Looking for a larger piece of the cake

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19 December 2008

Trade Finance (TF) talks with Lars Millberg (LM), head of trade finance at SEB in Stockholm about the merging of cash and trade, dealing with trade provision through the liquidity crisis, and the changing face of trade.

TF: With the liquidity crisis in full swing, how has SEB responded to its clients' needs/requirements for trade credit?

LM: We are seeing a larger demand for discounting letters of credit (LCs). In fact, exporting clients may find LCs a useful working capital tool as the client/exporter has the collection time within their control. This is due to the fact that they can actively work on speeding up and improving correctness in processing their documents and thereby get paid faster, while under ordinary open account receivables you are stuck with the fixed payment date and can't do very much other than wait for the payments. The additional cost for requesting your importer to issue an LC instead of using open account (O/A) is marginal. Other things can of course be a hindrance.

Our importing clients, in all sizeable segments are increasing their usage of import LCs for...

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