Articles

ECGC - Export Credit Guerentee Corporation 

–>  An Export Promotion Institution

– Provides credit risk covers to Exporters against non payment risks of the overseas  buyers / buyer’s country in respect of the exports made.
– Provides credit Insurance covers to banks against lending risks of exporters 
– Assessment of buyers for the purpose of underwriting
– Preparation of country reports
– International experience to enhance Indian capabilities
– An ISO organisation excelling in credit insurance services

Q. What risks are covered if we buy ECGC Cover?

COMMERCIAL RISKS                                          
Insolvency of buyer/LC opening bank
Protracted Default  of  buyer
Repudiation by buyer

POLITICAL RISKS
War/civil war/revolutions
Import restrictions
Exchange transfer delay/embargo
Any other cause attributable to importing country

ECGC Could be termed as "CREDIT INSURANCE" ECGC will pay you only if your buyer fails to pay. 

You should visit your nearest ECGC Office for more information https://www.ecgc.in/ (Government Body)

Q. Do ECGC Provide protection if there are quality issues or if our products get damaged in transit?

No, for products we have got marine insurance, marine insurance ICC Cover A would be helpful to us to get full claim if products get damaged in transit 

Q. Do CHA / Shipping Line / Transport Company provide any help if goods are spoiled due to their misconduct?

A. No, CHA / Shipping Line / Transport Company will not provide any help but yes Airline provide his personal guarantee, generally, we don't buy any insurance for goods if we send goods via airline as all airline has to follow the norms of SDR, SDR is Special Drawing Rights, if goods reached in damaged condition airline will pay 20$ Per Kg at Max (based on Invoice value)  

Q. Do ECGC, Insurance Co. Really help or its just a talk?

A. I really don't like to waste your & my time, they really do pay. 

See the pics of my student Bhavin Sakhaya , MIRACLE OVERSEAS, received the money from ECGC, withdrew it from the bank via "Self Cheque" to pay to his farmers for garlic. His buyer in Sri Lanka turned out to be a fraud. His Partner Arpit & Bhavin both tried to called his fraud buyer "Highway Impex" & ask them to buy garlic from them again. I asked them why you are calling fraud buyer ?? why you want to deal with them? they replied me no worries sir, ECGC pays us we are happy...

 Bhavin Counting money.....

My Students SDR Clam of AVD International 

Great but what about the loss people occurs due to currency?

In local trade, there is no security cover and protection for anything a loss a loss in local trade but in international business, we have got cover for every risk of loss. For currency, we could buy a forward contract from the bank, that you can discuss with bank forex manager while opening the bank an account. Suppose if we deal in USD & quote buyer at the rate of 1000 USD, while quoting 1 USD = 65 INR but in DP/DA/LC payment terms he will pay after we send the docs to our bank , and at that time he will pay bill of 1000 USD but currency rate might be 1 USD = 63 INR, in that case we will occur loss in conversion but if we have forward contact then bank will pay us difference of 2 INR. Its called heading the risk 

Understand This....

Startups always face trouble in generating finance for exports. Actually generating finance would never be trouble if startups give good parallel security against such finance to the bank or financial institutions. But what if Startups do not have sufficient securities to generate the funds from Banks or Financial Institutions. 

For Such CGTMSE could be a boon......!!! https://www.cgtmse.in

For us, CGTMSE Gives the Guarantee Security to Banks so that Bank can Fund Startup Exporters 

