Exclusive interview with Robert Casebert Ssemwanga, Manager, Trade Finance Sales, dfcu Bank
As businesses prepare for the end-of-year trading season, increased demand can create opportunities to grow sales, fulfil orders and enter new markets. But taking advantage of those opportunities often requires businesses to pay suppliers, purchase stock or mobilise for contracts before customers pay. Robert Casebert Ssemwanga, Manager, Trade Finance Sales at dfcu Bank, explains how trade finance solutions can help businesses manage these cash-flow gaps, reduce transaction risks and prepare for the busy season.
QN 1: Let us start with the basics. What exactly is trade finance, and why is it important for businesses?
Robert: Trade finance refers to financial instruments and product solutions provided by a bank to facilitate domestic and international trade. It helps bridge the gap between exporters and importers by mitigating supply and payment risks while improving liquidity. In practical terms, a business may have an opportunity to supply goods, import stock or execute a contract, but may not have sufficient working capital or may be exposed to trade-related risks that could result in losses. Trade finance provides solutions that support the transaction and help the business manage the timing between making payments, delivering goods or services and receiving proceeds. At dfcu, these solutions include Letters of Credit, Bills for Collection, Bank Guarantees, Avalisation, Contract Finance, Invoice and Certificate Discounting, Import Loans, LPO Finance, revolving short-term loans and Commodity Finance.
QN 2: Why is trade finance particularly relevant during the end-of-year trading season?
Robert: The end of the year is an important period for many businesses. Traders may need to increase stock, importers may need to bring in additional goods, while suppliers and contractors may receive orders or contracts that require them to mobilise quickly. The challenge is that the costs often arise before the revenue is received. Businesses need to plan for the amount of money required, when it will be needed and when it is expected to return to the business. Cyber fraud and substandard goods are also critical risks that traders and importers need to be cautious about to avoid losses. Trade finance can help mitigate payment risks, ensure compliance with agreed commercial terms by both the supplier and buyer, and bridge the financing gap, provided the financing is matched to a clear transaction and a realistic repayment source.
QN 3: If I am importing goods or raw materials, how can a Letter of Credit help me?
Robert: A Letter of Credit is a commitment by the bank, on behalf of the buyer, to pay the seller, provided the seller meets the agreed terms and presents the required shipment documents. It can be used for both local and international trade. It helps reduce risk for both parties: the seller receives payment if compliant documents are submitted, while the buyer pays when the seller fulfils the agreed conditions. dfcu provides Letters of Credit around the world for the importation of equipment, raw materials and other goods, with same-day processing and receipt of the SWIFT advice copy. The maximum tenor is up to one year, and confirmation can be arranged through correspondent banks at competitive rates.
QN 4: What if I need financing to pay for my imports?
Robert: Where a business requires funding to make timely payments to suppliers, it may consider an Import Loan. dfcu provides financing of up to 100% of the invoice value, with flexible financing periods of up to 180 days, subject to the bank’s assessment and applicable terms. Interest is proportional to the amount and period financed, and both interest and principal may be paid as a lump sum at the end of the financing period. The facility can help businesses take advantage of opportunities while managing the cash-flow pressure associated with importing.
dfcu Bank can also finance the payment of customs tax obligations to help ensure the importer’s goods are received for sale within the expected timelines.
QN 5: I have received a Local Purchase Order but do not have enough money to fulfil it. What can dfcu do?
Robert: That is the type of funding gap LPO Financing is designed to address. It helps eligible businesses access financing to deliver goods or carry out contractual works on time. dfcu can finance up to 70% of the LPO amount, with flexible financing tenors of up to 180 days. While the bank has unsecured limits on LPO Financing, additional collateral requirements are considered in line with the financing need. Interest is charged in proportion to the amount and period financed, while principal and interest may be paid as a lump sum at the end of the financing period. The LPO and other supporting documents will be required as part of the application.
QN 6: Suppose I have already supplied my customer, but I am still waiting to be paid. Is there a solution for that?
Robert: Yes. That is where Invoice or Certificate Discounting can become relevant. Rather than having operations constrained while waiting for an eligible invoice or payment certificate to be settled, a business can access financing against that receivable. dfcu provides financing of up to 70% of the invoice or payment-certificate value, with financing periods of up to 180 days. For a business that needs to replenish stock, pay suppliers or move on to the next order, that can help release money that would otherwise remain tied up while it waits for payment.
QN 7: How does Contract Financing work, and how is it different from LPO Financing?
