Capital Raising Solution
Case Study of Mr. Shumba the entrepreneur with a dream:
Shumba an entrepreneur with a registered company in Uganda has been importing cooking oil worth USD 15 000 from a company located in Malaysia over the past 3 years. Shumba has a supply contract with one of the wholesalers of cooking oil in Uganda. The entrepreneur contacted us to access finance for his business.
Shumba the entrepreneur from UG
TFC team immediately began work on Shumba’s company by analyzing his business inside out structuring and most importantly addressing his funding needs. They studied his business, track record, tax records, and supply and contract performance history with his Malaysian supplier. The team realized a common factor affecting his business growth – “working capital”. Shumba’s business success relied on cash in hand to pay the supplier, and government tax before delivery to the wholesaler who would pay him once product was delivered.
After weeks, Shumba’s company accessed a Financial Instrument without the need of collateral. TFC team was able to structure a revolving contract with the Malaysian supplier and Ugandan wholesaler. Every 3 months his Malaysian supplier would deliver cooking oil worth USD 75 000 and Shumba would then pay for it within 180 days.
How did Shumba from Uganda access a Deferred Letter of Credit of USD 75 000 from a Hong Kong Bank?
- *Shumba had been in a 3year business relationship with his supplier. Every 3 months, Mr. Lim (Supplier of cooking oil) knew he would receive a call from Shumba in Uganda indicating that he had made payment of X amount into their company bank account.
- *Each time Shumba supplied his client (wholesaler in Uganda), he would be paid in cash within 21 days of product delivery.
- *Shumba tax records were in order.
- *Shumba did not need a loan but Shumba wanted growth for his company but was constrained by cash to increase his volumes and increase his profit margin. Shumba dreamed of diversifying into importing sugar.
- *TFC structured Shumba’sbusiness which included analyzing his market, growth potential, analyzing investors risk and, negotiating with Shumba’s supplier to accepting Deferred Letter of Credit as mode of payment.
- *Agreements were executed and a Deferred Letter of Credit worth USD 75 000 issued via Citi Bank Hong Kong was effected towards Mr. Lim’s company in Malaysia for delivery of X quantity of cooking oil.
- *Shumba’s business was a legitimate business and was liquid enough to pay the fees of arranging a Deferred Letter of Credit being advised towards Mr. Lim (cooking oil supplier) bank. The fee (Finance Charges) of accessing the Deferred Letter of Credit for Shumba was 10.5% and the financial instrument was valid for 180 days.
- *Shumba’s business is growing. He now supplies 3 companies in Uganda, is waiting for his 3rd consignment from Mr. Lim.
The case study of Shumba is an example of many clients whom TFC has assisted in Africa, South East Asia, South America and Europe. We can structure projects for companies and assist them in accessing financial instruments including but not limited to providing Proof of Funds – which normally assists companies to prove they have the funds they need in committing to a Tender.
For project structuring, upon full submission of documents required, TFC will then engage with client during due diligence. Projects submitted will go through the Funding Guideline once Investment committee provisionally approve to structure project, Client must then provide project documentation then only can client provide a bank opinion letter to indicate readiness to pay fees after project has successfully been approved for Funding.