For those of you unsure of what exactly a Line of Credit represents, here is a brief description…
A line of credit is a predetermined amount borrowed from a bank. The loan may be used for a variety of pre-agreed purposes. Unlike a standard loan a line of credit is revolving. In other words, the borrower can keep borrowing up to the credit limit even if they have made repayments.
When a line of credit is applied for, the lender will be requested to fill out copious amounts of forms. The essential details will be how much, the expiry date and the reason(s) for the line of credit. All the documents will be accompanied by an extensive business plan, which must contain a strong exit strategy. This is very important regarding the lender’s due diligence. A strong exit strategy will show the bank that their line of credit can be repaid on the due date.
In most cases a bank will offer a secure line of credit. This means the company will be asked to provide collateral or security to the lender. Once the collateral has been agreed and approved, the client will be made a formal offer.
Due diligence forms a major part in obtaining a line of credit. The company’s accounts will be gone over with a fine-tooth comb. Updated World checks and Dunn and Bradstreet checks will be carried out on all directors.
Cash flow projections will form a significant part of due diligence. The company must show sufficient cash flow that will allow the Exit Strategy to come into play.
Despite all the above, banks continue to decline loan or credit applications. Banks have been cutting their loan books or they have been kept static for many years. You may find this article somewhat annoying to say the least.
Here in Geneva, many companies have turned to Collateral Transfer to obtain lines of credit. Not just Swiss companies, but companies from Europe, India and Pakistan, The Middle East, the Far East and S/E Asia.
IntaCapital Swiss are Europe’s leading exponents of Collateral Transfer and are based in Geneva. They have been successfully providing access to lines of credit for over a decade. Their clients are companies that have had their loan applications rejected by their banks and other traditional lenders.
Collateral Transfer is the means by which one company “leases” a financial instrument to another company. The most popular instrument is a Demand Bank Guarantee as this is the only guarantee that can be monetised. Once monetised by a lender the beneficiary of the Demand Bank Guarantee can obtain a line of credit.
If a company wishes to obtain a line of credit utilising Collateral Transfer, they must sign a contract with a Bank Guarantee Provider. The contract is referred to as the Collateral Transfer Agreement. The process is quite simple but IntaCapital Swiss will carry out the same due diligence procedures as banks and other financial institutions.
There has been a significant increase in the number of companies applying for Collateral Transfer, especially during the Pandemic. Collateral Transfer has been around for years but it has now become a significant medium for accessing a line of credit.
Companies suffering cash flow problems and rejection by their banks and other lenders should contact us today, to discover the opportunities that Collateral Transfer can bring to corporates around the world.