The following is a list of frequently asked questions and corresponding answers. If you have a specific question that is not answered below, please contact us and we will be happy to help.
All business engagements start with a conversation. Let’s have that conversation and discuss how Trade Credebt® can support you in financing your business potential.
For any business, the working capital requirement is the minimum amount of finance that the organisation needs to cover the usual costs and expenses necessary to operate. Working capital is a basic business concept that should be understood by any business person. In some instances, working capital may extend to include research and development cost and other expenses where additional finance is required for commercial and/or strategic advantage
The Trade Credebt® Finance Formula uses a purchasing model, a simple set of documents and a specific processing method that ensures you know quickly if Trade Credebt® Finance can work for you.
Traditional lenders often work to undefined, unclear and confusing processes. Simple requests for specific types of business finance can take weeks, or even months, to process. Throughout the process, its unclear if the finance you’re asking for will ever be provided. Everything seems to be cloaked in secrecy. To make matters worse, having waited patiently for an answer, regularly it is: No. This frustrating process is called the ‘Slow No’. Trade Credebt® works to a formula that is quick, clear and fair.
Invoice Discounting/Factoring [IDF] is a form of short-term commercial finance. The IDF provider uses your invoices as an asset and secures the money they advance/loan to you against these invoices. Typically, IDF providers require that you sell your entire debtors ledger (also called the ‘book debts’) and also personally guaranteed against any bad debts. IDF contracts are unwieldy and, once signed, are difficult to unwind and cancel. Additionally and depending on the IDF provider, the fees, surcharges and interest payments can make IDF an expensive form of finance. IDF is a long term commitment
Because Trade Credebt® Finance uses a purchasing model as opposed to a lending model. The business owner that originates or receives invoices is called an Originator. The Originator sells their invoices/ETR to Credebt Exchange® and once the Purchase Price is paid to the Originator, Credebt Exchange® owns the ETR. The Originator is using its own assets to generate cash and is selling them to Credebt Exchange®.
Credebt Exchange® rarely uses onerous loan finance terms, liens or guarantees (even personal guarantees). When successfully implemented, the Originator can become less reliant on banks or finance providers, is more self-sufficient and has a greater influence and control of its destiny
Trade Credebt® enables service and goods providers to offer their invoices as Exchange Traded Receivables [ETR] for sale on the Exchange. The Trade Credebt® model makes ETR attractive to the hundreds of Credebt Exchange® Investors. The Credebt Exchange® objective is to achieve rates that are comparable to, and preferably less than, other commercial finance alternatives or bank lending rates
All types of companies use Trade Credebt®. Typically these micro-medium sized organisations are Originators on the Exchange and sell their ETR to Credebt Exchange®
Because the Credebt Exchange® model is specifically designed to deliver intelligent finance to micro-medium sized organisations without the need for complicated ‘lock in’ contracts, liens or personal guarantees
Organisations should only use the Exchange when they need to raise additional working capital to improve their liquidity and/or to help grow their business
Simply, complete the online application form
Once your application form is approved (the approval process is not guaranteed. Member organisations are vetted thoroughly, to ensure they are credible, viable and trustworthy), you are then an official Member of the Exchange and can begin trading
Any reputable organisation can trade, once they complete the application form and are approved by Credebt Exchange®
Credebt Exchange® is a fast moving, liquid market and funds are allocated on a ‘first come, first served’ basis. Funds allocated to unconfirmed Revolving ETR Purchase Agreement [RPA] Offers are re-allocated to other Originators (and may not be re-issued for some time). Therefore, it is important that if you receive an RPA Offer, and the terms of the offer are acceptable to you, that you confirm your acceptance without delay. To avoid any Over Allocation surcharge, it is important that the funds allocated to you are substantially utilised (i.e. at least 75% used) within 30-days from the date of confirmation
All charges are clearly displayed on the RPA Offer issued to every Originator and the Originator must confirm and consent to these charges prior to trading. Once your account on the Exchange is activated, read the Important Notices to see the Exchange Fees & Charges applied to your account
To protect all Members’ information and keep it confidential access to the Credebt Exchange® system requires the strong security of a Digi-Access™ Digital Certificate that is provided to each Member
The Posting Fee is a discretionary charge of EUR 2.00 – 10.00 that may be applied to every ETR that is posted to the Trade Floor, regardless of its Face Value. If it is to be applied, it will be clearly indicated on the RPA Offer. An independent third-party monitors and reconciles all Bank transactions to ensure Posting Fees are correctly applied and to protect the interests of all Members of the Exchange
