN your Credit Committee weighs in by requiring that you not only have collateral in place to secure the loan, but you also must have a "FORMAL MECHANISM" in place to MONITOR and VALIDATE that the collateral is, in fact, perfected through the insurance policy.

When you look at all the administrative requirements, you cringe. When you study a trade credit insurance policy you know that there is more to it than simply paying the premium and "putting it on the shelf" until the next annual renewal date. In fact, if you have looked at political and commercial risk coverage for receivables, you know that there are more ways to make mistakes than you ever thought possible. Your policy may include:

  • Buyer Credit Limits

  • Country Credit Limits

  • Policy Credit Limits

  • Discretionary Credit Limits

  • Excess of Buyer, Country and/or Policy Credit Limits

  • Annual Policy Renewal

  • Buyer Credit Renewal (Different from annual renewal)

  • Buyer Limitations

  • Country Limitations

  • Policy Limitations

  • Fee Schedules - policy, country and/or buyer

  • Monthly, Quarterly or Annual Premium and Shipment Reports

  • Monthly, Quarterly, or Annual Past-Due Reports

Keeping track of all of these factors individually, and for each buyer under the policy, can be a daunting task. Even the most experienced among us can make mistakes. That is why Trade Banker® was created. It eliminates most of the common errors and addresses the most common reasons for claim denial.

  • Failure To Report ALL transactions

  • Underreporting ALL transactions

  • Inadequate Buyer Limits (shipping without coverage)

  • Late Filing (and late premium payment)

How does Trade Banker® work?

Here is a simple diagram of how this on-line system works:

At the same time, you do not want to alienate your borrower due to high costs or administrative burdens. That is where
Trade Banker® has solutions for every bank's needs, large or small.

There are
three different options available for how to effectively use Trade Banker®:

I. If your customer has an insurance policy,
you can REQUIRE that they use Trade Banker® to manage their policy while providing you with the reported details as part of their debt covenants. The cost per borrower is minimal. It is like a telephone bill only self-liquidating because of savings in administrative coats and reduced human errors. Best of all, your customer can make you a user on its system to audit, download and transmit information to loan administrator. You can also pay the policyholder's premium on its behalf (nonpayment of premiums being one of the most common reasons for claim denial).

If you are a small lender, a side benefit of this system is that it can help you manage country risk -- yours and your borrowers. a "World" policy can be established with countries as "buyers" with individual credit limits. "Invoices" become country risk utilization and "Payments" reduce utilization.

II. If you have an insurance policy covering shipments from multiple customers, you can use Trade Banker® just like a borrower, but maintain records for ALL of your customers in your own secure database. The cost can be passed on to the borrowers as fees or paid for through balance requirements or other cost-offsetting mechanisms. The cost in this case, like before, is modest when compared to the services received.

One of the best features for your borrowers is that they can provide invoice and payment information to you in delimited ASCII format to upload the data electronically into
Trade Banker®. By using Trade Banker's® convenient data management feature, you can also provide customers with Microsoft Excel® formatted reports. Both you and your customer/borrower can benefit from the system without the added hassle of paper shuffling and "telephone tag".

The regulators and your credit committee will be less likely to cite your practices for improvement if you have a system that reduces errors and costs less than hiring trade experts to provide you with auditable records.

III. If you have customers with insurance polices as well as one of your own, you can license the software for installation on your own Intranet system. This is recommended for high volume users or trade finance departments that manage a wide variety of insured financing programs. It can also be a great way to manage securitized receivables financing either for a single customer or as a multiple customer program. The program may even be able to reduce the cost of administration and funding by assuring policy compliance and accurate record keeping, always a competitive issue.

Trade Banker® is a cost-efficient system of managing your trade credit insurance needs to:
  • Eliminate human errors

  • Reduce manpower costs of administration and management

  • Improve employee efficiency and proficiency

  • Reduce Claim Denials

  • Provide reports in user-friendly MS Excel® format

  • Improve and increase financing-eligibility of insured receivables

  • Requires no special software installation - easy for IT administration

  • Provide a high security environment - four levels of password protection guards against unauthorized access

  • Available 365/24/7 (no vacations, leaves or holidays)

Trade Banker® is a service and, whether used on-line or installed on your own operating system, it pays for itself. AND you are only paying only for this service, not for extraneous features or additional products that you do not need or want.

For more information, Contact Us or call (404) 223-2453 for more information.

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Lex-Tek International, Inc. All rights reserved.