Robert: Contract Financing is intended for businesses that have signed contracts and need funding to execute them. dfcu can provide financing of up to 70% of the contract value, with the possibility of accessing financing at different phases of the contract. Security requirements are flexible and depend on the nature of the contract and its terms. While LPO Financing is linked to an LPO for the supply of goods or services, Contract Financing is structured around the requirements and schedule of a signed contract. In both cases, the financing is linked to an identifiable business transaction.
QN 8: What role do bank guarantees play when a business is bidding for tenders or executing contracts?
Robert: Some tenders and contracts require businesses to provide a bank guarantee. dfcu offers bid bonds, performance guarantees, advance-payment guarantees, retention guarantees and payment guarantees. These instruments provide the assurance required by an employer or contracting party at different stages of a transaction. For businesses bidding for work, dfcu offers unsecured bid guarantees of up to UGX 1.5 billion. The bank’s product information provides for same-day processing of bid guarantees, same-day verification to employers, competitive pricing and flexible tenors to match contract requirements. Guarantees can also be issued against counter-instructions from A-rated foreign banks or against flexible collateral considerations.
QN 9: Do I need to provide property or other collateral to access dfcu’s trade finance facilities?
Robert: Not necessarily. dfcu has specific unsecured limits for bid guarantees, Contract Finance and Invoice Discounting. For other facilities, or depending on the size and nature of the transaction, additional security may be required. This may include tangible collateral such as property, cash collateral such as fixed deposits, corporate guarantees, credit insurance or chattel mortgages. The security requirement depends on the product and the financing need, and is determined through the bank’s assessment.
QN 10: Which businesses are eligible for trade finance at dfcu?
Robert: Trade finance is available to registered businesses, including small and medium-sized enterprises and large corporations. It is relevant to importers and exporters, companies engaged in cross-border trade, manufacturers, contractors and suppliers. The specific facility and amount available will depend on the business, the underlying transaction, supporting documentation and the bank’s assessment.
QN 11: Does dfcu support trade transactions in different currencies?
Robert: Yes. Trade finance transactions may be undertaken in local currency, Uganda shillings, and commonly used international currencies, including but not limited to the US dollar, euro, pound sterling, South African rand and Chinese yuan. The currency will depend on the transaction and the requirements of the supplier, buyer or contract.
QN 12: What support is available for commodity producers and trading companies?
Robert: dfcu’s Structured Commodity Finance is designed for commodity producers and trading companies. The solutions include stock finance, pre-export finance and warehouse-receipt financing. They support liquidity management and risk mitigation in the production, purchase and sale of raw, semi-refined or semi-processed materials, and can help businesses realise payments from the export and sale of commodities. Financing periods are flexible for up to 180 days, with the underlying commodity taken as security. Additional security requirements may be considered in line with the financing need.
QN 13: What documents should a business prepare when applying for trade finance?
Robert: Documentation depends on the facility and the underlying transaction. For international trade, typical documents include a commercial invoice, bill of lading or airway bill, packing list, certificate of origin, insurance certificate and, for imports, a proforma invoice. For LPO Financing, the business will need to provide the LPO. Contract Finance requires a copy of the signed contract and contract schedule. Invoice and Certificate Discounting requires the contract and copies of certified invoices or payment certificates. Other requirements may include details of pledged security, latest annual returns and directors’ identification. Audited financial statements are required for certain facilities above UGX 500 million. Businesses should confirm the exact checklist with dfcu for their specific facility.
QN 14: What charges should businesses expect when using trade finance?
Robert: Charges vary depending on the product and transaction. They may include Letter of Credit issuance fees and commissions, guarantee issuance fees and commissions, document-handling fees, interest on trade loans and arrangement fees. Businesses should discuss the applicable pricing with the bank when structuring the facility so that the full cost is understood and factored into the transaction.
QN 15: What should businesses consider before taking financing for the end-of-year season?
Robert: Businesses should start by understanding the market, the business opportunity and the cash flow behind it. They should know how much stock or input is required, when suppliers must be paid, how long it will take to receive and sell the goods or complete the work, and when the proceeds are expected to return. The amount and tenor of the financing should match that cycle. Financing should support a clear business activity and a realistic repayment plan; it should not simply be taken because demand is expected to rise. Engaging the bank early also gives the business time to understand the product requirements and prepare the necessary documents.
QN 16: How can a business apply for a trade finance facility at dfcu?
Robert: Businesses can begin by speaking to their Relationship Manager or visiting the nearest dfcu branch. They can also contact the bank’s call centre on 0200 504 200, use the toll-free numbers 0800 222 000 or 0800 203 206, or email customercare@dfcugroup.com. We encourage businesses to engage the bank early, particularly where a shipment, tender or supplier payment deadline is approaching, so that the transaction, financing need and documentation can be discussed in good time.