Regardless of its Face Value, every Traded ETR is subject to a Trade Commission of EUR 2.90. All Trade Commissions are automatically deducted prior to payment. Similarly and regardless of the value of the Reserve, every settled ETR is subject to the same Trade Commission. To ensure Trade Commissions are correctly applied and to protect the interests of all Members of the Exchange, an independent third-party monitors and reconciles all bank transactions
All Originator Purchase and Reserve payments, regardless of the value of the payment, are subject to a Processing Commission of EUR 15.00 that is automatically deducted prior to transfer. To ensure Processing Commissions are correctly applied and to protect the interests of all Members of the Exchange, an independent third-party monitors and reconciles all bank transactions
Yes. You only pay the Credebt Exchange® Collection Service charges if you want the Exchange to collect the proceeds from a Traded ETR on your behalf. The Credebt Exchange® Collection Service charge is EUR 50.00 per ETR
All Members of the Exchange must use Digi-Access™ two factor authentication to login to the trading system. This level of security is used by banks, governments, tax authorities and other online systems where high security, authentication and identification are required
No. The identity of your organisation is protected and only specifically authorised Credebt Exchange® employees can see your identity. All other users only see your Membership ID, NACE category, NACE description and, in some instances, will see a Credit Limit and Risk Value as provided by third-party rating agencies (e.g. Dun & Bradstreet, Creditsafe, etc)
No. The identity of your organisation is protected so that all other users only see your Membership ID. In the unlikely event that your customer is also a Member of the Exchange, they cannot know your identity because they can only see your Membership ID
An invoice is evidence of a Contract (point 2.02 below) with an obligation on the recipient (the debtor) to pay
Means, in relation to any ETR (point 2.03 below), as applicable, any and all contracts, understandings, instruments, agreements, invoices, refunds, notes, purchase orders, accounts receivable, payment obligations, Letter of Credit, promissory note, payment by installments, lease payment obligations or other writings (including an agreement evidenced by a purchase order or similar document) pursuant to or under which a Person becomes or is obligated to make payment in respect of such ETR
Exchange Traded Receivables [ETR] are debts that are evidenced by a contract showing a monetary obligation of one entity to another that has, or will be, Traded on Credebt Exchange. Evidence of an ETR can be a contract, an order, an invoice or any other type of document that proves the existence of a debt and the entity that is liable for that debt. Once Traded, the ETR monetary obligation belongs to Credebt Exchange and the liability must be settled in full to extinguish the debt
Any organisation seeking to sell its ETR on the Exchange, will first submit an enquiry for consideration to be an approved Originator on Credebt Exchange®
The ‘Face Value’ of an ETR is the total value of the ETR including all taxes, VAT, delivery charges, etc. It is the total amount that must be paid for the ETR to be regarded as Settled or ‘paid in full’
RSA trading is the most common form of trading on the Exchange and occurs on a discounted basis. There are the four simple steps required to access your required Trade Credebt® intelligent finance:
How to become an Originator on the Exchange
From the information you provide in your initial application, we will issue a Provisional Revolving ETR Purchase Agreement [RPA] Offer. This is a single offer document that will specify the total finance available to you. Once you confirm your acceptance, you are invited to register
After user registration, you enter your organisation details, followed by the debtor details and creditor details provided in your original application. Depending on how you wish to operate your account, you can enter all your debtors/creditors or just a handful to start with, so that you can learn how the Credebt Exchange® trading system works
The Provisional RPA Offer becomes a Formal RPA as soon as your first debtor/creditor is approved
The Cash-to-Cash [CtC] measure of a business measures the number of days needed to fund a single trade life-cycle. The measurement starts on the first day it pays for something/someone to fullfil a single order. And ends when the completed order is paid for in full
A Revolving Sale Agreement [RSA] trade is where the Originator agrees to sell invoices/ETR on a recurring/revolving basis over a fixed period of time (e.g. 1-Year). As this RSA is a selling transaction, Credebt Exchange® issues a Revolving Purchase Agreement [RPA] offer as a buying transaction that matches the RSA. If the working capital Requirement of a business is EUR 0.5m and the average time it takes for debtors to pay their invoices is 90-days, then the Originator will agree an RSA with Credebt Exchange® for EUR 2.0m per annum (i.e. EUR 0.5m x 4 = EUR 2.0m)
A ‘Traded ETR’ is any ETR that has been sold on Credebt Exchange®
With exception of Outright ETR trades like fixed credebt® facilities, the Discount Percentage is calculated on a daily basis using the Trans-European Automated Real-time Gross settlement Express Transfer 2 [TARGET2] system from the European System of Central Banks using the Euroclear method of 1/360 to define 1 day, or part thereof. Asset ETR/a-ETR Finance uses periodic repayments where the calculation uses a single, same amount payment, at the end of each period on a fixed rate percentage, based on a fixed number of compounding periods and using TARGET2. Variable credebt® facilities like b-ETR, c-ETR or d-ETR Trade Finance, applies the Discount Rate every TARGET2 day where the calculation uses a fixed rate percentage, based on the number of days the ETR remains outstanding.
