The EBRD has made its first factoring transaction in Ukraine by lending to Ukreximbank, according to Cbonds.

The bank signed a factoring finance facility with the EBRD Trade Facilitation Programme earlier this year of up to $10 million to finance sales by small and medium-sized producers, importers and traders across the country.

Through factoring, Ukreximbank provides its corporate clients with an additional way to obtain trade finance without having to mortgage property. Factoring - the purchase, administration and collection of short-term accounts receivable by a financial intermediary - is a fast and flexible method of improving a company’s cash flow. With factoring companies get immediate access to cash that is normally tied up for 30, 60 or 90 days in accounts receivable.

The EBRD’s first disbursement to Ukreximbank is for $2 million to support various factoring agreements, including sales of computers, television sets and wall paper in Ukraine. This will allow the sellers to immediately receive funds for their deliveries instead of waiting for payments from their clients.

The EBRD has added factoring as a new product to its Trade Facilitation Programme (TFP) in order to further transfer know-how and innovative trade finance solutions to its countries of operations. Through TFP, the EBRD also provides guarantees to international confirming banks and factoring companies, taking the political and commercial payment risk of international trade transactions undertaken by banks in the countries of operations (the issuing banks). In addition, the EBRD grants short-term loan facilities to banks and factoring companies for the purpose of funding sub-loans to their clients.

Established in 1999, the programme has grown rapidly. As of November 2008, TFP has facilitated more than 7,700 trade deals worth over ?4.7 billion, including 645 transactions in Ukraine worth ?480 million.

Jean-Marc Peterschmitt, EBRD Director Bank Relationships, said the loan to Ukreximbank will have a wide impact in helping local SMEs to become more competitive through better access to finance. With factoring services, a business can take advantage of growth opportunities, reduce debt and solve problems associated with the collection of the accounts receivable.

“This first factoring transaction in Ukraine is yet another milestone in our cooperation with Ukreximbank,” added Rudolf Putz, Head of TFP at the EBRD. Ukreximbank joined TFP in 2007 and has since used facilities for financing foreign trade transactions worth ?35 million.

Cbonds