Following are the Key Points of CGTMES made very easy for Startup Exporters

• CGTMSE is "Credit Guarantee Fund Trust for Micro and Small Enterprises" set up by Government to help the small startups business to generate loans from Banks
• CGTMSE is a trust helps to build your trust for banks, so that you can get the bank loans as they give your securities to banks. 
• CGTMSE provides help mainly to Startups / New Small Business and can help Startup Exporters to generate funds up to 2 Cr. from Banks. 
• CGTMSE can provide help to all small startups exporter dealing in all products  excluding Agro Products  i.e Agri Products Exporter will get no help from CGTMSE, moreover, it does not provide support to service exports indulge in training or imparting education. 
• In Documents, CGTMSE only requires PAN of Exporter or its Company if loan required above 5 Lacks, if less the 5 Lacks loan required then even PAN not required. 
• If Exporter receives more order then he may extend his loan, but maximum up to 2 CR. 
• To Small Startups Banks can only charge at max 14% yearly rate of interest in a year for CGTMSE Loans. 
• To avail the CGTMSE Loans startup exports only need to approach Banks. Almost all major Private and Government Banks including rural banks are eligible to take the securities from CGTMSE and provide loans to Startups. All Scheduled Commercial Banks, NBFC (Non-Banking Finance Companies), Small Finance Banks, or such of those institutions as may be directed by Government of India can avail of the guarantee cover in respect of their eligible credit facilities under the scheme. Small Industries Development Bank of India (SIDBI), National Small Industries Corporation Ltd. (NSIC) and North Eastern Development Finance Corporation Ltd. (NFDFi) have been included as eligible institutions. 
• ECGC [Export Credit Guarantee Corporation] Cover must not be taken for any deal funded with the support of CGTMSE, as clubbing of two Gov Credit Insurance not allowed as per the guidlines. 
• Term period of Loan would be available for startups for at max 5 years.

Is it really true? How Banks can trust CGTMSE? What Securities CGTMSE Provide on behalf of Startup Exporters ?

• On the part of the government, they emphasis to give loans to startups but there are following challenges for the bank which has to be taken care of...
• There is a lock-in period of 18 months for any banks to lodge the claim for the date of issue of the loan.  [Suppose if you have taken the loan for exports wherein bill the due date is after 1 month for payment but buyer defaults then for banks it's not easy and instant money they have to wait for 18 months to register a default case with CGTMSE.
• CGTMSE provides securities to the banks in the form of Collateral Security - [For eg. Assets] & Credit Facilities [For eg. Bank Guarantee or Letter of Credit in favour of Banks] if the Exporter defaults banks may trigger this securities but at max banks can avail 85% of the loan amount i.e banks would be given securities of 85% of the loan sanction to the Exporter, so to safeguard the full interest of banks would ask for the Primary Security from the exporter i.e Assets or gold of 15% to 25% not covered under CGTMSE before sanctioning the loan. 
• 

There is also the concept of Annual Guarantee fee of 1% to 2% imposed on banks which is payable by Banks to CGTMSE to get the Securities for the exporter, such cost banks can't take directly from exporter but it may charge under some another head i.e like service fees, processing fees etc. CGTMSE is Charging Annual Service Fees / Annual Guarantee Fees at differential rates depending upon NPA Levels / Claim payout ratios of Banks, so banks have to take care if there is the default, banks will lose the trust in the eyes of CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises.

If Exporter is unable to pay the loan then Banks have to file a legal case against the exporter in court & always remember, hear if the firm of exporter is proprietor or partnership then he could be forced to sell the personal assets, so PVT LTD companies are more safer for the exporter. So before the lodgment of claim to CGTMSE for default they have to file a legal case against the company of exporter and they must try their best to recover from exporter at first then if they fail then they can come to CGTMSE.

So how Exporter Can Practically avail the loan from Banks with the help of CGTMSE, what would be the action steps from the exporters end?

1. Exporter needs PO from buyer i.e Purchase Order. PO must not be of Agri Products, it must be of any non-agri & non-perishable goods, an exporter must make sure that latest shipment date mentioned in PO must be a month from today's PO date so that he can enough time to avail CGTMSE loan for exports. 

2. With the PO exporter must at first get its DNB report Dun & Bradstreet from bank , i.e the Credit rating agencies check the credit report of the buyer, if DNB suggests that the buyer is good and deal is advisable then it would be easier for the exporter to avail CGTMSE loan form the banks. 

3. Exporter must give in writing to banks that this deal is not protected by any other government agencies like ECGC; exporter must not buy ECGC cover for such deals, else in case of default Banks will not get funds from CGTMSE. 

4. Banks may charge or ask for little securities from Exporters as they know CGTMSE is not providing the 100% securities to banks. One may visit https://www.cgtmse.in & mainly visit their respective Banks to know more about CGTMSE, Exports have to approach banks only, they can't directly approach CGTMSE for loan sanction.

5. CGTMSE could be more helpful to those startups who have done a few successful deals directly or with International Brokers, here turnover is important even agri will do if they wanted to avail a loan more loan at max 2 Cr.  For core startups exports, they must become the SUB Brokers if they want to generate the funds from almost scratch.

Soon adding the article of SUB Brokers with Practical Example of Barai Overseas Students......Remember its not International Broker.... its SUB BROKERS.