Following the Trade Credebt® Finance Formula, a 1-page provisional Revolving Purchase Agreement [RPA] offer is issued. This single page document clearly explains what the finance offer is and what the finance costs are. Once you get your RPA offer, your Branch Manager, or Specialist, will explain this to you. Once you understand this finance quotation, you can either accept or reject it
Yes. It is very important for two reasons that affect:
When an invoice/ETR is issued it has a date on it, this is the Issue Date. The issue date is very important because all calculations are based using this date and the Expected Date. For example, if an invoice dated 2016-01-01 is traded on 2016-02-01 and is not settled until 2016-03-31 then it will be outstanding 90 days (i.e. not 59 days)
The Reserve is a sum of money, related to the Face Value of the ETR, that is held by Credebt Exchange® to ensure the Originator/Agent gets the ETR Settled (i.e. paid in full) efficiently.
With exception of Outright ETR trades (because the Sell Rate is fixed, regardless of when it is Settled), the Reserve is a percentage that is calculated on a daily basis using the Trans-European Automated Real-time Gross Settlement Express Transfer 2 [TARGET2] system from the European System of Central Banks using the Euroclear method of 1/360 to define 1 day, or part thereof. The number of days is calculated by subtracting the Issue Date from the Expected Date
In an Outright ETR, the Offer is the fixed value amount that the Originator/Agent offers an ETR for sale on the Exchange. In RSA trades of either Performance ETR, or Managed ETR, an Offer is the fixed monthly percentage Discount of the Face Value of an ETR that the Originator/Agent offers for sale on the Exchange. The Investor makes a Bid against the Offer and if the Bid equals the Offer, the trade closes and becomes a Traded ETR
The Spot Market offers ‘as you need it’, intelligent finance whilst the Revolving Market is a revolving/recurring market that is popular with almost all Trade Credebt™ users, as explained below:
The true sale of an ETR occurs the moment that Credebt Exchange® transfers payment to the Originator. For example, if the payment transfer is EUR 9,900 on an Outright ETR with a Face Value of EUR 10,000, the moment that Credebt Exchange® transfers the Purchase Price i.e. EUR 9,000 (less processing fees), the sale occurs. TomNext payment is transferred electronically to the Originator’s Bank account once the ETR is traded (i.e. the trade closes). There are five types of ETR:
A Basis Point [BPS] is 0.01% (1/100th of a percent) or 0.0001 in decimal form. BPS are used on the Exchange to improve trading speed using one-click Spread (i.e. the difference between the Offer and the Bid)
As an Originator with a confirmed RPA Offer, your ETR are purchased before 1.00pm (if this is a business day). Originators prefer the Revolving Market because it means that funds are ‘always there’, meaning that they have a reliable source of low cost capital
In the case of an Outright ETR, the Discount or d-ETR Sell Rate is a fixed value amount. In the case of RSA Trades of either Performance ETR or Managed ETR, the d-ETR Sell Rate is a Discount Percentage monthly charge that is deducted from the Face Value of the ETR for each month that it is outstanding. This Discount Percentage monthly charge applies to both d-ETR and c-ETR. An independent third-party monitors and reconciles all Bank transactions to ensure all Discounts are correctly applied and to protect the interests of all Members of the Exchange
Contracts with Invoice Discounting & Factoring [IDF] companies are very strict but from comments made by some providers, once you make them aware that you are using Credebt Exchange®, there should not be an issue. Before deciding to trade on the Exchange, you should talk to your account manager and ask for clear advice on this, before proceeding further (see below)
Many Originators with Invoice Discounting or Factoring [IDF] ask Credebt Exchange® to Buy-Out their contract so that they can completely dispense with their current provider. This is a simple and straightforward process where Credebt Exchange® buys the complete ‘book’ of debt from the IDF provider in a single transaction. As the new owners of the book, the Originator and Credebt Exchange® work together to get all the outstanding invoices paid in full. During the transition period from the previous IDF provider to Credebt Exchange® the Originator uses the Revolving Market that works and ‘behaves’ very much like an IDF provider’s service. Using the IDF Buy-Out should have little or no impact on the Originator’s day-to-day operations
The cost of funds is calculated based on the Annual Target Rate [ATR]. The ATR is calculated the same way as Annual Percentage Rate [APR], subject to the correct trading balance between customer/d-ETR and supplier/c-ETR invoices sold to and bought by the Exchange
Credebt Exchange® is not regulated by the Central Bank of Ireland as a result of operating the Exchange and providing the Exchange Services. Its role is limited to that of Negotiation Agent, Document Agent & Servicer in respect of the Exchange and the Exchange Services and that of introducer, negotiator and facilitator in respect of the sale and purchase of ETR by Members over the Exchange.
