Post-financing documentary letter of credit

Letter of credit postfinancing is a financing 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 favour of a Polish Exporter (the beneficiary of the l/c). BGK  transfers the 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 the 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,
• the seat of the issuing bank is in a non-marketable risk country,
• the l/c is subject to „Uniform Customs and Practice for Documentary Credit", ICC Publication,
• only  Polish product  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 the transaction:

1. Conclusion of a contract between a Polish Exporter and a foreign Importer.

2. Establishment of the terms of the postfinancing between BGK and the issuing bank (Importer's bank) and issuance of the 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 the 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

How to obtain financing?

Contact:
Foreign Trade Support Department
Al. Jerozolimskie 7, 00-955 Warszawa
Tel. + 48 22 522 92 75 lub +48 22 522 926 65
Fax + 48 22 522 91 28
E-mail: dwhz@bgk.com.pl