DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
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4. Management of Approved Invoices/Drafts
The bank manages the approved documents process with respect to potential financing and
the scheduling of transaction settlement.
5. Document Payment
The buyer pays at maturity (usually the document due date) and the seller is paid or seller's
financing (if any) is repaid with any remaining proceeds going to the seller.
6. Documents/Payment Reconciliation
When payment is received, the bank may, on behalf of the buyer and the seller, reconcile
payment to the documents' value (usually the invoice/draft value) and keep track of PO
balances.
Section 3: Trade Finance Definitions
Supply Chain Finance
As applies to Open Account transactions, Supply Chain Finance (SCF) solutions encompass a
combination of technology and services that link buyers, sellers, and finance providers to
facilitate financing during the life cycle of the Open Account trade transaction and repayment.
The below financing opportunities fall within the overall definition of Supply Chain Finance.
1. Purchase Order Commitment to Pay
The buyer's bank issues its commitment to pay the seller (at sight or at maturity) once the
seller ships and makes available the required documents that match the purchase order and
other stipulated conditions. This service allows the seller to take the risk of the bank issuing its
commitment to pay instead of that of the buyer.
2. Pre-Shipment Finance
Pre-Shipment Finance, also known as Purchase order financing, is made available to a seller
based on a purchase order received from a buyer. This financing can cover all the related
working capital needs of the seller including raw materials, wages, packing costs and other
pre-shipment expenses. Once the goods are ready, refinancing or repayment can occur.
3. Warehouse Finance
Warehouse financing is a form of trade finance in which goods are held in a warehouse for the
buyer, usually by the seller, until needed. At a minimum, warehouse receipts are commonly
required as evidence for the financing.
4. Post-Shipment Finance
Post-shipment financing is provided to a seller using the receivable as collateral. The seller
presents shipping documents as evidence of a receivable and the bank may also require a bill