Albeit that ETR differ significantly from Invoice Discounting/Factoring [IDF], ETR ‘fall under’ the IDF exception. For example, although a Bank is regulated, the Bank’s IDF business is not regulated. This is because IDF uses neither financial instruments nor investment instruments in operating its business.
Credebt Exchange® uses the Exchange to introduce ETR to Originators (i.e. sellers) to ETR and documents the buying and selling of ETR. From meeting with the Central Bank of Ireland, the buying and selling of ETR is IDF exempt and is therefore not a regulated activity
Automated trading occurs according to the Originator Global Settings or if the Originator is selling Revolving ETR. The typical Investor trades automatically because they have a specific Buy rate with protected capital and yield in place
Once an ETR is sold and becomes a Traded ETR, Credebt Exchange® is the legal owner and as the legal owner, has vested the ownership and care of that ETR in the Exchange
The Originator deals with its customers, as it would normally, unless the debtor fails to pay the ETR within the time specified at the time of becoming a Traded ETR (see point 3.4 above)
If a debtor cannot pay within the time specified, the Originator must advise the Exchange as to the reason for the delay and confirm when it will be paid
If the debtor never pays, because Credebt Exchange® is the legal owner of the ETR, they will pursue the debtor until payment is satisfied (including using legal remedies, as necessary and at the sole discretion of the Exchange). Prior to contacting the debtor, the Originator may offer to refund the Exchange the entire payment (including processing fees)
To trade on the Exchange, you must complete an application form and there is a legal contract between the Originator and the Exchange, but there is rarely any requirement for any personal guarantee
Automatically, all Traded ETR results in the invoice being clearly stamped as ‘Sold on Credebt Exchange®’ and will display a specific reference code (e.g. 1001001234); a Credebt Exchange® Trading Bank account number; and a specific sort code. All of this will be provided to you once your application is approved
In many instances the purchasing department in a large organisation may not be in the same location as the accounts payable department. Your customer’s accounts payable people will be aware of Credebt Exchange® because they must transfer the payment into a specific Exchange Trading Bank account. So, it is possible, albeit unlikely, that the contact person that you supply in the organisation may become aware that the invoice has been sold on the Exchange
The Notice of Assignment [NoA] is a PDF document that is emailed to the accounts contact person (specified by the Originator/Agent when creating the debtor, prior to Trading the ETR) to advise them that the invoice has been sold and is owned by Credebt Exchange® and that payment must be made to the specified Credebt Exchange® Bank account
A Notice of Assignment [NoA] is necessary because Credebt Exchange® must have absolute security in the ETR they purchase and this means they require legal assignment. By law, to achieve legal assignment, the debtor must be notified that the ETR has been sold and that the Credebt Exchange® is the new owner
Credebt Exchange® offers a new and unique form of low cost capital that is highly competitive. In many cases it is more competitive than any other alternatives (e.g. commercial lending). The ETR you are selling will be from large organisations or government agencies and will be sophisticated enough to understand that the Credebt Exchange® business model is highly competitive and, most likely, they will admire organisations that are clever enough to utilise its assets to access the low cost capital
Furthermore, as most large organisations and government agencies have many different departments (perhaps in different locations and even in different countries), it is more than likely that the contact person that places orders with your organisation, rarely if ever, has contact with the accounts person that would be aware of the Notice of Assignment. Therefore it is unlikely that your contact would be aware that your organisation is selling its ETR on Credebt Exchange®