Advances and Loans
Funds advanced to a borrower, to be repaid at a later date, usually with interest. Legally, this is a contract between the borrower and Darfin Finance, enforceable in the courts of law in Ghana.
Darfin Finance provides its’ clients with the following credit facilities;
Direct Lending Products
Short Term Loans
A fixed term business loan with maturities not exceeding one year, providing borrowers/clients with funds to acquire assets or inventory. Monthly repayments is the main feature of this product.
Line of Credit
This is an evergreen revolving credit facility, where borrowers are provided with a revolving three months short term loans up to a period of 18 months to meet the working capital financing needs. The main feature is a three-months cycling out conditions and terms, which marks the expiry period of a term.
Import and Export Trade Finance
Import Trade Financing: A Loan Against Import (“LAI”) is provided to finance a drawing under an Import L/C or Import Bill for Collection where Darfin Finance retains control of the merchandise, usually in a warehouse approved by Darfin Finance or Bonded Warehouse with the goods held to the order of Darfin Finance. The goods are insured by an acceptable insurer at the expense of the customer.
Export Trade Financing: This Export Trade Finance/Pre-shipment Finance is provided by Darfin Finance to an exporter (Client) who is the recipient of an export order as evidenced by a purchase order / contract or equivalent from the importer. The client/exporter may require Pre-Shipment Finance to purchase goods, or to produce the goods in order to fulfil the export order.
This product is a facility where Funds to complete a variety of Real Estate projects by organisations and businesses are obtained from Darfin Finance. This facility is also available to Real Estate developers for the purchase of inputs for projects near completion. The maximum tenor for this product is 18 months and could be tied to a project investment plan accounts at Darfin Finance.
A short-term loan, also called a swing loan, made in anticipation of intermediate-term or long-term financing. The maximum tenor for this product is 90 days.
Darfin Finance will provide a bridge finance where it can be demonstrated that a pending finance is been approved by a major bank awaiting disbursement.
Asset Lease Financing
This is a credit contract giving the right of possession and use of an asset for a specified period in exchange for payments. There is the option of ownership at the end of the term. This facility is available for the acquisition of Plants, Equipment, Machinery and Motor Vehicles needed by organisations and businesses.
Organisations and Businesses may have assets financing needs and Darfin Finance offers this prime product.
Indirect Lending Products
Letters of Credit (LCs)
A documentary letter of credit (“L/C”) is a written undertaking issued by the Bank in favour of the seller (beneficiary) at the request and in accordance with the instructions of the buyer (applicant), to effect payment up to a stated amount within a prescribed time limit and against stipulated documents.
Governed by the Uniform Customs and Practice for Documentary Credits 600 (“UCP 600”), an L/C:
- is a facility provided by banks to clients in order to facilitate international trade transactions and occasionally local trade transactions;
- assures all contracting parties that the Bank will honour its obligations provided the terms and conditions of the L/C are complied with;
- ensures payment, as long as the terms and conditions of the L/C are complied with in the country of issue of the L/C;
- assures payment on the basis of the documents alone.
L/Cs are, by their nature, separate transactions from sales or other contracts on which they may be based and banks are in no way concerned with or bound by such contracts. As such, all financial parties concerned deal with documents, and not with goods.
A L/C should clearly indicate whether it is Revocable or Irrevocable. In the absence of such indication, the L/C is deemed to be irrevocable. An Irrevocable L/C cannot be amended or cancelled without the agreement of all parties, whereas a Revocable L/C can be amended or cancelled by the Issuing Bank at any moment and without prior notice to the beneficiary.
Darfin Finance will assist its clients to provide funds for the establishment of L/Cs from major banks. Also, local standby L/Cs are available at Darfin Finance.
Advance Payment Bonds/Guarantees (APG)
An Advance Payment Bond/Guarantee (APG) is issued instead of or, in conjunction with a Performance Bond. This type of bond is required only when the Principal asks for a sum of money to be paid in advance of the works/services being carried out. The beneficiary is therefore guaranteed that these funds will be repaid in the event of non-delivery of goods or default on the contract. APG is usually 10% – 15% of the contract amount.
A Retention Bond is issued instead of or, in conjunction with a Performance Bond or Advance Payment Guarantee. The beneficiary may withhold a certain amount of money to ensure the works or services have been completed satisfactorily. The issuance of a Retention Bond allows early release of the funds by the beneficiary to the Principal. The beneficiary has the comfort that any funds that are released to the principal can be claimed back if the Principal has defaulted under the terms of contract. Typically, a Retention Bond will be for 5 -15% of the contract value.
A financial guarantee (also called Financial Bonds) is a written undertaking issued by a bank on behalf of a customer (principal), guaranteeing that should the principal not comply with his financial obligations to the beneficiary, leading to a claim under the guarantee, then the issuing bank will make financial recompense in accordance with the terms of the guarantee.
Under the guarantee, the beneficiary is indemnified for a stated amount against presentation of a written demand and/or any other documents called for by the guarantee, evidencing that the principal has failed to fulfil his obligations under the underlying transaction/loan agreement.
If the guarantee only requires a demand to be received then the issuing bank should pay without contest (Demand/Unconditional guarantee). If the demand must be accompanied by documentary evidence then these documents must be checked by the issuing bank for compliance with the terms and conditions of the bond/guarantee (Conditional guarantee).
Darfin Finance can issue a guarantee directly to the beneficiary (Direct guarantee). Darfin Finance currently can assist its clients with the following financial guarantees
A Bid/Tender Bond is issued in favour of a Beneficiary (importers, state institutions and major corporates) to support tenders for contracts made by businesses/exporters/contractors. The beneficiary/importer is compensated for the amount specified in the Guarantee if the applicant/exporter or the contractor fails to take up the contract if it is awarded to him. Therefore, Bid bonds serve to prevent the submission of frivolous tenders. Generally, the value of a Bid Bond is usually between 1% – 5% of the contract value.
In addition, the tender bond may commit the exporter’s / contractor’s bank to joining in a performance bond if the contract is awarded to him. Therefore, when Darfin Finance issues a bid bond it must be prepared to issue a performance bond once the contract is awarded, in accordance with conditions specified in the tender (e.g. duration). Adequate facilities must be in place/available to cover the liability for the performance bond, if the contract is won.
Once the contract has been awarded and the relative performance bond issued, the bid bond should fall away provided that the Principal notifies the Bank that the particular Performance Bond replaces said Bid Bond.