Finance:Trust Receipt Facility

When we regularly import goods from overseas,we need to seek a more permanent form of import credit facility and Trust Receipt facility is one of them.

Trust receipt facility is simply one form of banking facility,our banker assists us to finance the import of goods for a certain fixed period of time. That period of time can range from 30 to 180 days. This period of time granted by the banker will normally correlate with our business operating cycle.

Vide this trust receipt facility,the banker are granting us a fixed loan secured against a trust receipt. In return,the bank is remunerated by charging us interest basing on a simple rest basis and at an agreed rate of the period of advance granted.

Basically in law,a trust receipt is just a legal document signed by us as buyer/importer customer,amongst other things,agrees and covenant to:

• hold the goods in trust for the bank,pending sale of the goods and realization of the proceeds;

• hold the proceeds in trust for the bank,upon sale of the goods and realization of the proceeds;

• keep the proceeds from the sale of goods separately from his other funds;

• hold the goods safely;

• keep the goods adequately insured;

• allow the bank to take possession of the goods when necessary and

• allow the bank to inspect the goods when required.

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